The way people manage a business has changed over the past few years. Executives nowadays are being asked to do more with less, which is why many of them turn to HR outsourcing services. Outsourcing human resources can sometimes provide a solution to some of the skill-related and staffing problems that many small and budget-strapped companies face.
For many of these organizations, staffing an HR department with full-time employees with the necessary skill and experience can be difficult. As a result, the HR departments of these companies can suffer from a lack of good employees or a gap in critical skills.
In reality, some of these companies don’t need to hire a full-time employee to address their pressing HR needs or to fill a skill gap. Instead, what they need is the services from an external provider. HR outsourcing services allow these companies to focus on their core tasks while entrusting human resource functions to professionals that can devote the right amount of time and expertise necessary for each organization.
What is HR?
Before you decide why you should outsource HR, you should first learn what human resources is. HR, in a nutshell, is concerned with human beings in an organization. “The management of man” is an important, yet challenging job because of people and their dynamic nature.
No two people are the same in terms of behavior, sentiment, and mental ability because they can differ widely as a group and are subject to many different influences. People cannot be altered and shifted like a template in a room layout or operated like machines because they think, they feel, and they are responsive.
HR is the process of managing people of a company or business using a human approach. The approach to manpower in human resources allows managers to view their employees as important resources. This allows organizations to use their manpower not only to provide benefits for the company, but also for the development, self-satisfaction, and growth of the people themselves. Essentially, HR is the system that focuses on employee development on one hand and effective and dignified management of people on another.
Human resources is also concerned with providing employees with human dignity. They into account their talents, potential, achievements, motivation, commitment, skill, abilities, and personalities, recognizing them as valuable human beings. If a company can trust and depend on the strength of its capital assets by drawing into their bank account, they can also trust and depend on their people by drawing on their commitment, talent, dedication, and capability.
Because many of the problems in an organizational setting are human and social rather than a technical, physical, or economic failure, human resources play an important role in the success of any company. As Oliver Sheldent puts it, “No industry can be rendered efficient so long as the basic fact remains unrecognized that it is principally human.
Human Resources Defined
Human resources can be defined in two different ways. The first definition of HR is the process of managing people in organizations in a thorough and structured manner. This includes the fields of staffing or hiring people, performance management, pay and perks setting management, change management, retention of people, and taking care of exits from the company. This is how HR is traditionally defined; it is simply a modern version of the Personnel Management function that came before it.
The second definition of HR is the management of people in organizations from a macro perspective. In other words, managing people in the form of a harmonious relationship between management and employees. This approach is focused on the outcome and objectives of human resource functions. It means that the HR function in modern organizations includes enabling people, developing people, and making the employment relationship fulfilling for both management and employees.
To summarize, human resource is a management function that helps a manager to recruit, a select, train, and develop the members of his or her organization. HR is the process of making effective and efficient use of human resources so that the goals set by the company can be achieved.
Why Outsource HR?
Organizations that choose HR outsourcing services choose to do so for many different reasons. Some of these situations and the reasons for them include:
- Some companies only hire essential staff. They have outsourced all administrative functions such as accounting, technology support, and of course, HR.
- Their HR needs have outgrown the expertise of their current HR staff.
- Their HR department has experienced a huge turnover and they do not have the time or resources to create the kind of internal HR department that they need.
- Their director/controller of finance or CFO is now consumed by accounting and finance functions so he or she no longer has the time to devote to HR tasks.
- They no longer have the financial resources for full-time staff members devoted to HR responsibilities.
But perhaps the main reason why organizations choose HR outsourcing services is that they need to comply with employment laws and regulations; even small organizations can face a hefty fine if they fail to abide by these laws. The employment regulations and laws can be even more difficult for organizations that have multiple employees all over the world because these regulations can vary from place to place.
Outsourcing HR services relieve the company from the concerns regarding these variables and save them a great deal of trouble. Some executive directors have even claimed that as soon as they began an HR outsourcing engagement, they started sleeping better knowing that the organization’s risk of noncompliance is reduced because all the employment-related compliance requirements are already being taken care of.
How Does it Work?
HR outsourcing can be used by some organizations as a long-term solution to meet all their HR needs or to supplement their existing HR staff. Other organizations can use HR outsourcing on a temporary basis to fill in until HR positions have been occupied by new hires or to replace HR staffers who are out on leave.
Outsourcing provides a solid temporary solution in some cases where infrastructure and systems can be implemented or updated while an outsourcing team does their daily responsibilities. This can also put the organization in a better position when these functions are brought back in-house.
With this setup in place, a company can hire a less-experienced and lower-salaried HR professional to take over the daily functions rather than establishing an infrastructure internally from scratch.
