Outsourcing the HR Function
Outsourcing is a technique used by some companies in which they transfer or contract out certain work to external companies, typically in an effort to save costs. Outsourcing the human resources (HR) function involves the transfer of the tasks usually performed internally by human resources employees to external companies. Depending on the structure of the organization, the human resources office often handles such matters as managing employee compensation and benefits, recruiting new employees, ensuring compliance with employee rights and safety laws, overseeing employee relations, and often the provision of certain employee training.
There are advantages and disadvantages associated with outsourcing the HR function. In addition to the potential cost savings, outsourcing the HR function provides companies with a means of garnering expertise in the growingly complex areas of employee rights and employment compliance without hiring additional staff. Outsourcing the HR function may also give companies, whether large or small, a layer of protection from some lawsuits. By outsourcing, a company can more readily focus on its primary purpose and avoid potential distractions.
Outsourcing the HR function, like any outsourcing, creates distance between the employees of a company and the outside contractors. This distance may lead to a culture mismatch between the company and its contractor, delays in processing, and reliance on another company to manage a critical function (i.e., loss of control). The best HR managers align their actions with the organization’s strategic goals. HR managers typically have organizational and financial knowledge that comes from being a part of the company. Can the outside contractor provide the necessary alignment with the company’s strategic interests? This outside contractor may or may not be as dedicated to making process improvements as your own company is, and so, particularly when in a long-term contract, may not expend resources to improve the quality of service.
For multinational organizations, there are special challenges. Best HR practices may not transfer effectively between countries due to cultural and institutional differences. Can the outside contractor adapt to local practices and customs while standardizing the best HR practices across country borders?
These, and other, advantages and disadvantages of outsourcing the HR function should be weighed carefully and discussed prior to action.
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