Why Outsourcing HR Functions Makes Business Sense?

In technical language HR outsourcing or Human Resource outsourcing is defined as the process in which the entire Human Resources work is sub contracted to an outside agency. Means all the HR services are managed by an external agency instead of an in-house team. Today scores of organisations are embracing this new trend. These organisations feel that it makes a lot of business sense to outsource most of the non-core activities. Nowadays it is common to hand over all of the Human Resource work to specialists. Companies justify their decision by arguing that the HR services do not bring any financial gain to the organisation. Moreover, it has no role in activities such as finance or strategic planning, which in fact are the core activities of the organisation. So, in this changed scenario outsourcing is the buzzword — and an HR Outsourcing Company has turned into a valuable asset of an organisation.

Companies today have realised how important it is to outsource their entire HR services to specialists. And the industry experts too have backed their decision. Experts opine that cost cutting is the only way to offset the present economic downturn. Experts further suggest that organisations need to thin down their non-core functions if they want to preserve their valuable resources. So all the HR services are moving out of the company’s offices and into the cubicles of specialized firms. Because these HR firms have specialized skills they can offer top quality services to their clients who are looking to outsource their Human Resource functions.

Think Before Leaping Into This New Idea

But before plunging into this practice business organisations must mull over the idea. They must devise a plan and be aware of the risks involved. Plan A can be to outsource the entire HR work to a specialist. Under this plan all the functions from payroll management to recruitment is done by an external supplier. Plan B can be to outsource a part of HR functions. Under this arrangement the face to face interaction is kept within the walls of the company and the rest of the work is outsourced to a third party. Although outsourcing the HR functions save money, and resources as well as helps boost the bottom line, but also pose certain risks.  

The first risk is that the relationship between the employee and the employer can get impacted. Second risk is that the organisation loses control over its internal affairs. Third risk is that the expected cost benefits may not be reaped. And the fourth risk that there can be a reduction in flexibility, which is another worrying factor.

Therefore, to mitigate the risks the service agreement between the organisation and the specialist firm need to be explicit. Only a well defined service agreement can help minimise the likelihood of  financial losses. Here a detailed discussion on the service level document is called for between both parties so that no disputes occur afterwards. All in all outsourcing of HR functions to a specialist HR outsourcing company offers the business organisation an opportunity to focus its energy on strategic affairs, as well as helps save costs. So outsourcing is an intelligent to make.