Is it better to outsource HR?

Companies exploring options to improve employee efficiency and effectiveness often look to external professionals to manage what are otherwise considered internal functions. These experts can come in many forms, like accountants or bookkeepers, creative agencies, or even full-suite human resources teams. Business owners exploring their options for external HR support may discover outsourced HR services and wonder: “Is it truly better to outsource HR?”

Let’s take a deep dive into the pros and cons of outsourced HR services—and why outsourcing just might be the right solution for your growing business.

Why is outsourcing important to human resources management?

Simply put, many small and midsized businesses don’t have the means or true need to employ a full-service internal HR department. Outsourcing enables businesses to gain the power of a team of HR professionals without the same overhead cost that they would otherwise incur if they brought the same expertise in-house. This is why outsourcing is a great way for business owners to maintain necessary HR processes without sacrificing hard earned revenue. Sure, outsourcing comes with a cost, but it’s often much less than the total cost an employer pays an employee, when you consider salaries, payroll taxes, and benefits.

The objective of HR outsourcing services is to provide the basic and complex human resources functions without the overhead cost that inhouse HR teams might require. For small and midsize businesses, justifying the expense of a full HR team isn’t easy and finding talent that can handle the many silos of HR work can be a challenge. What are the standard functions of an outsourced HR service? Here’s the top 5 types of HR outsourcing functions:

1. Documentation and Compliance
2. Payroll Administration
3. Talent Acquisition
4. Onboarding and Training
5. Performance Management

The pros and cons of outsourcing HR functions

Pros

Saves money

The thought of paying an external team to handle HR duties sounds expensive, but considering what it takes to maintain headcount for those duties, it’s a fraction of the cost. Outsourcing allows businesses to pay nominal fees for an entire team of HR pros without paying for their salaries, payroll taxes, or benefits.

Frees Resources

As with any major function of a business, HR work encapsulates a large spectrum of tasks and processes. When internal resources are able to spend less time with tedious HR tasks, they are able to redistribute their talents to boost the business, it’s talent, and align both on strategic initiatives.

Provides Expertise

If a business doesn’t have inhouse expertise, outsourcing can provide resources to fill those gaps, effectively providing even small businesses with the attention and support of large-scale HR teams.

Cons

No internal expertise

Outsourcing will ultimately mean that there is no longer a need to support those outsourced services internally. For many small and midsize businesses, this may mean relinquishing the headcount or resources to house internal HR expertise. This also sometimes feels like removing the human element in human resources, as there is no longer a dedicated internal source who understands the business, it’s people, and the goals for the future. While this is a con, it’s directly tied to what’s otherwise considered a bonus: reduced headcount and overhead expenses. Plus, a reputable outsourced HR services provider will serve as an extension of your team and take the time to learn your company well.

Longer response times

Longer response times can sometimes be identified as a pain point that comes with outsourcing. When employees need assistance with functional tasks or policies, it can seem easier to walk across the office to the HR department, or pick up the phone to call a dedicated internal HR representative. Most outsourced HR services are managing multiple clients, which means they may have slower response time. It’s important to note, however, that a quality HR service will be able to provide a business with exactly what it needs—especially a firm that embraces modern communications technology that erases distance and encourages collaboration. This has only become easier with the increased adoption of remote work across the board since 2020.

How does outsourcing affect the role of human resource professionals?

There are many facets to HR work. Outsourcing some components doesn’t mean that you can’t keep others to be performed internally. Many small and mid-sized companies prefer to outsource logistics tasks to external HR services, like managing employee payroll and benefits, while keeping HR strategy and employee relation activities internal. However, companies that don’t have a dedicated internal HR Professional can lean on certain outsourced HR providers, like Milestone, to fulfill the more human element of Human Resources, like employee correspondence, health and safety, talent development, employee relations, and even HR Strategy. One of the biggest reasons for investing in outsourcing HR functions includes the freedom to choose which parts of an organization’s internal functions are better left to dedicated services. A combination of internal and external approaches allow leadership to feel confident their employees are taken care of, the team is being developed, and that the organization’s operational and strategic needs are addressed.

Is it a good idea to outsource HR? Yes! The perks that come with outsourced HR services often outweigh the expense, which is typically the largest reservation business owners have. By outsourcing, businesses are able to focus their internal talent and resources towards other business-boosting initiatives. Ready to see how outsourced HR services can help your business thrive? Contact us today. Milestone Business Solutions offers tailored HR services that are designed to make our clients’ lives easier and the businesses they run more successful.