Advantages of Outsourcing Human Resources

6 February 2013
Author Christa Summers

Assistant Editor's Note: The following guest post, by Christa Summers, Consulting Associate at Moementum, was originally published on their company blog and is re-posted here with there full permission.

When do companies typically outsource their Human Resources?
Many smaller organizations do not have internal people focused specifically on Human Resources. It can be difficult for a company to internally handle the comprehensive and sometimes complex issues that fall under the HR umbrella. Utilizing outsourced HR services can provide multiple advantages including helping an organization minimize risk. There are many laws and regulations that impose requirements on employers, including employers with as few as 1 to 5 employees. Something as simple as not paying overtime properly can escalate into a full investigation of a company if an employee files a claim. Outsourced HR specialists can complete HR audits to look for potential liability within a company and make sure they are in compliance with postings, record keeping, equitability, etc.

Additional benefits to outsourcing HR include helping the organization to minimize and control overhead costs, improve efficiencies, and experience increases in productivity through employee training and development.

Why is it good for a company to have an employee handbook?
For the employer, an employee handbook allows the company to outline useful and necessary guidelines, policies and procedures in a concise and easily accessible format. The handbook is also a tool for managers to reference when dealing with employee performance issues, and should outline legally defensible policies and procedures that govern the workplace.

Lack of communication and/or lack of guidance and structure are often ranked high in employee surveys regarding employee dissatisfaction in the workplace. Employees want input and may actually be more productive when provided guidelines, policies and structure. Not every company is the same, so especially when a new employee comes in they like to know what is expected of them. Things like, “Is there a dress code? Are the hours flexible? What are the rules?” Employee handbooks are beneficial for both the employee and the employer.

Is it hard to be an outsider in a company doing HR?
Just the opposite is typically true. HR consultants are able to come in to an organization with a fresh perspective and operate outside of the politics and norms that exist. When people are immersed in a culture it can be hard to see problem areas or new ways to approach concerns and create a great working environment. Given the appropriate circumstances, employees may also be more willing to open up and provide honest feedback to a neutral party such as a consultant than to their own managers.

Can outsourced HR help overwhelmed internal HR people?
Yes, sometimes HR consultants can be an excellent resource for existing HR staff when the job is too big for a tiny team, but too small for a multi-functional HR department. In these instances consultants partner closely with the HR staff to execute their vision. Often consultants can help with time intensive activities such as recruiting, performance management, and soliciting employee feedback.

If a company loses their HR person can a consultant step in?
Bringing in an HR consultant to serve as HR Generalist, HR Manager, or even VP of HR for short or long-term stints can be a cost-effective alternative during functional transitions. As a company grows, it is challenging to stage HR resources according to the scale of the organization, and as a result, many lack the level of HR help they need. Utilizing a consultant can buy an organization time to audit their HR needs, implement new programs and search for the right person to fill the appropriate internal HR role.

What should organizations do to retain employees?
Retaining great employees helps not only morale, but also the bottom line. Current research shows that to replace an employee costs approximately $3,400 for every $10,000 in salary paid to an employee. This can add up quickly when an organization is experiencing high turnover. It is important for companies to realize that not everyone is motivated by money alone. Sometimes an employee needs a path to more challenging work, sometimes they need flexibility or additional training. Sometimes they need to feel more engaged with the vision of the organization. It is critical for employers to seek input from their workforce and take action based on that input in order to increase or maintain high employee morale and retain great employees.

Can you give me an example of a flexible employer?
A flexible employer is one that will solicit input and factor in the needs, wants and desires of the individual employee as much as possible. For example, a local organization recently completed a performance review of a high level employee. During the 360º review the person was asked what really motivated her. To her, the most valuable motivator was additional time off, not money. The management team was able to create an incentive program for her where with each level of achievement she meets, she receives cash as well as incremental amounts of increased paid time off.

Is that what you mean by “Creative HR”?
People are such an important part of the success of any organization. Why wouldn’t you be creative in achieving both satisfaction and high performance? Employers, employees and especially HR representatives must be dynamic, flexible and willing to step out of “this is how we do things” to be successful in today’s marketplace. The days of the stereotypical HR person in the polyester blouse with a bow, doling out regulation requirements are gone…hopefully.