What Are 3 Advantages of Outsourcing?
Whether your business is small or large, brand-new or well-established, human resources (HR) is responsible for a collection of vital functions impacting every aspect of the business. It’s no exaggeration to say that HR professionals are like the glue holding everything together.
HR touches the entire employee lifecycle, including recruitment, talent development, compensation and benefits, performance management, operations, and exit strategy.
More companies are finding value in outsourcing some or all of their HR functions. Data from Everest Group research shows that the market for human resources outsourcing is experiencing 6-8% annual growth, which is expected to continue over the next three years. Everest Group’s report identifies “the most critical issues facing enterprise companies today are HR challenges such as the scarcity of talent, the high cost of HR operations, and providing employee experiences that are required to maintain competitive positioning.”
Recognizing the essential functions of HR, one way to ensure you “get it right” is to consider outsourcing HR functions. The first step in HR outsourcing is understanding HR outsourcing advantages and disadvantages.
By leveraging the services offered by companies like Milestone, several benefits emerge for businesses. These include:
- A bigger talent pipeline
- Cost savings
- better employee engagement/experience
Advantage #1: Access to Expertise
Considering the myriad responsibilities already on most teams’ plates, outsourcing HR is one way to provide a solid foundation for successful, efficient operations. New hire information, benefits and paid time off details, payroll information, employee feedback, and professional development tracking all fall within the purview of HR, and when some of those responsibilities can be shifted to a team of dedicated professionals, it frees up other teams’ bandwidth to better focus on their own specialties..
What is the benefit of outsourcing in terms of expertise?
When the HR department’s specialty functions are outsourced, dedicated experts can keep their eyes on the available data to better understand the current and past state of the organization, and make recommendations for dealing with issues that may arise or are anticipated. HR experts are able to keep in lockstep with changing compliance and best practices.
The level of expertise available to companies who opt to outsource their HR functions is the clearest benefit. Looking at the bigger picture, outsourcing HR functions enables your skilled workforce to focus on their core competencies, while also expanding the organization’s network of professionals and experts.
If knowledge is power, outsourcing human resources functions is one way to harness a more diverse and deep core to power the business.
Advantage #2: Lower Administrative Burden
Ensuring that pay and benefits (including PTO policies, retirement plans, employee stipends or subsidies, and company-provided technology like laptops or cell phones) are fair and equitable fall under the HR umbrella as administrative tasks. When these administrative tasks are assigned to the outsourced HR provider, it relieves other teams of those burdens.
What is the advantage of outsourcing in terms of the administrative burden?
Letting dedicated professionals research and manage these items not only helps reduce overhead and costs, and lets internal teams focus on their core competencies. If HR is being handled by employees who have full time jobs outside of HR, these tasks can be a drag on their overall job satisfaction which can often lead to mistakes and compliance issues.
Finding the right solution for your business requires you to think about immediate and long-term needs. In some cases, it makes sense to just outsource specific functions as needed; in other cases, the retainer-type arrangement will be more appropriate. Either way, it helps business owners avoid having to make these hires internally.
The bottom-line impact of any business decision is crucial to consider, so it’s only natural to feel a little uneasy with the thought of ceding a certain amount of control. So is it worth it? Well, 78% of respondents in a Deloitte survey stated that their outsourced HR provider met or exceeded their objectives.
Advantage #3: Better Employee Engagement Experience
A business is only as strong as its employees. And business moves fast. There are endless decisions to be made, processes to evaluate, and market changes to respond to. You don’t want employees to feel lost in the shuffle, so having an end-to-end process for managing the employee lifecycle can go a long way in keeping employees feeling connected, valued, and engaged.
The employee lifecycle, starting with recruitment and selection and ending with succession planning and exit interviews, is rife with inflection points that can make or break an employee’s relationship with the company. Outsourcing HR can help ensure that the employee experience is consistent.
What is the payoff in outsourcing employee engagement?
Since happy, engaged employees are absolutely vital to success, you’ve got to take care of your people. This includes onboarding them in a way that makes them feel confident and comfortable, offering a competitive salary and benefits package, creating effective learning and development programs, and leveraging data-backed performance management are additional areas you don’t want to leave to chance or approach in a piecemeal fashion.
Outsourcing HR helps businesses build an HR function that reduces turnover, and helps get employees happy and productive faster. Dedicated professionals can keep the employee lifecycle humming along smoothly for current and future employees.
Make HR A Business Advantage with Milestone
Hopefully we’ve answered the question “What is outsourcing and its advantages?” for you. Whether you’re just starting research HR outsourcing advantages and disadvantages or have a pretty solid idea of what functions you want to outsource, let’s talk. We are able and ready to offer support to companies looking for a new way to handle the complexities of human resources.
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