Making the HR Outsourcing Decision

Companies are looking for new innovations by evaluating where and how they can best discover experienced manpower to add exceptional value to their businesses. While some are still contemplating if outsourcing HR processes is the best way to go, others are backsourcing HR processes.

As streamlined human resource (HR) processes affect a company’s most valued advantage — its employees — HR professionals need to consider how such processes allow them to efficiently focus on essential actions that result in real strategic value.

Of late, there has been an increasing trend towards outsourcing of functions such as human resources, financial services and IT. While HR outsourcing can be defined in various ways depending on what service and relationship is agreed with the provider, it is often referred to as the act of fully or partially contracting out HR processes to a third party.

In contrast, HR backsourcing is the opposite of outsourcing where outsourced processes are brought back in-house.


Issues for Consideration in HR Outsourcing

Some HR activities that are most often outsourced include payroll, leave and claims. Outsourcing HR processes is like a double-edged sword; it can generate positive outcomes when done right or cause you to lose control over a portion of your business if not implemented correctly. The costs of liability and supervising dealings with the outsourcing provider require cautious appraisal. These are variable costs that characterise how the contract should be settled and the dealings with a service provider should be handled to achieve pragmatic outcomes that are in line with your company’s business goals.

The most vital consideration is not how to outsource, but when and why. A company that successfully outsources its HR processes can focus more on its core competencies and enjoy substantial cost savings. As operations may be significantly disrupted during backsourcing due to data migration and reallocation of resources, businesses should adopt outsourcing carefully, with a detailed and properly executed arrangement to ensure its success.

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