Human Resources Outsourcing: Is it New? Will it Last?
The HR Coffee Room by 1BC Consulting, Inc.
Outsourcing has become a hot topic in today’s business world. One aspect to this is Human Resources Outsourcing, which many people consider yet another new step in this business trend. Here we’ll discuss the nature of Human Resources Outsourcing, where it’s going and where it’s been.
To begin, let’s discuss the term outsourcing as its definition is a bit cloudy for some people. Outsourcing, contrary to some miss-information, involves the contracting out of a business process (e.g. payroll processing, claims processing, insurance, employee performance, training & development, human resources functions) and operational, and/or non-core functions (e.g. manufacturing, facility management, call center support) to another party, consulting firm or provider. This is outsourcing.
Now onto a working definition of Human Resources. The definition is a little less unclear, as many people have worked in a large corporation where there is at least one Human Resources representative. This is the person who is responsible for making office relations go smoothly. Not from the business end, but from that of personality. Personalities clash at times and the Human Resources representative will assist by creating a neutral ground along with mediation. Or, if there is a problem with only one employee, the HR representative can provide advice and be a shoulder to lean on.
So, by now you’ve surely figured out how these two terms can work together. Human resources Outsourcing is when an organization is simply not large enough to constitute (or afford, or see the need to have) a regular, full-time professional HR representative. Another option is that an organization with numerous offices spread around a city finds it not cost-effective to have a separate representative at every office, and will also call Human Resources Outsourcing into play. This simply means that employees with personal problems will be sent to a professional mediator. This can be a psychologist, or other form of expert Human Resources professional arbitrator.
Against common reasoning, Human Resources Outsourcing is probably older than other forms of outsourcing. Long before HR became a familiar term, organizations were sending their employees to “hired guns” to alleviate personal and professional problems. This probably began with the outsourcing of doctors, which even today is a common practice as few companies have on-site doctors on their payroll.
But Human Resources Outsourcing is not only to assist with resolving employees’ problems, in fact it brings a larger value to any organization. Here are some reasons why companies decide to outsource the services to a Human Resources consulting firm.
- Companies outsource to save money – this is not necessarily a surprise. Sometime hiring an additional HR professional to take on other important tasks, could be more expensive than outsourcing.
- Companies outsource to focus on strategy – when a company spreads too thin with all administrative tasks, it doesn’t leave too much time for planning, so outsourcing makes sense.
- Companies outsource to improve compliance – it is more and more challenging to stay in compliance and gradually riskier not meeting requirements, so outsourcing any compliance tasks is a wise decision. For medium and larger companies, compliance can be a vast risk as can legal liability, so outsourcing grants extra layers of protection.
- Companies outsource to improve accuracy – if you’ve got too much on your plate (and let’s be honest who doesn’t?) accuracy may fall by the edge, so this also makes complete sense.
- Companies outsource due to a lack of in-house experience – knowing your weaknesses is very important, just as important as knowing your strengths, so assigning off a task you know you can’t handle properly to someone with expertise is a smart business decision.
As for the future, we can only presume that Human Resources Outsourcing will continue, along with other shades of this practice, bringing value to any organization. The bottom line in business is not mental health or safety, but money. With such actions and philosophy in business, the financial world is ever changing, hopefully for the better.
If your company is considering outsourcing Human Resources, either one or many of its functions, you are certainly part of a growing trend.
Contact us for assistance in assessing your organization and provide the most appropriate strategy to make your business operations more efficient.
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