Outsourcing HR: Does It Make Sense for Your Business?

Outsourcing HR: Does It Make Sense for Your Business?

Assessing whether your organization should outsource HR functions requires careful consideration.

From managing the onboarding of new employees, to administering the payroll process, to ensuring compliance with local, state and federal regulations, today's human resources departments carry an increasingly heavy administrative burden.

In fact, given the onslaught of important tasks that the department assumes, HR leaders often become overwhelmed, with burnout a very real possibility. Outsourcing HR functions can lessen that burden and allow the department to focus on its core competencies. Here are some tips to help your business evaluate whether outsourcing HR makes sense.

Determining Which Tasks to Outsource

The first step to outsourcing involves determining which tasks it would make sense to assign to a third party. In order to identify such tasks, initiate a discussion with HR leadership to assess their interest in outsourcing work. As part of the effort, work with the HR leadership team to prepare an inventory of the work the department currently performs, including the key attributes of each task, their complexity, the time spent and the cost incurred to complete them. In addition, assess the inherent complexity associated with outsourcing the task. For example, the payroll process may consume considerable time, effort and expenses each month to administer, yet present a relatively low degree of difficulty to outsource.

Once you've identified the tasks that you want to outsource, make sure to document the financial impact of outsourcing as well as the benefits associated with reallocating staff to higher-value tasks within the HR department. If your organization decided to outsource background screening of new employees, for example, quantify the labor hours savings and the benefits associated with relocating HR employees to higher-value tasks, such as executive talent management or efforts to improve employee retention.

How to Ensure a Successful Handoff

Before outsourcing tasks to a third party, make sure that the HR department possesses a strong understanding of its existing processes as well as a willingness to refine their approach to fit the approach employed by the outsourcing firm. Remember, the success of an outsourcing firm depends on their ability to generate economies of scale, meaning that by standardizing processes, they create the means to administer HR processes for their entire customer base. In most cases, businesses end up making minor changes to facilitate the outsourcing process that require minimal time and effort to accomplish.

In addition, designate one employee to serve as the primary point of contact for the outsourcing organization and report the status of the transition effort. Remember, unless your organization feels the need to downsize the HR department as part of the outsourcing effort, make sure to stress that the goal of outsourcing is to free up time for your HR department to focus on more important projects.