HR outsourcing can be arranged to perform their work on-site at a client’s office, off-site at an HR outsourcing provider’s office, or a combination of both. Usually, an off-site model is preferred because the company that hires them can save costs on office rent as well as office equipment.
Contrary to popular belief, a consultant often works better when he or she performs his or her tasks off-site as opposed to adhering to a fixed, rigid on-site schedule. In some companies, clients with time-sensitive issues are often more comfortable when they can call an off-site consultant anytime rather than having to wait for them to arrive at the office.
In-person meetings are still necessary, of course, especially for new-employee orientations, annual performance evaluations, and terminations. The bottom line is, no matter where the offices are located, a good HR outsourcing group makes itself available at the convenience of their client.
When Should you Outsource?
Lack of experience with employment law from your human resources department is certainly a reason to consider HR outsourcing services, but there are other reasons for outsourcing HR tasks as well. From simply needing to improve your company’s process to more serious legal and compliance concerns, here are a few example situations why you should consider HR outsourcing:
- A lack of trained, in-house HR professionals
- An outdated employee handbook
- An ineffective system for performance management
- A need to train in areas such as motivating employees, appropriate recruiting methods, and providing effective employee feedback
- A lack of effective processes for a company’s major HR functions and/or a lack of written policies and procedures
- High costs of benefits
- Questions about the competitiveness of employee salaries and/or benefits
- Concerns about complying with employment laws and regulations
- Difficulty in hiring or retaining employees
- Concerns about HR managers over the course of an annual financial audit
- An increase in complaints from employees
- One or more outstanding employee lawsuits
- Inadequate workers compensation insurance, improper employee classification, and assessment of fines for noncompliance for hour and wage laws.
When to Outsource and When not to
Making use of HR outsourcing services has several potential benefits:
It frees the internal HR staff of the company to focus on more important activities that provide more value than administrative, transactional tasks;
- it allows a decentralized structure that promotes flexibility and innovation;
- it relieves the burden of bureaucratic centralized hr administration;
- it enables the HR department to do its part in the overall downsizing effort of the company; and
- it encourages new ideas and approaches outside the organization.
Despite these benefits, HR outsourcing is not without its risks and hurdles. A survey of 125 medium- and large-sized companies found that the factors most frequently mentioned discouraging HR outsourcing were:
- Perceived higher cost and lower quality
- Fear of losing control
- Poor service provided
- Contractors with insufficient knowledge, and
- Unanticipated resources required to manage the relationship
These pros and cons often play out differently for firms depending on their size and their respective HR processes. Of the total market for HR outsourcing, large clients account for 55 percent, midsize organizations for 17 percent, and small companies for the remaining 28 percent. In general, large corporations are the primary customers for integrated HR services, while smaller firms only tend to outsource their payroll function.
What to Look for in HR Outsourcing Services
There are many different individual HR consultants that are available today. Hiring an individual consultant other than for a one-time project or for a specific task may not get you what you need. Different organizations have different HR needs, so an HR outsourcing firm with a diverse staff and skills that can handle all of the HR tasks at the level of expertise required is the best choice.
For instance, while there is no need to pay a high-level individual consultant to simply audit your personnel files, there is still a danger in employing someone who lacks the expertise to handle the issues required of them. Employing a firm with a lot of staff and various experience levels with unique skill sets can even save you on costs.
Why choose NN Road?
HR departments today no longer have to settle for in-house employees that sometimes lack expertise or to forgo additional staffing altogether because they lack the time and resources for a full-time hire. An HR outsourcing arrangement with NNroad can provide your HR department the flexibility, staffing, and skills needed so they can perform their day-to-day functions and comply with all the important regulations.
NN Road can save you time and money because they can do all the work for you when it comes to HR, especially when it comes to company formation services, company registration services, and business formation services. They will provide you with the attention you require in order for them to fit into your organizational culture. You can be sure that you will reach a solid agreement with NN Road regarding fees, hours to be worked, and so forth to make sure that the work you need gets done at competitive rates.
NN Road is the appropriate choice for your HR outsourcing needs so your organization, company, can pave the way to a long-lasting and mutually beneficial relationship. With more than 30 years of experience with human resources, NN Road aims to support its clients all over the world by providing reliable employment solutions, processing payroll, administrating benefits, and providing international support that follows legal compliance.
As an HR outsource service platform, NN Road selects and engages with only the qualified and professional service providers in your country or region to provide company formation, payroll benefits administration, work VISA applications, and accounting services all over the world.
You don’t have to worry about learning the ins-and-outs of the country you wish to expand to. Forget about the risk of infringing legal compliances. NN Road has the knowledge to keep you safe and running.