HR outsourcing is a hot topic and a growing industry. Indeed, by outsourcing redundant tasks from your human resources department, you will have more time to focus on strategic and critical tasks for the company. HR outsourcing is facing a bright future as more and more companies start to see the benefits.
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HR Outsourcing is the Long-Term Hiring of an External Service Provider
The external service provider manages one or more HR processes. Today, more than two-thirds of companies implement HR outsourcing for at least one activity and studies show that this market is growing at around 10% per year as more and more companies decide to implement HR outsourcing.
The process most prone to HR outsourcing (used by 30% of companies) is payroll management but more and more companies are starting implement the HR outsourcing of higher value-added processes such as training (which is the second most outsourced HR activity).
Is HR Outsourcing Risky to Implement?
The first risk to consider when it comes to implementing HR outsourcing is the confidentiality risk. But what is the risk of a confidentiality breach of information from within the company? Employees are the first ones to be interested in the salary of their superiors or managers. The information is less sensitive and therefore less interesting for an external person who does not personally know the company employees.
Secondly, HR outsourcing is in essence placing skills outside the company, so it can be perceived as a risk for the sustainability of the company. It is therefore a question of choosing the right skills for outsourcing: do not implement the outsourcing of skills that add value to the company.
The relationship with the provider can sometimes be seen as a dependency on the provider. However, the relationship with the provider is not very different from the relationship with a supplier for example: it is a two-way street and the provider is also dependent on his client and needs to do his utmost to satisfy him to ensure the sustainability of his activity.
The last risk when implementing HR outsourcing is the one that seems more serious and difficult to grasp: that of the poor involvement of the provider in the corporate culture. Employees of the same company share uses and common values that are not necessarily those of the service provider. In order to mitigate this risk, it is important to implement HR outsourcing to a provider who has values that resemble those of the company and, above all, to build a true and lasting partnership.
Why Implement HR Outsourcing of Certain Activities?
Some HR activities consume a lot of time, resources, and money. Implementing HR outsourcing promises a reduction of costs and allows a company to focus on the development of the key skills that produce a marketable product or service. Just like you may outsource certain specialties such as advertising to marketing agencies to optimize your ad spending, yyou may also want to use specialized HR services or HR virtual assistants to optimize your HR processes.
Implement HR outsourcing so as to benefit, through the provider, from the expertise and experience gained from other projects and other companies. You will be able to hire the services of specialists that you may not be able to afford to recruit internally. This is reassuring in a field where regulations are very complex and evolve regularly.
In addition to certain expertise, the provider will also bring a new and critical eye to your processes and possibly help to improve them. This in particular is where HR outsourcing differs from subcontracting. The service provider does not just execute the orders of the company that calls on him, but he must be proactive and guide the client with advice and methodology taken from his experience.
Finally, implement HR outsourcing so as to benefit from a real on-demand service adapted to your needs. You will have access to the latest tools and technologies and can trust someone who knows how to use them. Remember to delegate, for example, the management of part of your information systems, typically the maintenance of your HRIS.
Understanding the HRO meaning helps companies distinguish between which HR functions are essential and which are better suited for outsourcing. This way, organizations can streamline their operations and focus their internal resources on activities that provide the most value.
Successfully Implement HR Outsourcing
In conclusion, to implement a successful HR outsourcing, you need to respect 5 golden rules:
- Carefully choose your partner and the tasks assigned to them
- You have to know how to keep a limited HR department and call on the partners of choice when a particular expertise is needed (technical, organizational or legal)
- Outsourcing low value-added HR activities helps you to focus on more strategic activities such as talent discovery and talent management
- Distinguish between what is important and what is strategic: Payroll management is fundamental because mismanagement will result in employee mistrust and legal risks, but it is not a strategic activity and has no impact on the company’s performance
- Finally, to successfully implement HR outsourcing, closely monitor and manage the collaboration by establishing precise specifications and watching closely the service provider’s activity.
