Pros & Cons of Outsourcing HR

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In today's world, companies are continually working to stay competitive, cut costs and increase efficiencies. One of the trends in the corporate world today is outsourcing different functions to other companies that specialize in those functions in order to allow the main company to focus on its core competencies. One department that is commonly outsourced is Human Resources (HR). Outsourcing HR functions can have both positive and negative effects on the company, its employees and the corporate culture.

Savings Advantage

The most significant benefit to companies that outsource HR functions is the cost savings. Because outsourcing removes several costs, including payroll and benefits for staff HR employees, it is a beneficial move for small companies or start-up businesses that do not have a lot of dispensable cash. In many instances, companies that provide outsourced HR functions pool the resources to serve several companies at once, meaning you only pay for what you use. For instance, if you are not hiring employees, you are not paying for a recruiter's full-time salary.

Efficiency Advantage

Companies that provide outsourced HR functions are able to be more efficient than a company building an HR department from the ground up. This allows companies to focus on their core competencies. By saving the money on HR costs, companies have additional funding to become more efficient in other areas, allowing them to compete more aggressively in the marketplace. An example would be a manufacturing company that uses the money they save on HR outsourcing to improve their production lines.

Process Advantages

Companies that provide outsourced HR functions spend a lot of time researching the current rules and regulations, and develop processes that can be applied to multiple industries. They work to understand what processes for training, hiring and retaining employees work best, and they implement them within your corporate structure in a standardized way. This saves your organization from trial and error when it comes to building HR policy.

Expertise Disadvantage

One of the disadvantages of outsourcing HR functions is that you limit your company's in-house expertise when it comes to employee training and relationships. If your company has complex operational processes, it is difficult for an outsider to understand how those processes impact your workforce. Having an in-house HR team is an important consideration because those employees will understand how any changes in the company will affect safety and/or labor considerations.

Cultural Disadvantage

One of the biggest disadvantages to outsourcing the HR function is that it can potentially create an environment of "us against them" within the company. Employees who work with outside HR professionals may not trust those individuals as much as they would trust a fellow employee. To build solid employee relations, employees need to feel that they can relate to their HR team, and that the HR has their best interests in mind.

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