Last Updated on September 13, 2023
You hear people talking about outsourcing
The question is: should you outsource your HR, or is it best kept onsite? This article will focus on outsourcing HR and the pros and cons. The goal is to provide you with some golden nuggets so you can make your best decision.
In a nutshell, outsourcing HR implies using a third party, whether fully or partially. This means that tasks such as payroll processing, staff benefits admin, and other tasks are completed remotely from the business. More so, outsourcing HR means saving money and time. However, remember that your best assets are your workers. Let us first explore what outsourcing your HR entails.
What does outsourcing HR mean?
When a business outsources its human resources, it appoints a third party to conduct a function or functions that would normally be conducted in-house. A business can either outsource their HR to an outsourcing service or to a virtual assistant. The virtual assistant would, for instance, process the payroll, acquire talent, deal with staff benefits admin, and other such tasks.
Two types of outsourcing
There are two core options when you outsource your HR. Firstly, there is HR outsourcing; and secondly, there is personal employer organization. Both types will handle your HR work. Moreover, some of these types overlap, but their legal structure is different.
Personal employer organization
Personal employer organization utilizes a co-staff model. This means that the staff appears on the records of the personal employer organization provider for tax and legal purposes. The business still has control and delegates work to the staff, which includes firing or promoting the staff member. Moreover, a personal employer organization manages all HR duties and takes on the financial and legal onus relating to the staff.
HR outsourcing does not use the co-staff model as does a personal employer organization. The staff members remain on the records of the business, and the business takes on the onus of the staff’s actions. With HR outsourcing, a business can outsource a specified section of the work. For instance, you can hire a virtual HR assistant to assist your HR department. Here the virtual assistant will have a supporting role.
Who is HR outsourcing for?
HR outsourcing can work for most businesses. There are some points to look at:
- Unbalanced amount of time expended on HR duties equated to other company needs.
- Previous or foreseen liability exposure or lawsuits.
- Lack of funds to employ new staff or to cover staff benefits for onsite HR staff.
- HR duties spread amongst staff from supplementary departments.
- Lack of onsite HR staff to appropriately handle the task of hiring and managing the staff.
If one of these ticks a box, then you should consider outsourcing your human resources. Small businesses benefit the most from this arrangement.
What functions are offered in HR outsourcing?
The various HR tasks that you can outsource include payroll processing, employee benefits administration, employment law compliance, employee relations, talent acquisition, performance management, background screening, reference checks, risk management, drug testing, and employee counseling.
The pros and cons of HR outsourcing
Pros of HR outsourcing
Onsite staff cost not only their salary but certain additional costs. These include staff benefits, taxes, and the costs associated with setting up and maintaining their office space and equipment. HR outsourcing is cost-effective, thus saving you money. Outsourced workers cost much less.
HR outsourcing can save you time. When a virtual assistant is hired to complete tasks, your core team can focus on their core work, the admin-related work having been outsourced. This will lead to increased productivity and boost in efficiency.
Cons of HR outsourcing
Outsourcing may appear impersonal. A more personal touch is preferred for some staff and is linked to staff satisfaction. Some staff could be dealing with an outsourcing service that comes across as cold and impersonal.
If there are any corrections, there could be delays. Some delays may result. For instance, if a staff member notes any errors on their payroll, they will need to contact the outsourcing service to correct the error.
Outsourcing can present some hiring challenges. The challenges can appear in the hiring process – especially when the outsourcing company is not familiar with the business culture. Therefore, there is the risk that someone who is not the right match for the company culture can be hired.
Some misinterpretations and myths about HR outsourcing
Some people are not entirely sold on the concept of outsourcing. Most of this is due to myths, misunderstanding of what outsourcing is, and how it can assist a business.
A small business cannot benefit from HR outsourcing
In fact, small businesses benefit the most. For instance, start-ups often lack the funding to hire a full complement of employees. Outsourcing allows such a business to gain access to incredible talent that is still within budget. More so, on a limited budget, the business can still adhere to norms such as state, local, and federal rules and regulations.
Large businesses don’t need to outsource
With larger businesses, the best outsourcing strategy would be to hire virtual assistants to assist current staff members, thus lessening the burden. This means taking on low-level tasks so that the core team can focus on more high-level tasks. Moreover, since great talent is hired, the standard of work will not drop.
When you outsource your HR, you will lose control
When you outsource, the outsourcing company or virtual assistant works for you. Therefore they need to adhere to your rules and work around your needs. The business will not lose any control. Instead, the business will have time freed up, allowing them to focus on more important work.
HR outsourcing is unaffordable
There is a myth that outsourcing is expensive. However, the fact is that you will save in the long run. In fact, you could save up to 70% on business expenses when you outsource.
Are you ready to outsource your HR?
Still not sure? Then book a complimentary discovery call with our outsourcing expert. Our expert, with more than a decade of experience in the outsourcing sector, working with some of the most prominent outsourcing companies globally, is there to assist you. Get the best advice clearly and simply put. You will receive effective suggestions to help you to make the best decision. Book your consultation today!