Human resources, deal with anything and everything that has to do with people in a company. Sadly, this mentality can result in the HR department handling a lot of tasks which take time & energy away from the HR activities that provide the most strategic value to the company.
Outsourcing Human Resource service is a process in which a company utilizes the third party to take care of its HR functions.
Outsourcing some, or even all, HR functions are a widely practiced concept among companies of all sizes. A company may outsource its HR-related activities to a single or combination of service providers located offshore or within the geographic reach.
Outsourcing HR services enables a company to focus on HR activities with the most strategic value while saving money and benefiting from specialized expertise. If someone has specialized in an activity that is not strategically critical to our business and can do that cost-effectively, it is better to get it from outside.
For example, an HR function like talent development is critical for a company to identify and develop its future leaders. Nonetheless, payroll is a process-oriented task which can be outsourced to a third party, thereby saving up HR’s time for the company’s vital HR needs.
Outsourcing of HR functions has accelerated over the last few years and will continue to do so. Outsourcing empowers companies to offload work which is not part of their core business and saves money.
It is critical to decide what functions to outsource and what work to be kept in-house. Companies need to decide what HR tasks are special & critical for the business. Any role HR is currently managing and seems to be taking considerable time and effort could be considered for outsourcing. Activities like temporary hiring, background checks, screening and other such functions could be handled by good outsourcing firms. These processes are also important but do not drive the strategic mission of the company. Many a time, critical functions like regulatory compliances could also be considered for outsourcing.
Firstly, high manpower turnover places a lot of challenges in the HR department to design HR services that are similar to their competitors. When employees are changing their employer for small reasons, Organizational HR practices for customized services give way to standardized services.
Under the pressure of competition, a company not only increases its purchase of manufactured parts and services generated by other companies but also considers many other innovations for outsourcing new areas of its internal processes.
In this fast-moving and the era of lean management, most of the HR departments cannot afford to have an in-house expert managing every HR issue. On the other hand, there is a big concern regarding the quality if you outsource certain HR functions. Companies need to compare benefits, the associated costs, and their approach. Firms need to conduct background checks to ensure the outsourcing firm’s reputation is excellent.
The decision of Outsourcing HR functions depends on the type of company, its priorities & the role of HR.
Below are the most commonly outsourced HR functions:
- Mass recruitment
- Temporary staffing
- Background checks of the recruits
- Payroll
- Benefits administration and management
- Training
- Creating Employee handbook and HR manuals
- Compensation
Increasingly, many large firms are getting their HR activities done by the third party. Employee hiring, training, development and maintenance of statutory records are the general tasks contracted out to outsiders.
Outsourcing HR services is quickly emerging as one of the most exciting business trends. It reflects the need, recognized by increasing numbers of firms, to focus on their core areas of business and to outsource processes that add little or no value in terms of achieving their business objectives.
Outsourced Accounting & Bookkeeping 