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Outsourcing the HR function | Pros & Cons

author Written by Jigna Boghani September 30, 2020

quick guide to build

Outsourcing means obtaining work that was done by employees previously inside the company from the sources outside the company. If someone has specialization in the event which is not critical to the business and unable to do it cost-effectively, it is better to get it done from outside the company. An asset of any firm is its employees. Leading companies worldwide are taking the most strategic approach to manage human resources.

HR outsourcing refers to the process by which a company uses the HR outsourcing services of a third person to save their HR functions. A company can outsource some or all functions from the single or combinations of HR service providers located in many destinations like India, China, and the Philippines.

Requirements of HR outsourcing

The points which conquer the firm decision to outsource the HR services are as under

  1. To enable the business to focus on key functions.

  2. Cost savings.

  3. To create a suitable and cost-effective platform to work on.

  4. To transfer focus from an internal process to the business goals.

  5. Transferring the risk for peoples of the organization.

Differentiations of HR outsourcing

HR outsourcing services can be broad divides into the following categories:-

  • Application service provider -  A group of many companies specializes to provide hardware and software applications in support of big firms that have developed application packages to support HR activities in an organization.

  • Business process outsourcing - The difference between ASP and BPO is that BPO clients have directly connected to firm employees through call centers. Multinational companies mostly go for BPO as they operate in many countries which employ a lot of people.

  • Total HR outsourcing - In this, the whole function of HR is domed by the service providers. There is no particular HR department in firms.

Services by HR outsourcing

HR outsourcing services involve the whole organization and any short cut or opportunistic behavior from the service provider will make the company's long term benefit. Company HR advantage is sustainable because it is very difficult to be copied by others.

HR can take the following outsourcing services from outside the company

  • Hiring services - Recruiting and selecting is the HR outsourcing services which a company can conquer from outside the company. A variety of people join the labor markets at different stages of their career, firms find these peoples and give them the opportunity to be hired by them.

  • Developmental services - In the area of outsourcing the external development resources, companies buy markets with developed knowledge. An organization can enhance the capability of its employees by giving them exposure to outside companies.

  • Performance management - Organisation performance based on their total organizational level, departmental level, and individual employee level. Employees are chosen based on the above level to work in HR functions.

  • Compensation and benefit man agent - Compensation and incentive play a vital role in an HR department. Employees feel motivated when they get perks, bonuses, and rewards besides the salaries for their dedication to work in the organization.

  • Specialized consultancy service - Consultancy being the most popular service of today's business world. Many MNCs and big firms provide policies and insurance to their employees so that they can stick and work on the organization for a longer period of time.

  • Management of employees relation - Apart from outsourcing, the HR department also manages the relationship between the employees to ensure that the work will be running smoothly at all times and all organizational goals are achieved.

Benefits of HR outsourcing

HR the department enjoys the following benefits in an organization

  1. Risk reduction

  2. Easy solutions and costs

  3. Experience the broad skills and new learnings

  4. Reducing non-operational distraction

  5.  Giving a strong career to the employees

  6. Expanding the sales and production capacity

  7. Easily generate cash by transferring assets to service providers

And so on.

Barriers or drawbacks

HR outsourcing department also has some barriers which affect their work in firms are

  • Unable to create relations or manage the resources and outsources of the firm.

  • The organization has not all control over the outsourced employees.

  • Risk involves a cost for outsourcing employees.

  • Outsourcing when done with a non-reputed firm can destroy the image of the firm in the market.

  • Much higher costs.

  • Cultural difference.

And so on.

Importance of HR Outsourcing

In today's world of business, a new concept has been added to reduce the complications of managing day to day HR issues more effectively and efficiently. Depending upon the size of the firm's business and how much control one wants to maintain over HR functions, one can either outsource all the tasks or some to an outsourcing company. If you need to hand off the entire HR function consider a PEO(Professional employer organization). A PEO becomes the employer of handling all the tasks very certainly and conveniently. If one needs no PEO then he/she can sign a contract with some other outsourcing company.

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