What are the pros and cons of outsourcing HR functions?

The Milestone Team March 1, 2022
What are the pros and cons of outsourcing HR functions?

Human resources is a vital function for businesses, with responsibilities ranging from hiring new employees, to making sure that labor laws are followed, to succession planning for executives. In order to cover all the essential HR functions, some businesses turn to HR outsourcing solutions. 

Let’s take a look at the advantages and disadvantages of outsourcing human resources functions to see if this solution is right for your business.

What are the advantages of outsourcing hr functions?

The advantages of outsourcing HR functions include access to expertise, potential cost savings, the ability to focus on core competencies, and an expanded network of relationships. 

What are the advantages of 
outsourcing HR functions?

Access to Expertise

Companies that specialize in HR are able to give advice and expertise for any situation that may arise. You don’t know what you don’t know, and HR covers a wide range of legal and regulatory requirements for businesses. Outsourcing your HR can give you the resources you need to have a top-notch HR department that follows best practices. 

Potential Cost Savings

A study done by PwC found that organizations managing payroll, workforce administration, time & attendance, and health & welfare benefits in-house spend on average 18% more administering these functions than organizations that outsource these functions. And, in fact, organizations outsourcing multiple functions to a single vendor had on average 32% stronger cost-efficiency versus those using multiple vendors or a top-of-the-line in-house approach. 

Focus on Core Competencies

Outsourcing HR can give you back the time to focus on your core competencies. Most companies are not in the business of HR and don’t spend the time necessary to understand compliance, so outsourcing administrative functions and HR tasks can free up time and effort that can be directed back into what you do best: growing your business.  

Expanded Network of Relationships

Due to the fact that outsourcing companies are dedicated to providing HR services, they have a wide network of relationships with different providers. These relationships can help you find the benefits and perks that you wish to provide your employees often at lower prices. 

What are the disadvantages of outsourcing hr functions?

There are a few potential disadvantages of outsourcing HR functions such as loss of control, the business impact of outsourcing HR functions, and the worry of hidden costs or fees. 

What are the disadvantages of 
outsourcing HR functions?

Perceived loss of influence 

A business owner may be concerned that they won’t have influence over how HR is done. The right HR partner should be an extension of your team and culture. They should blend in and feel like a part of your team. 

This fear may be realized if an outsourced HR company sends work to a team in a different time zone that can’t effectively communicate with your team. Or, they may use the same general templates regardless of the client resulting in HR that lacks personality or doesn’t represent your company culture. At Milestone, we strive to be a true business partner that is an extension of your own team.

 Difficulty communicating

It’s great to be able to walk down the hallway and chat with your HR team whenever you want. Some business owners may worry about the implications of HR outsourcing on HRM functions and how that will affect the workplace. 

While it is nice to have an internal team, the reality is that business is becoming more and more virtual. A recent Gartner survey revealed that 82% of businesses that responded intend to permit remote working some of the time as employees return to the workplace. At Milestone, we provide you with a dedicated point person who will work closely with you on the solutions you need. We find that working virtually is actually an advantage as it allows us greater access to a workforce that is increasingly filled with remote employees. 

Hidden Costs and Fees

Before entering into an agreement it’s good to understand the true cost of the engagement. Great partnerships start out transparent. Hidden fees and costs should be a red flag.  

It’s important to work with a trusted and reliable company so you understand the costs going into the relationship. Here at Milestone, we provide customizable, flexible packages that have no nasty surprises or sudden bills that will come out of nowhere. 

What is the benefit of outsourcing HR functions for small to medium sized companies?

For small and medium companies, outsourcing HR functions is extremely valuable. In fact, more than 52% of small businesses planned to outsource functions in 2019, primarily to increase efficiency and access expertise. Many small and medium-sized companies struggle to hire dedicated HR professionals due to the large price tag of salaries and benefits, so outsourcing allows businesses without HR practices an easy and cost-effective way to institute HR policies and procedures. 

Outsource your HR functions confidently with Milestone

At Milestone, we know how important your HR functions are to the success of your business. As a trusted HR and Accounting partner for businesses of all sizes, we are dedicated to helping your business grow and thrive. Our team of highly experienced HR professionals is ready to provide you with the expertise you need and the resources you require. Our packages range from monthly HR support, strategic HR initiatives to employee engagement programs, and more—all customizable to fit your business needs. Contact us today to get started with your HR solution.

Related Content

employees talking about startup employee benefits

Startup Employee Benefits – Compensation and Health Benefits for Startup Companies

At its core, your startup or small business should include the following benefits: Health Insurance (vision and dental), paid time ...

how to pay employees in a startup

How To Pay Employees in a Startup

At a fundamental level, HR management includes any tasks that help optimize your most valuable resource—your people!

What are the 4 fundamentals of HR

What Are the 4 Fundamentals of HR?

At a fundamental level, HR management includes any tasks that help optimize your most valuable resource—your people!

Stay in the know