Many organisations, especially small businesses with limited resources, face a huge challenge of managing a wide range of human resource ("HR") functions efficiently and cost-effectively.
Some of these include:
• Employee payroll and tax filing
• Employee benefits such as pensions and health insurance coverage
• Compliance with labour legislation
• Maintaining employee records
• Employee training and development
By outsourcing their HR functions, businesses can overcome this challenge and benefit in several areas:
A business that outsources its HR functions minimises the risk of non-compliance with labour laws, which are subject to regular changes. The outsourcing firm employs HR professionals who constantly stay updated on the latest employment legislation to help their clients avoid penalties arising from failure to remain compliant. Outsourcing firms can also audit company policies and practices to ensure the protection of employers’ and employees’ interests.
Overhead costs associated with performing HR services are typically very high. A fully functional HR department requires additional office space and highly trained and experienced HR staff. The outsourcing firm may achieve economies of scale that are unavailable to its individual clients. Businesses that outsource HR functions will therefore be able to enjoy cost savings even if their labour requirements increase with growth.
Organisations also improve efficiency and productivity by outsourcing their HR functions. With the outsourcing firm handling routine HR work, the client’s HR staff are free to focus on strategic activities that enhance business value.