HR outsourcing solutions have become increasingly popular in Australia in recent years.
As workforces become fragmented – thanks to remote working, more contingent workers, job sharing and flexible working arrangements – the supporting legislation tends to evolve quickly. And, what’s considered ‘best practice’ also changes frequently.
So, staying on top of your company’s HR needs can be complex and – at times – fraught with risk.
HR outsourcing solutions are a great alternative for achieving consistently strategic, best practice, HR outcomes for your organisation. Oftentimes, the HR practitioner in a business is presented with situations that fall outside their expertise – be they legal, procedural or cultural. HR outsourcing solutions can offer a massive network of experts and specialists which the organisation can tap into based on business demand. (You can check out these great insights on HR outsourcing solutions from Deloitte, right here).
Today, we’ve provided full coverage of what it means to outsource your HR function; why you should do it; and the benefits and pitfalls to look out for.
HR Outsourcing Solutions: Defined
HR outsourcing solutions is the process of engaging an external third party to manage the HR function of your business. Typically, it’s the day-to-day HR functions that are outsourced. These include:
- Recruitment and applicant tracking
- Staff training
- Remuneration and benefits
- Job evaluation
- Record keeping
- Temporary worker management (like CXC)
- Relocation services
- Staff mediation
- Workcover case management
- Employment contracts
This approach allows the company to focus on the more strategic factors of its workforce: thus, enabling a deeper internal focus on HR issues that impact business performance and shareholder value.
Why Outsource HR Functions?
Some of the needs noted by organisations in deciding to outsource HR functions, include:
- Allowing a deeper focus on core operations
- Ensuring compliance with legal, statutory and industry best practice
- Undertaking HR transformation investment with IT systems
- Transferring the risks and liability of the organisation’s people issues
- Cost savings
- Greater HR efficiencies
- Shifting focus from internal processes to achieving business goals
Types of HR Outsourcing Solutions
- Software-as-a-Service (SaaS)
- The organisation contracts a software application provider, which is accessed via the web
- HR services outsources usually applicant tracking & performance, payroll, and vendor management
- Business Process Outsourcing (BPO):
- The organisation contracts a single task (for example, payroll), to an external third party
- Unlike SaaS, the BPO provider typically offers both the service and the software
- Benefits admin is often outsourced: great for quality auditing, processing and reporting
- Shared Services Centres
- When the shared service centre is external, rather than internal
- HR functions often allocated to external shared services include payroll, procurement, health benefits, travel expenses
- Technology developments have made shared service arrangements increasingly attractive to big business
- Single-source outsourcing
- One supplier that manages the entire employee lifecycle
- Underpinned by technology, this solution includes talent acquisition, payroll, talent management, benefits admin, and employee offboarding
Benefits of HR Outsourcing
- A flexible solution that’s easily scalable
- Allows in-house HR function to focus on strategic value
- Access to a broader scope of skills and expertise
- Consistently operating to industry best practice
- Turn a fixed cost into a variable – and usually lower – cost
- Risk mitigation: non-compliance with changing employment legislation can threaten the organisation
- Improve operating performance
- Accelerate business expansion via access to supplier processes and systems
- Better optimise existing business resources
- Offer the business a better HR service
- Boost HR operational efficiency
Drawbacks of HR Outsourcing
From our experience, the benefits of HR outsourcing solutions, far outweigh the drawbacks. That being said, if you’re considering outsourcing your HR function, you need to take an objective position on what’s going to be right for your business. Some of the downsides of HR outsourcing include:
- Cost justification can come into question, especially if the company has historically undertaken the HR function internally
- If people and IT systems aren’t ready, HR outsourcing can add unnecessary complexity
- Cultural resistance from the company’s HR function
- Loss of control of the outsourced function
- Long-term cost variables
- Outsourcing can be associated with downsizing which can damage the organisation’s reputation
There’s much to consider in the decision to outsource some or all of your HR function. If you’d like to have a conversation with me about our client experience, please get in touch with me here.