In today’s challenging business environment, many businesses are turning to outsourcing as a way to reduce costs. It is not uncommon for firms to outsource functions such as IT, payroll, back office functions etc. Now, however, firms are beginning to consider the potential of outsourcing human resources (HR).
The benefits to a business are simple: lower operational costs and increased efficiency, as the outsourced provider will generally commit to a service level agreement (SLA). However, is outsourcing HR really a viable business solution?
A business can save money by outsourcing HR: tax contributions, employee benefits, desk space etc can all be saved as a result of removing the need for direct employees. In the quest to secure the best value for money, some businesses outsource their HR function to offshore firms that have considerably cheaper labour costs than the UK. This saving can then be passed on to the client.
More Efficient Service
Because of the specialisation of these third-party service providers, the quality of service required by a company can be met consistently. In an outsourcing scenario, front line services would still need to be delivered in the UK (assuming this is where the business is based). However, customer service, back office functions etc can be delivered efficiently from offshore locations using high speed internet connections, phone systems, video conferencing, email etc.
Just like any other aspect of running a business, outsourcing HR has its positives and negatives. The positives, as we have identified, are the cost savings and increases in efficiency. On the negative side, outsourced HR people do not know the business as well as an in-house HR team would. As a consequence, they won’t understand the strengths and weaknesses of the firm’s team and may struggle to deliver real value.