Outsourcing the HR Function: Pros & Cons of HR Outsourcing
As a business owner, you know that having employees comes with a host of responsibilities.
There’s hiring, benefits, payroll, onboarding, and training, establishing a culture, and hiring and attracting top talent — you have your hands full.
These and other tasks fall under human resources. And when HR is managed smoothly, you and your staff can focus on your primary responsibilities to help the business grow.
As a business owner, you may be wondering if you’re better off handling HR in-house or outsourcing and whether outsourcing is even something you can afford.
This is a big decision that affects the future of your business so the below comparison will help you to make the right decision.
In-House vs HR Outsourcing
Option One: Manage HR In-House
HR In-House Gives More Personal Touch
Helps you to maintain personal repo with employees but makes it challenging to find the right potential candidate in-house and have expertise in all HR areas.
Also, in small businesses HR is people dependent function as you do not have a backup for resources and when they leave, you will have to again hire new HR resources and train them so they can do their job effectively.
In-house, HR can’t necessarily solve everything – they May not have the right knowledge (or access to it) to solve the problem appropriately.
HR has multiple sub-functions to manage like Recruitment, Payroll & compliance, HR Operations, Performance Management, Talent Management, Employee Engagement etc… and one person having exposure to everything is next to impossible.
Eat up founder’s energy – 45% of small business owners spend about one day a week or more on HR administrative issues.
Even if you hire HR in-house, small businesses can only afford mid-level HR professionals and they have limited knowledge hence they can not manage the HR department independently and hence founders have to get involved in HR activity.
The risk is entirely yours
All the employee-related liability and compliance concerns are simply too high if you’re not well-versed in employer laws and HR rules.
It will be very costly for small businesses if they try to manage the entire HR and compliance in-house and if it is not managed well it will have huge liabilities for the company.
Cost of HR Resource
The minimum cost of mid-level HR professionals is between 35k to 50 K per month.
It is difficult for one person to manage complete HR responsibility and it is always costly and ineffective to manage non-core business activity in-house.
Option Two: Outsourced HR to a professional HR agency
Productive from Day 1
Trained and Exp. HR resources get the job done faster. With an outsourcing partner, you get access to a professional HR team who does not need any training to start the work and they become effective from day 1.
Access to trained HR professionals
Outsource partners have the knowledge and resources to solve all the problems appropriately.
Since it is the core business of an HR outsourcing partner, they have a team of trained HR professionals who have the expertise and knowledge to manage HR functions for many small organizations.
Your critical, but non-core work gets done
When you outsource HR and other critical but tactical functions to the experts, you are freeing up your time and your staff’s time.
You should focus on growing your business rather than creating expertise in-house for your support functions or non-core activities.
Risk is divided
Distributing HR tasks to the right HR Partner helps Your business to get more specialised expertise, outsourcing non-core activities helps you to distribute your risk than keeping everything in-house.
When you work with a partner your risk is divided as they own the responsibility of managing the outsourced function independently.
HR Outsourcing Save Overall HR Cost
Outsourcing is not always costly, roughly the cost of 50 people in HR Management comes to 20K per month (Onboarding to exit process Management).
Emgage HRMS works with Small and mid-size businesses as their extended HR team to help them to simplify their complete Human resource Management and help them to manage their workforce professionally.