There are various factors that can lead to a company making the decision to outsource HR.
As an HR outsourcing provider, we talk with many companies who are considering outsourcing their HR. There are some common themes that crop up as to why they are considering taking this action. In this post, we review the themes that lead to companies outsourcing HR.
Time to read our post: 5 minutes
The areas discussed in this post are:
1. Companies That Don’t Have Any HR Support Currently
For some companies, they simply don’t have any HR support at all.
They have been muddling along with the knowledge and experience that they have within the team. However, they are feeling that this is no longer enough, and they are exploring options. One of the options they are considering is outsourcing their HR.
When an organisation does not have any HR support at all, outsourcing can be an excellent option.
With a good outsource provider, an organisation can access the skills and experience they need, in the quantities they need. An outsource provider will be able to establish HR processes for matters such as joiners and leavers. Then, they can run those processes on behalf of the business.
What else can an outsource provider offer?
In addition, the outsource provider will be able to offer guidance and support on any employee issues that arise. They can also support with the creation of an HR plan.
An advantage of using an outsource provider when a company first has a need for HR support is that it allows the company to really understand what HR can offer and what is needed for their business. It could be that the outsource model works brilliantly for them. Alternatively, it could be that by working with an outsourced HR provider, they decide they need to hire in-house.
Their experience with the outsource provider will allow them to know exactly what skills it is they are looking for and what they want the HR role to contribute to their business.
2. Internal HR Isn’t Providing the Business What It Needs
Another of the various factors that can lead to a company to outsource HR is when a company has in-house HR support, but it just isn’t working for them.
Some common issues that can arise with in-house HR are:
- The in-house HR “goes native” – this is a phrase we’ve heard from several clients. What they mean is that their internal HR support has become so embedded with their colleagues that they begin to struggle to do what is right for the business when it will have a negative impact on their friends.
- The in-house HR doesn’t give the business access to the right level of support – as a business starts to grow and develop, their HR needs can be more complex. They can find that the existing HR support isn’t giving the business what it needs. The thing is, what it needs continues to change and evolve so simply hiring different skills isn’t really the answer.
- The in-house HR is unable to provide continuous support – if the in-house HR consists of a single person then, when that person takes annual leave or becomes unwell, the business is left without HR support.
Outsourcing is a good solution to these problems.
An outsource provider, whilst still being caring, empathetic and compassionate towards your employees, will not have a personal relationship with them. An outsource provider is focused on doing what is right for the business as a whole. They will be more comfortable having those difficult conversations.
What can a business access through an outsource provider?
Engaging with an outsource provider will give a business access to the full range of HR expertise in the quantities and at the times they need it. If a business has a particular project that requires an expert in a particular area of HR, they will be able to access that skill. If there is a peak in demand, they will be able to increase capacity.
Another key advantage of outsourced HR when compared to in-house HR is the insight that an outsource provider can offer. Your provider will be providing HR support to many, many companies and through this, they will have a great deal of insight into what companies like yours are doing in relation to HR matters.
With an outsourcing arrangement, whilst your regular contact will also need to take time off, there will be a back-up option in place so that your business is always able to access the HR support it needs.
Why not chat through your requirements to see what HR support is right for your business?
3. The Desire to Decrease the Cost of HR Support
In most situations, outsourced HR will be a more cost-effective way of gaining the HR support that a business needs when compared to having in-house HR.
With in-house HR, there’s not just the salary cost but also pension, holiday, sick pay, and any other benefits that a company offers. This can really mount up.
It’s also worth remembering that you are paying in-house HR for times when they aren’t doing HR work.
This may sound harsh, but you are paying them to chat with their colleagues, to make a cup of tea, attend company update meetings.
With an outsource provider, you are only going to be paying for hours spent on HR activity. The per hour cost will likely be higher than in-house HR, but you will only pay for hours spent completing work. This is another of the various factors that lead a company to outsource HR.
Manager’s Guide to HR Support for SME
Read our comprehensive guide on HR support for SME. The guide sets out the various ways that businesses can get HR support and the advantages and disadvantages of each option.
Why not chat through your requirements to see what HR support is right for your business?