HR Outsourcing Challenges

Weighing the cost of outsourcing versus the cost to hire employees with the necessary qualifications is a challenge human resources managers encounter when they decide to outsource department functions. Other challenges include evaluating the outsource provider's expertise and qualifications, quality management and employee satisfaction. Although these challenges should be addressed prior to engaging the services of an outsource provider, they can be ongoing issues for human resources managers and the provider they select to handle their outsourcing needs.

Cost

The decision to hire an outsource provider for human resources functions isn't always an easy one. Factors to consider include what it costs to engage professional services versus what it costs to hire someone with the expertise necessary to perform the functions. If your organization chooses an outsource provider to handle benefits administration, for example, the overall costs to provide this service may be higher than the cost to recruit, hire and train an in-house compensation and benefits specialist. Human resources managers must carefully consider the annual expenses associated with an outsource provider and the annual salary for a compensation and benefits specialist, based on how complex the compensation and benefits structure is, along with the company size and employee base.

Outsourced Expertise

Outsourcing any type of human resources function --- whether compensation and benefits, employee relations, training and development, or recruitment and selection --- requires an examination of the provider's expertise in each area. Some of the most common outsourced HR functions include recruitment and benefits. Throughout your organization's relationship with the outsource provider, you must have confidence in their expertise, as well as confidence that the provider will continue to improve its expertise by continuing education. Human resources outsourcing companies make an enormous amount of money charging large and small companies for their knowledge and expertise in a number of different human resources areas. Given the rapidly changing demographics of the workforce, combined with unique needs that every client has, outsource providers should have a system of improving their expertise so they can meet their clients' needs.

Quality Management

Even if your organization elects to outsource one or most of its human resources functions, that doesn't mean your responsibility for maintaining the quality of services rests solely in the hands of the outsource professional. Quality management --- from the employer's perspective --- requires someone with enough human resources expertise to monitor the quality of services rendered by an outsourcing company. Outsourcing benefits administration, employee relations investigations or recruitment demands a qualified, in-house professional who has the expertise and knowledge required to oversee the provider's services. In addition, your in-house human resources staff should be capable of determining employee satisfaction with the outsourced services. There's an added challenge to consider: There exists the potential to alienate your workforce when employees discover they have to contact a third party to discuss their health insurance matters.

Employee Satisfaction

Employees may feel better about discussing issues concerning health insurance, benefits and compensation with people they can interact with regularly. Being directed by the human resources department to an outside provider for answers to questions about sensitive topics can be unsettling for certain employees. Therefore, it's necessary for an organization's human resources staff to maintain employees' trust by acting as a liaison between the outsource provider and the employee. Maintaining employee satisfaction is another challenge employers face when they decide to hire an outsourcing company for specific human-resources functions. Employee satisfaction should be a factor during the negotiation stage and ongoing support for an outsourcing agent.

References

• Outsourcing Center: "Four Trends That Are Changing Human Resources Outsourcing"; Beth Ellyn Rosenthal; January 2010
• New York State Society of CPAs: "Advantages of Human Resources Outsourcing"; Lyle DeWitt; June 2005
• HR Outsourcing Association: "HR Outsourcing Delivers Transformation Above Cost Savings"; February 2006
• The Human Resource Consulting Group: The Benefits of Outsourcing Human Resources Services

Resources

• National Association of Professional Employer Organization: What Is a PEO?
• Society for Human Resource Management
• National Human Resources Association
• Workforce Management
• Employee Benefits Research Institute