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How Outsourcing HR Services Helps the Business

Raksha Tiwari

| Updated: Nov 21, 2018 | Category: HR Outsourcing

Outsourcing HR Services

Here, we will discuss how outsourcing HR services can help a business but analyzing all the possible pros and cons of outsourcing such activities for the business.

Importance of Human Resourcing Activities

Often the Human Resource Department of a business is ignored if you have an effective workforce and work is going smoothly. But, what is required to be understood is that the HR department is not just concerned with the hiring and firing routine. This department contributes to smooth administration of your business in many other ways including the following:

  • They maintain employee payroll.
  • Income Tax Filings
  • Maintenance of employee records
  • Conducting training and knowledge transfer
  • Legal compliances and health administration etc.

What is HR Outsourcing?

When an organization sub-contracts is human resource activities to any external party then it is known as Human Resource Outsourcing. It is also termed as HR Outsourcing or HRO.

As the Human Resource department is a noncore department and is a non-profit center of the organization people often decide to outsource this function.

Human Resource Outsourcing can be done in any of the following manners:

  • Business Process HR Outsourcing

This kind of outsourcing can either be complete or all the discrete functions are transferred to the external party.  These outsourced activities can include recruitment, payroll administration etc.

  • Shared or Partial HR Outsourcing

Here only particular elements of HR department activities are sub-contracted to external parties like the administrative elements of the department.

  • Application and other facilities HR Outsourcing

In this type, the external parties provide either infrastructural or technological support services to the organization in relation to their human resource activities.

How to implement HR Outsourcing

If you are planning to outsource the HR activities of your organization then the best way to do so is to execute a service level agreement between the organization and the external party. This SLA must be executed with a great deal of care and consideration to avoid any conflict in the future. Service level agreement shall include the following:

  • Details of both the parties
  • Expected Standard of performance from both the parties
  • Penalty and fine provisions in case of any kind of non-compliance
  • Term of appointment
  • Renewal provisions
  • Consideration to be paid

Benefits of Outsourcing HR Services

More and more organizations are starting to outsource the HR services as they are considered to be too complex to be dealt with in-house by them. This practice makes perfect business sense as human resource management is one of those non-core activities which can be contracted out to outside parties which have a professional forte in that particular are off work. However, if you are wondering if HR outsourcing is actually a smart idea or not and whether you should adopt this practice in your organization or not, then we have listed out the benefits of HR outsourcing for your consideration.

  1. Better Time and Money Management

Despite the fact that Human Resource Management is a non-core activity in the business, it requires a lot of resources in the form of time, effort and money for smooth functioning. A lot of trained staff is required and office space to accommodate them. This is the reason in the initial stages of business and sometimes permanently many small and medium-sized organizations prefer to outsource such HR activities. This saves a lot of resources which is required to maintain an in-house HR department. These HR outsourcing services are cost-effective and as they are variable in nature they can be controlled as per actual business requirements.

  1. Increased Efficiency

Human Resource management involves a lot of activities than just general hiring firing routine. There are a lot of compliances required to be done by them including payroll and employee administration. This requires a lot of time, energy and dedication. But when the HR activities are outsourced to outside parties these resources can be utilized for the furtherance of the main objects of the organization. This results in increased efficiency and focuses on the core activities of the business. When you get to focus on what you do best it ensures better results. Therefore you can expect better financial results.

  1. Risk Management

Human Resource department might not seem like a very busy or important department in the organization. However, it plays quite an important role in the organization. There are so many laws regulating the HR activities and employment in any organization. It is important to keep a track of all these laws and all the related changes and notifications to function smoothly. This asks for a lot of effort on the part of the organization to remain up to date and maintain the required technology. This creates an additional business risk. On the other hand, HR service providers have professionals working in that specific field who are abreast with all such developments. You are not required to worry about any lapse in compliances due to such regulatory changes.

  1. Provides Flexibility

One of the important benefits of human resource outsourcing is that it makes the in-house resources available for new projects. And as the cost of HR outsourcing is a variable cost this does not burden the organization as the fixed costs do. In a similar way if the organization faces a sudden influx of work which cannot be easily managed by an in-house HR department then it can be easily outsourced and managed. This makes the management easier and hassle-free.

  1. Better Employee Management and Growth

The Human Resource outsourcing services help in better employee management. They take care of a number of activities like resource hiring, maintenance of employee records, maintenance of payroll, conducting training and workshops for the staff etc. This ensures better employee management and the organization is not required to worry about such trivial issues. There HR service providers are also responsible for monitoring the employee’s performance and provide regular reports on the same. When the employees are satisfied they ensure better performance and results. This also relieves the management from performing such regular administrative activities.

  1. Increased Productivity in the organization

Outsourcing Human resource management services help the organization in more than one manner. As this is a trivial and time taking work, its outsourcing ensures free time and resources. On the other hand, when employees are better managed and are happy with the organization they work in a more productive manner. This all ensures that all the resources are working with a single goal i.e. organizational development. They are motivated for the same and work harder. This helps in overall organizational development and progress.

  1. Helps regain the Primary Focus

All the Human resource department activities are very complex and time taking. Thus, if you plan to keep all such activities in the house it may take up a lot of time and energy. The management will be swamped with everyday HR activities. This can distract anyone from the primary focus or the main object with which the organization was established. Thus, outsourcing such activities helps the organization focus on their primary objects for which company registration is done and work with an objective to achieve them.

We hope now you have some clarity regarding the importance or we should say the benefits of outsourcing of HR services to professionals. For any further queries, you can contact Enterslice as we have a group of professionals ready to serve you and solve your queries.

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Raksha Tiwari

Experienced Tax and Corporate Law Professional with 5+ Years of Experience in Corporate Laws, NBFC Advisory and GST Implementation

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