The Disadvantages of Outsourcing HR Functions

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Outsourcing can have a negative impact on employees.
Outsourcing can have a negative impact on employees. (Image: two businessmen shaking hands image by Alexey Klementiev from Fotolia.com)

Outsourcing human resources functions can save time and money. However, it can also cause employees to feel disconnected with the company. According to an August 2008 study conducted by the Society of Human Resources Management (SHRM), the most commonly outsourced HR functions are background checks, employee assistance programs and flexible spending accounts. While outsourcing these functions may not cause a disconnect between employees, companies have the option to outsource other functions that would. When deciding which functions to outsource, it is important to weigh the disadvantages.

Loss of Human Factor

According to the same August 2008 SHRM study, the loss of face-to-face interaction is the biggest disadvantage of outsourcing. Employees want a familiar face when they have HR issues; replacing a human with an 800 number to call is not a positive exchange. For example, when answering questions of a personal nature or discussing a possible retirement, most people would feel more comfortable talking face-to-face. Employees want to feel secure with their personal information and decisions.

Climbing Costs

Cost savings is often considered an advantage of outsourcing, however, the August 2008 SHRM study found that 28 percent of the companies reported their costs had increased due to outsourcing. It can also take more time, especially during start-up. Proposals are accepted and evaluated, then processes must be outlined and put in place. This transition period can be costly.

In-House Expertise

Outsourcing HR functions discourages the development of in-house expertise. SHRM's August 2008 study found that 43 percent of the companies surveyed prefer to develop their own employees, rather than hire a third-party to do the work for them. Outsourcing important HR functions such as employee training and development can prohibit your HR employees from accomplishing their career goals. For example, hiring a third-party to conduct safety or compliance training could prevent an HR training professional from learning something new and challenging.

Change Company Culture

Outsourcing can definitely change the company's culture. It can drive a wedge between HR and the employees, which leads to trust issues. Outsourcing certain staffing functions, such as background checks, employment verifications or resume screening, may have no impact on culture. However, outsourcing more personal functions, such as employee training, new employee orientation or retirement processing, can change the company's vision drastically.

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