Want to outsource HR? Here’s your playbook

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For businesses, managing employees is a complex task. It needs specialised knowledge to avoid running afoul of the law. Most small and medium enterprise (SME) owners do not have that knowledge and end up making mistakes with payroll, paperwork or policy implementation. So, what is the solution?

Outsourcing brings in a lot of benefits for small businesses. A sharp focus on strategy and long-term plans, leveraging the expertise on a pay-as-you-use basis and better compliance are some of them.

The all-in-one HR person who gets involved in all the HR and administrative activities will be a problem as an SME grows. As the workforce begins to grow, outsourcing HR has a great advantage.

HR may be a single department, but it amalgamates multiple functions and responsibilities such as:

Recruitment

This includes everything from manpower planning, sourcing candidates, scheduling tests and interviews and rolling out offers. It does not stop with the issuance of the offer letter. It moves to follow-ups with candidates who have been offered jobs, scheduling and confirming joining dates and the documentation for joining formalities.

Outsourcing these functions to a third party ensures that the company can save money and time on these activities. The provider can also outsource tasks like posting job openings and reviewing resumes.

Onboarding

Onboarding begins where recruitment ends. It begins with joining documents and the paperwork related to adding employees to the payroll and activities like employee induction and orientation. Outsourcing this function, especially activities such as creating training materials, delivering them, conducting the training and tracking employee progress, saves time and money for SMEs.

Employee handbooks and policies

Employee policies must be updated and staff should be able to access the latest workplace policies and procedures. Outsourcing this function ensures updating of policies and procedures as well as their maintenance for compliance purposes.

Temporary staffing

Hiring new staff for temporary or short-term needs and training them is also part of HR work. This calls for time and effort, so outsourcing this function to firms that provide temporary employees reduces the burden on the in-house HR, allowing them to concentrate on long-term initiatives.

Benefits and payroll

Outsourcing the benefits and payroll function ensures that employees get paid on time and their concerns are addressed.

Do a cost-benefit analysis

Like everything else, outsourcing HR functions is not without its disadvantages such as loss of control over essential processes and talent, allowing an outsider to influence the work culture, diminished value of internal HR, lack of control and security over employee paperwork, loss of institutional knowledge and security issues with the vendor's systems.

HR is the backbone of most of the activities mentioned above. But, some activities are routine and purely transactional and these can be safely outsourced without the fear of loss of data or money.

HR outsourcing depends on a good cost-benefit analysis. The company should keep in mind that the cost and benefits must also include intangible elements.

Getting started

The most common functions that are being outsourced are payroll processing, benefits administration, training and development content, and performance management. Once you decide which of these you want to outsource, you have taken the first step.

Next, decide whether you want to follow the standard operating procedure or want changes to suit your work environment. Depending on the cost and efficiency, SMEs may want to use the standard processes, so that delivery can be efficient and cost-effective.

Ask for a speedy turnaround from the vendor, so that the employees are not troubled. This also means easy access to a single-point contact that can resolve all your issues related to the outsourced work. In the early stages, you won’t need much value addition in terms of process improvement.

The next thing you should decide on is the duration of the contract. Should it be for a year as a test case or three years? Are there any no-cost escalation advantages in taking a long-term contract? Check the reliability of the provider signing on the dotted line.

Finally, ensure data security and privacy. Make sure the vendor complies with data and security rules. Insist on cyber security. SMEs can insist that data should be purged once its work is and should not be stored beyond a duration specified by you.