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What is HR outsourcing?
As with so many aspects of a business – from marketing to accounting to actual labour – work can be outsourced.
This means that any organisation can approach an external HR outsourcing agency as their partner to provide some support with internal HR. Alternatively, a business can choose to completely outsource the HR function.
The arrangements can look slightly different for every business, depending on needs, size, scale, goals and capacity.
The rest of this article is going to look at when you would choose to outsource only part of the HR responsibilities or the whole department. We will also move onto discussing other factors and considerations that might make HR outsourcing a strategic decision that benefits your organisation.
Outsourcing a portion of the HR function in your business may mean that you already have an HR team or individual professional in place. Outsourced HR teams will work cohesively alongside any existing HR team, there is no need to have one or the other. Roles, responsibilities and ways of working will be determined as part of the arrangement between your business and the external HR agency.
One popular time to start outsourcing HR responsibilities is during growth and transition. This can occur when a business is now ‘big enough’ to realise they need dedicated HR support (often for small businesses a CFO or an operations manager will also handle HR responsibilities). Alternatively, it can occur during growth when your in-house team members have a full plate, perhaps dedicated to one sole activity like recruitment.
Choosing to outsource some human resources responsibilities also means that an organisation can access specialist knowledge and a wealth of experience, without having to commit to the salary or overheads of a full-time employee (which might be unnecessary anyway). This can benefit your company, as internal teams can learn from another expert, but also, depending on the work the HR agency does, they may be setting your company up for long-term improvement, with new processes and solid HR foundations.
Finally, having a contract with a professional HR agency or experts means that your business has someone to turn to. We all know that things crop up in business – both positive and negative. From workplace disputes and investigations to employee value propositions and a drive for growth and workplace planning – if you have an ongoing arrangement with an HR agency (even part-time), your organisation has access to expert support, guidance and experience immediately. Essentially, this means your business will be able to make confident, strategic decisions, faster.
Outsourcing your full HR department and responsibilities has all the benefits of partial outsourcing: access to expertise, support whenever it is needed, no overheads or long-term financial commitments and coaching opportunities for internal teams (this can be applied to managers and leaders as opposed to in-house HR).
It also comes with a few additional advantages, including rapid scalability and flexibility of the work that is being done, as well as experience in particular areas of HR and potentially, specific industries. There is also anecdotal evidence that suggests employee feedback is more reliable and honest when directed through an external team member.
However, there are a couple of considerations as well. These are not really disadvantages, just factors to think about when deciding whether outsourcing HR is the right decision for your company.
Firstly, who will be managing the relationship with the external HR partner? Although the HR team should be able to integrate with your business, they will also need to understand who they report to, who to liaise with and what the communication process will look like.
Similarly, an overdependence or a misunderstanding of the relationship between the HR team and your company can occur. This can manifest as managers unloading their responsibilities onto the HR team or a fear of a loss of control by business leaders.
All of this can be managed within the initial stages of any HR partnership. It is important for a business to hash out the ways of working together and the scope of work that will be undertaken.
We’ve all heard it before – globalisation has happened. The working world will never be the same as it was before 2020.
One offshoot of this is that there are now more international teams working under one umbrella. This occurs because of multi-national hiring and completely remote working, i.e. you do not need to be in any physical location to do a job.
Alternatively, it can happen because of growth, i.e. a business has expanded and now operates in another geographical location – nationally or internationally.
Both situations have their unique HR challenges and requirements. And both circumstances lend themselves extremely well to outsourced HR.
Working with an external HR company, businesses could provide their employees with support, wherever they are. Moreover, you would be able to access the expertise and experience needed to manage multi-location teams that may not have a manager nearby – or even in the same country.
As we’ve previously mentioned, outsourcing affords a company flexibility and strategic investment. Essentially, you can have all the skills you need to run your operation, without the financial commitment – particularly advantageous during growth and when entering a new market or market location.
As well as the day-to-day running of an HR department, there are often big initiatives or projects which HR will play a key role. The scale of these varies – from implementing a new benefits package or taking a strategic approach to skills gaps and recruitment, all the way through to mergers and acquisitions within a company.
Naturally, these are things an organisation needs to get right. From planning, to communication, execution, measuring and feedback.
Outsourcing project-based HR work means that the day-to-day roles and responsibilities of an in-house team are not impacted. This can help your team feel stable in their position, and clear with their roles and responsibilities. All the while, the organisation can access the expertise as well as the resources to implement a big change.
HR outsourcing can take on so many different shapes. The one important takeaway here is that it can be suitable for businesses of all sizes and scales at some time or another. The actual scope of work and relationship with the outsource team will be determined by the business circumstance.