Understanding HR Outsourcing

Do you want to find out more about HR outsourcing and the benefits it can bring your business?

READING TIME: 5 Minutes

This article is written and produced by Auxilium, one of the GCC’s leading Employer of Record and outsource staffing solutions providers.

Human Resources (HR) management is one of the most important corporate functions within an organization and is recognized as a key factor in its business performance. Although the HR Department still represents one of the most prominent and often largest corporate support services divisions in many organizations, there is an increasing trend for businesses to outsource all or part of their HR function.

HR: What to Outsource

Some organizations outsource their entire HR function. This is often the case for companies that have expanded their businesses into new countries, where they either do not have the local corporate infrastructure, or they are partnering with an Employer of Record (EOR). It can also be the preferred solution for SMEs, where the size of the business does not always justify employing a fulltime dedicated HR team. Other organizations may choose to outsource only specific areas of their HR function, with the most common being:

Recruitment

One of the key roles of the HR Department is to find new talent. This can be a relatively process-driven and time-consuming function, and is one of the most frequently outsourced parts of the HR remit.

Visa Processing & Onboarding

Companies operating internationally and employing personnel in overseas territories, will often use external resources that have the expertise to process visas and onboard staff.

Payroll Management

This is an extremely important, but normally admin-heavy and time-consuming part of the HR remit, and is often outsourced.

Compensation & Benefits

Although an important factor in retaining the best talent, this is a function that most companies only need to carry out periodically, and therefore choose to use external professionals to undertake it.

Performance Management

This is a periodic function that requires substantial data analysis, particularly for organizations with large workforces, and is one that can be undertaken effectively by external professionals with the requisite expertise and tools.

Why Outsource: The Benefits

Like all business outsourcing decision, there are a number of reasons why an organization will choose to outsource its HR, and these will vary from company to company. SMEs will have different reasons for outsourcing from larger organizations, which will be different again from companies undertaking global expansion, or looking to employ personnel in new overseas territories. However, in general the benefits will fit under a broad set of categories.

Cost Efficiency

There are a range of cost savings to be made, depending on the type of organization and the HR functions being outsourced, and include costs associated with:

• Headcount: HR personnel

• Infrastructure: Office space and associated costs

• Technology: HR-specific systems and applications

Expertise

One of the biggest benefits of HR outsourcing is gaining access to teams of professionals with the skills, experience and expertise that it would be impractical or expensive to employ directly.

HR Technology & Data Management

HR outsourcing consultancies will use the latest technology, systems and data management tools that it would often be restrictively expensive or impractical to purchase as a single organization.

Efficiency

Access to experienced HR professionals, advanced technologies and suites of HR-specific tools, will also mean that HR tasks and functions will be performed more quickly and efficiently.

Risk & Compliance

HR outsourcing consultancies will be able to give clients contractual assurances on risk mitigation and compliance issues relating to all employer/employee related laws and regulations. This is particularly important for businesses that are deploying staff in overseas countries.

Recruitment & Retention

HR outsourcing consultants often have better connections with recruitment agencies and platforms, enabling better engagement with talent pools and better understanding of job markets. Increased efficiency and professionalism in an organization’s general HR function can also impact on employee engagement, loyalty and retention rates.

HR Outsourcing: The Drawbacks

There are a few drawbacks associated with outsourcing your HR function, but most can be overcome or mitigated to a great extent. They include:

Risk

Outsourcing any business function has associated risks. The primary concerns are over confidentiality and security as an HR outsource partner will have access to sensitive personal and financial information on all a client’s employees. It is therefore extremely important that organizations undergo a rigorous vetting and due diligence process when appointing their HR outsourcing partner.

Employee Engagement

There are generally two potential communication issues. The first is that employees may feel they have no personal relationship with their HR department and have limited or no face-to-face access to HR representatives. The second is that employees may feel less empowered to communicate personal or HR-related concerns internally. Both of these need to be acknowledged as potential issues and can normally be overcome through an effective communication strategy.

Customization

Organizations may have concerns that outsourcing their HR function will mean adapting parts of their people strategy and corporate culture to align with the ‘one size fits all’ HR policies and processes of an external consultant. To mitigate this, and in the same way that they choose any outsource partner, organizations will need to consider a range of factors including customization, flexibility and cultural fit.

Talk to Auxilium

If you are considering outsourcing your HR function, then you should talk to Auxilium, one of the leading EOR and outsource staffing solutions providers in the GCC Region. We help organizations in the UAE, Qatar, Bahrain, Saudi Arabia, Kuwait and Oman.

For more information, please contact the Auxilium Team

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