HR is one of the most important functions in an organisation; it doesn’t matter whether the organisation is large or small. It ranges from the selection of employees and compensation to legalities and human resource management. However, handling the department within the company may be complicated; especially for companies that are starting and have few funds. That is when the concept of HR outsourcing proves useful. Outsourcing to the best HR outsourcing companies for small business means that some tasks are delegated to external specialists; in this case, a business can work with specialised providers and not worry about some essential HR functions.
In this blog, let us discuss about the advantages and disadvantages of HR outsourcing, its positive impact on the small businesses and the role of provider such as phoenix HR and payroll services.
What is HR Outsourcing?
Outsourcing HR is similar to when an organization hires a third party to complete certain duties like paying employees, hiring employees, training employees, etc. Outsourcing HR for small business is especially worthwhile because of the specificity of the opportunities most of these companies provide for small organizations. The service provider will assist in rationalizing processes, cutting expenses, as well as conforming with legal requirements in the sphere of labour relations.
The Pros of HR Outsourcing
Reduced Cost – This is perhaps the biggest benefit since hiring another company to manage the Human Resource department will help to eliminate costs in the organization. Small business enterprises rarely afford to develop a competent HR department as they are undeveloped institutions. In- house HR can sometimes be costly when it comes to hiring, training and retaining of the professionals. With the outsourcing of HR functions, companies are relieved the burden of having to pay employees through their salary, bonuses, and other expenses among other overhead costs of having a formal HR department, but they get to hire the services of a team of specialists in that given area at an otherwise affordable price.
Expertise -As mentioned earlier, there are outsourcing firms that deal specifically with small business, which hire Human resource professionals willing to devote their time in identifying compliance with Human resource standards. To be able to effectively and efficiently meet your employment needs effective and efficient, these providers keep tabs with changes in the employment laws. For example, a Phoenix providing HR and payroll services will include specialized support for tax issues, award rates of pay, and occupational health and safety, which are daunting for small business to handle on their own.
Efficiency – Another advantage of outsourcing of the HR tasks is an increased efficiency of the work. Some common administrative tasks like payroll processing, document storage and record, handling of employees’ benefits, etc. are often executed with the help of sophisticated program and integrated business processes. By doing so, your work becomes efficient, and less prone to mistakes; your team is able to work on more important strategic business processes instead of getting bogged down with what is essentially mundane work.
Scalability – The needs of the human resource department will also change with growth of a business. This means that outsourcing holds the added advantage of being easily scalable depending on the needs of the calling organization. When you are recruiting new workers, entering new regions, or changing employees seasonally, different outsourcing human resources can adapt.
Risk Management – Compliance with other labour laws and regulations is a bit challenging not only due to their numerous change. Non-compliance is punishable by sanction, legal action, and can bring a company serious bad image. Outsourcing of HR services minimizes these risks because your business will be subjected to the laws and regulations by the providers. For example, Phoenix HR and Payroll Services provide expertise in various legal measures in employment laws in Australia thus minimizing on legal compliance costs.
The Cons of HR Outsourcing
It’s important to note that like any other model of business functioning, HR outsourcing also has certain discords. Here are some potential challenges to consider:
Lack of control – It is common knowledge that outsourcing implies the same; it means letting go of that certain degree of authority over that operation. As mentioned earlier providers want to have a symbiotic relationship with your business, meaning they want to achieve the same objectives as you yet sometimes they come up with methods or have priorities that may be slightly different from those of your business. There have to be no misunderstandings and for this, managing must work out the communication and SLAs.
Small Business Options – While some companies that offer Human Resource outsourcing services may provide comprehensive services that fit your business needs perfectly, others provide services with very little customization. Larger service providers such as Phoenix HR and payroll services operate on package deals while small providers or those who have not specialised in this field may not be in a position offer special packages.
Data Security Concerns – Risk arising from use of a vendor for implementing the HR functions entail provision of employee data to this third party. This can bring in question the necessary standards of data security and confidentiality. To manage existing risks, use suppliers with well-articulated data protection policies and make sure they adhere to the local legislation, for example, the Privacy Act in Australia.
Employee Resistance – Outsourcing of an employee’s duties is likely to attract resistance from the employees by the time an external firm is hired to offer the Human Resource services. These concerns should be addressed by further explanation of what is to be gained by outsourcing and by ensuring that customers are comfortable with how their data will be used and that the services being outsourced will be of improved quality.
Control Over Services – If your business depends on a certain provider for services then you will end up being controlled by the Provider. This is because if the provider’s performance decreases, or if they shut down their business it will affect the operations of your business. To avoid this risk it is always wise to source with more than one provider or to have a backup supplier.
Implications – Although outsourcing is generally cheaper, this comes with added costs if the provider’s cost model is complex. Always examine the contracts to make sure that you are not sucked in for other hidden charges; always request for a bill break down.
Conclusion
There are many advantages associated with the HR outsourcing in which small businesses can advantage from cost advantages, expertise, and efficiency. Companies such as Phoenix HR and payroll services offer the clients comprehensive services that are suited to meet the needs of business entities in Australia. But that it should be noted that there are possible disadvantages of using this service such as loss of control and also data security issues.
