In our previous blog, “The Top 3 benefits of outsourcing your HR”, we highlighted the opportunities that arise from outsourcing, including a return on investment for businesses. According to research, outsourcing your HR functions can result in an ROI of 27.3% in cost savings alone.
Generally, organisations will outsource because they do not have the experience or expertise when a particular challenge arises. However, research shows most do not realise that outsourcing HR can save them money in the longer term as well as support them to keep a focus on core business activities.
Businesses, more than ever, need to be responsive to change and adapt rapidly to succeed. When new business opportunities come along, your organisation may need to find and hire skilled employees to meet the demand quickly. Outsourcing your HR to the right company will give you access to the correct expertise exactly when you need it and will take pressure off your internal team.
HR outsourcing can save your business time, money, and stress, but what investment is required to achieve this?
There is no definite answer to this question, as there is no one size fits all solution, and neither should there be. Instead, when thinking about outsourcing your HR and the investment that is required, there are three key factors to consider:
1) The HR services that you wish to outsource
Depending on your needs, you may want to outsource all of your HR activities or just specific HR areas. Commonly outsourced tasks include HR admin, Policy and Contract Creation, employee engagement, socio-legal regulations, employee reward HR process automation, and performance and grievance management support.
When choosing which services to outsource, consider key areas of growth for your businesses and the challenges you may face: what are the core activities of your organisation? Where do most of your profits come from? Are you spending time on tasks that you could delegate or even outsource? For example, spending significant time trying to understand HR requirements of casual labour or the constantly changing regulations around employing staff from outside the EU are tasks that could easily be outsourced. Create a list of the aspects of your business that will see the most growth and the associated challenges that you can foresee. If you have an existing HR team, consider their capacity; comparing the two of these will help you decide the areas you will require the most support and help you identify activities you may want to start thinking of outsourcing.
2) The size of your company
It can be highly cost-effective for SMEs to outsource HR. Committing to a total or even part-time employee with the required skills and experience can be costly, especially for start-ups where every penny counts.
Apart from reducing the fixed cost of managing employees, outsourcing gives small and medium businesses a step up by gaining access to expert skills and knowledge that their larger competitors have access to. This does not mean that larger organisations should not outsource their HR functions: on the one hand, the structure and location of the business may dictate that an in-house HR department is more cost-effective. On the other hand, it may be helpful to outsource some HR activities so that HR professionals can focus on hands-on work with employees, such as training, skill management, and problem-solving.
3) The company you use to outsource
Choosing the right HR vendor is crucial; it is essential to ensure that anyone handling your HR understands and aligns with your organisation’s culture, goals, and structure before starting. Communication and clarity on the business terms between organisations are essential for a long and successful partnership.
Outsourcing your HR can bring tangible benefits to your company, especially if your chosen provider has the full set of skillsets: HR knowledge and experience; reward & recognition strategies; employee benefits expertise; HR system management capability; HR administration skills; recruitment experience.
Whether your business is just getting started or already established with multiple employees, HR outsourcing should be considered by those seeking to increase efficiency, reduce costs, ensure compliance and unlock their true business potential.