vHuman their HR functions. So, we would now go

vHuman Resource Management has come a long way
from being just “personnel management”. It has taken many years for HR
from being a someone
who never got a ‘seat at the table’ to being considered critical
to the company’s long-term success. However, as markets today become more and
more competitive, HR must distribute its time wisely between critical functions
like talent development, performance management, succession planning, etc. and process-driven
tasks like payroll, temporary staffing, etc. As a result, focusing HR’s time
and energy on strategic efforts have driven many companies to outsource
the HR functions like recruitment, payroll, etc. According to the Cambridge
Dictionary, “outsourcing” is a situation in which a
company employs another organization to do some of its work, rather than
using its own employees to do it.  Over
the last few years, the outsourcing of HR activities has increased
dramatically. The HR service providers reported v a 27% growth for
2016 (PrismHR, 2017). According to
industry analysts, Everest Group, the multiprocess HR outsourcing market
is worth about US$3.3 billion globally. 

 

Now, outsourcing the HR function is usually done
with the aim to cut costs. This approach is a short-sighted approach in the
worst. It has far-reaching implications on the “Human factor” in the
company. So, it is highly advisable that companies do a thorough cost-benefit
analysis before deciding to outsource any of their HR functions.

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So, we would now go on to discuss the potential
benefits of outsourcing the HR function.

 

First and foremost, we shall talk about the obvious-
cost reduction. In fact, in the 2016 Global Outsourcing Survey by
Deloitte, 59% of the participating companies said their chief
motivating factor to outsource some of or all HR functions was cost cutting. (Deloitte , 2016)

For a startup, which is low on funding, HR
costs can be a substantial amount of the total cost. Hence, outsourcing functions
for immediate requirements like recruiting can ensure two things- save money from
fixed costs expenditure and gain better recruits due to the established expertise
of the external company (assuming it is a reputed company). Also, for an established
company that is facing a financial crunch, fixed costs can be reduced by outsourcing
recruitment. It could also bring in expert advice from specialists in different
fields of HR. This could, in turn, enhance the organizational knowledge of the
company.

Next, it brings in external expertise to
the organisation. Managers are the first “HR” point of contact for the
employees. However, they are also responsible for a lot of other tasks. As a
result, sometimes, HR activities are neglected. HR professionals having had valuable
experience in the field of HR bring valuable knowledge to the organisation. Companies
enjoy all the benefits of having a competent, professional team working for
them; that too, without having to employ a full-time staff.

 

Then, we move on to the benefit of better
compliance. Employment laws are changing like ‘the weather changes due to
global warming’. In this scenario, maintaining strict adherence to rules
becomes difficult for the company. And, in the case of any ‘Employment Law’
being broken, it invites strict actions from the government. So, having different
company looking into your non-core HR matters independently not only leaves the
HR team to focus on more strategic tasks, but also gives the company immunity
in case of any law being broken in any country as it would be the
responsibility of the vendor company.

Every domain of business has to adapt its
processes to keep pace with this ever-changing digital world. So, how can HR
stay behind? Outsourcing HR to an external agency gives the company access
to better technology in handling its HR processes. For example, ‘software-as-a-service
(SAAS)’ is a software licensing and delivery model in which software
applications are hosted remotely by a vendor or service provider and made
available to customers via a Web browser. This model of software delivery
creates greater organizational agility.

It can be said that recruiting the candidates
that are the best fit for the organization is critical to the success of the
organization. However, employee turnover is becoming a greater problem for
companies; especially those ones that employ candidates for jobs with highly
specialized skills where losing a single employee can be very costly to the
companies. When companies are undergoing change, it might delay some HR
processes. This might translate into employee discontentment. Also, when a company
loses a HR employee without prior notice, it may have an impact on the employees
he/she was responsible for. When HR processes are outsourced, there is a team
hired to give dedicated service to its employees. Employees feel more connected
to the company because their problems are dealt with more seriously. Outsourcing
ensures that there are experts available to dedicate their time, knowledge and
resources to safeguarding the smooth running of HR administration, resulting in
improved company morale and thereby, reduced employee turnover.

Employment labour laws are the sword hanging
over the head for companies. They cannot afford to break employment
regulations; especially in countries where there are strict penalties for doing
so. Since, these laws are prone to change frequently, it can be difficult to
remain up-to-date on them. A representative study of
1,214 closed claims reported by small to medium-sized enterprises (SMEs) with
fewer than 500 employees in the U.S. showed that 24% of employment charges
resulted in defence and settlement costs averaging a total of $160,000. On
average, those matters took 318 days to resolve (Hiscox, 2017). Outsourcing firms
employ HR professionals who are up-to-date with the federal and state
employment laws. HR firms also maintain and audit company policies and practices
to ensure the client organization’s best interest are protected.

 

 

 

 

 

 

 

 

 

 

 

Works Cited
 
Deloitte , 2016. Global
Outsourcing Survey, s.l.: Deloitte.
Hiscox,
2017. www.hiscox.com. Online
Available at: https://www.hiscox.com/documents/2017-Hiscox-Guide-to-Employee-Lawsuits.pdf
Accessed January 26, 2018 January 2018.
PrismHR,
2017. Human Resource Outsourcing (HRO) Trends Report, s.l.: PrismHR.
 

 

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