In our previous blogs, we covered the topic of HR outsourcing and the common benefits that businesses experience after they choose this solution. Today, we will be looking at some of the hidden and uncommon benefits that businesses experience after delegating either some or all of their HR functions to an expert HR solutions provider.
What Functions Come Under the Umbrella of Human Resources?
This is probably the biggest, most important function of any human resource team, which is why it also demands a huge chunk of their attention as well as resources. Most businesses outsource recruitment to experience great benefits in terms of time and money saved. Outsourcing recruitment changes everything for a lot of businesses. They find more time to solve complex business problems. They save a lot of money. They get easy access to top talent networks. They can upscale or downscale their hiring on-demand, overnight, without paying extra. The list goes on. Global competition for most businesses is fierce. Therefore, businesses take advantage of areas they can leverage to improve efficiency and reduce costs to allow more time and human resources to focus on revenue-generating activities.
- Payroll Processing:
Payroll is not something that most HR teams are required to take care of, but it can very well be an integral part of some HR teams that are tasked with processing payroll. This scenario is usually seen in companies with fewer employees. HR generalists are required to calculate and process payroll for those employees every pay cycle. The biggest disadvantage such companies face in these scenarios is poor compliance management. Every established state/nation has its own set of employment-related laws and regulation laid out that have to be complied with if people who work in those states and nation work for your business. With constantly changing regulatory laws, it becomes extremely challenging for HR generalists to keep up with them. In the case of an audit, any inconsistencies can result in huge fines that have to be paid by the business in full and within a specific period.
- Compensation and Benefits:
Compensation and benefits are probably the most critical function of any business. The way employees are compensated and benefitted is directly related to business growth and individual productivity. Bad compensation and benefits management can be because of various problems in an organization – negative work culture, high turnover, dropping productivity, low employee morale, etc. To add more complexity to these problems, it can be very difficult to detect and resolve a C&B problem because solutions that work for one organization do not necessarily work in other organizations. People behave differently in different environments and circumstances, which makes problem-solving even more difficult than it seems to be.
- HR Business Partner Services:
HRBPs are the oil that keeps the engine running smoothly. Their areas of expertise include grievance management, leave management, coaching, regulation, compliance, organizing engagement activities, travel and expense management, and much more. They act as a direct link between employees and the HR department, which is why it is so important to hire the right HR Business Partners who have the right type of experience in managing people. One Gartner study also found out that organizations that hire high-performing HRBPs improve employee retention by up to 24%!
- Learning and Development:
This is a new function that has taken off in recent years. Business growth has skyrocketed in almost every other industry in the past decade or two, thanks to constant improvements in technology. This growth in business resulted in competition getting fiercer. This eventually led to the boom in implementing learning and development programs for employees because businesses quickly realized that they could gain a real competitive edge if their employees kept learning and sharpening their skills as time progressed. Today, learning and development is a $400 billion dollar industry that keeps on growing. HR teams, outsourced or otherwise, all around the world hire top-notch L&D professionals, as they are called, to conduct training sessions and courses to keep their employees in sync with the progress that happens in the industry.
Hidden Benefits Businesses Experience After Outsourcing Their HR Functions
- Turning Variable Costs into Fixed Costs:
Having this ability is no less than having a superpower, especially for businesses that are newly starting up or for businesses that operate on very tight budgets or time constraints. First, let us define what cost means. Investopedia defines cost as “any expense that a business incurs during the manufacturing or production process for its goods and services. Put simply, it is the value of money companies spend on purchasing and selling items”. Furthermore, fixed costs are costs that do not change with a change in production output, while variable costs are costs that change with a change in production output. Putting these definitions in the context of the human resource department and its functions:
Example: Your business has 5 HR personnel to manage 100 employees who produce 500 units per month. Your business grows with time, and now you have to supply 1000 units per month, which automatically means that you will need 200 employees and 10 HR personnel to meet that monthly demand. Therefore, the time, money, and resources you will spend on your HR team will increase drastically with respect to the increase in output. This is a variable cost. When HR is outsourced, this variable is cost converted to a fixed cost depending on the rate of change.
- Generate Cash by Transferring Relevant Assets to the Providers:
In some outsourcing arrangements, cash can be generated consistently by transferring relevant assets to the outsourcing providers.
Example: Assets like data centers and highly-specialized, custom-built proprietary software applications can be leased out to third-party outsourcing providers in order to get the job done for your own employees as well as other clients that the provider may have.
- Gain Market Access and Business Opportunities through the Provider’s Network:
Wikipedia defines the network effect as a “phenomenon by which the value or utility a user derives from a good or service depends on the number of users of compatible products. Network effects are typically positive, resulting in a given user deriving more value from a product or a service as more users join the same network”.
Example: Many businesses that have never experienced the wonders of recruitment outsourcing never realize the doors that open for them once they choose to outsource. As the Pareto principle dictates, a typical recruiter will do 80% of manual labor in searching for great candidates, which will result in a 20% success rate. With an outsourcing provider, your business gains instant access to hundreds of exclusive talent network pools that were/are carefully developed and maintained over the past few years or even decades.
- Reputation Gain Just by Association:
This is a powerful yet hidden benefit that many businesses experience when they choose to outsource. Working with a prestigious partner automatically improves the reputation of every other partner that works with them in a business setting.
The formula for the successful functioning of an HR outsourcing partnership is based on communication, commitment, and mutual trust. Outsourcing some or all HR functions could mean more costs but outsourcing to a skilled vendor like Exela HR Solutions, and using the services of that vendor correctly, can save an organization a lot of time, money, and resources in the long run. The key is to manage the relationship well. This requires establishing a collaborative method of working with your outsourcing partners to build trust and open communication. It can be difficult sometimes to get started, but it is definitely achievable by setting forth all expected benefits in a written business case that includes qualitative and quantitative targets and by using practices that have had a history of producing successful outcomes consistently and accurately.
Need help in HR outsourcing? Exela HR Solutions offers world-class services in recruitment, global payroll processing, compensation and benefits, HRBP service, and learning and development outsourcing. Get in touch with our experts today to learn more.
Sources: google.com | en.wikipedia.org | reddit.com
DISCLAIMER: The information on this site is for general information purposes only and is not intended to serve as legal advice. Laws governing the subject matter may change quickly and Exela cannot guarantee that all the information on this site is current or correct. Should you have specific legal questions about any of the information on this site, you should consult with a licensed attorney in your area.