An adept HR team is a must-have asset for every organization, irrespective of its size and age. The HR team is not only responsible for unearthing the right talents for the company, hiring and training them, but also making sure the company complies with all the labor and employment laws of the state. As employees are one of the most prized assets of a company, they need to be motivated and appreciated for their performance and offered ample growth opportunities accordingly. A company must gain its employees’ trust and ensure maximum employee-company-engagement to retain them for a longer period. Assessing the performance of the employees, overseeing payroll, and ensuring a blissful work environment also come under the job description of HR executives.
For large established companies, it is often beneficial to have an in-house HR team, considering their high budgets, but for small companies and start-ups with money constraints, hiring and maintaining a team of experienced and qualified HR executives usually turn out to be an expensive affair. Hence, to save money, most small companies and start-up owners take up the responsibility of hiring and other HR-related tasks. This leads to sheer mismanagement as the entrepreneurs try to manage HR functions along with multiple revenue-generating tasks like dealing with clients, planning and conducting impactful marketing campaigns, etc. But, multitasking often hampers the output quality of each function. Therefore, outsourcing crucial but non-revenue-generating functions to external agencies is generally considered advantageous for small businesses and start-ups that are witnessing exponential growth. Besides recruitment, the commonly outsourced HR responsibilities include administrative HR functions like creating employee handbooks, implementing HR policies, initiating terminations, etc., employee benefits administration, payroll management, HR risks, and legal compliance handling.
Outsourcing firms, that are equipped with teams of skilled HR professionals and the latest technologies, are also well-aware of the labor laws and other employment-related legal issues of the states, in which their clients are located. Therefore, contracting out the HR responsibilities not just reduces some burden from the business owners’ shoulders, but also helps them to manage their time better and focus on what they do best. However, there is always a right time for every action. Hence, entrepreneurs must understand the changing needs of their growing businesses and identify the signs that indicate ‘it’s time to outsource the HR responsibilities.
6 situations that demand immediate HR outsourcing:
- Extend personalization
When too much time is spent on managing HR problems.
Hiring, training, sorting employee conflicts, ensuring a productive work culture, complying with the latest labor laws, etc. are quite time-consuming. Hence, entrepreneurs, especially start-up owners often find themselves spending too much time performing HR functions. As a result, they are left with less time to focus on business-building activities, which are extremely crucial to run a company. This is when HR outsourcing must be considered.
- When the business owner is finding it difficult to abide by all the latest employment laws, due to the lack of knowledge in the particular field.
Employment laws change from time to time and it is quite arduous for business owners to keep updating themselves on the same. But, HR outsourcing consultants, who are specifically trained in a particular field, always stay aware of the changing laws of the states where their clients are located. Also, they have a thorough understanding of the collective bargaining agreements and different hiring rules. Besides, outsourcing HR functions enable business owners to make sure not a single tax reporting violation is made.
- When the need to save more money is felt.
There are times when business owners feel the need to contain costs. But, hiring experienced HR executives and offering them all the employee benefits is a costly affair indeed. Besides, implementation of the latest HR-optimizing software, digital platforms, tools, and cloud-based technologies, which primarily ensure secure data storage and automation of the day-to-day processes, requires a certain amount of investment. But, HR outsourcing are firms usually decked with all the cutting-edge technologies that provide analytical tools and help make more strategic decisions. Also, outsourcing HR functions make sure the company is adhering to all the latest labor laws, violating which can cost it much more than paying the external HR consultant.
- When the improper allocation of HR responsibilities is about to put the business owner in trouble and the entire management into chaos.
Working in a corporate structure, employees often have multiple work, leaves, increments, and salary-related queries that need to be solved by the HR executives. But, companies that don’t have specific HR teams tend to allocate the HR functions to managers and department heads, who are usually not aware of all the HR policies and hence fail to give the right information. This creates misunderstandings that lead to big turmoil. Hence, an entrepreneur must consider outsourcing the HR function to a specialized agency immediately once he/she senses the possibility of a chaotic situation arising.
- When an entrepreneur is witnessing steady business growth but is unable to respond to the changes promptly.
During the growth phase of a company, the business owner usually feels the need of hiring more employees to cope with the increasing workload. In such a situation, instead of overburdening the in-house HR team, if available, it is always beneficial to partner with an external HR firm, that helps the business owner quickly find the right talents for the company. Outsourcing HR functions keep a business responsive to new opportunities and ensure uninterrupted growth.
- When a company is unable to ensure enough employee engagement and retainment.
Employees look for competitive salaries, motivation, ample growth opportunities, and a balanced work life. To retain employees, companies must provide them with a good experience through a desirable work culture. Small companies, when they fail to boost their employee engagement practices, start losing their employees. In such a situation, business owners must outsource their HR functions to make sure their employees are given access to various development programs that will considerably increase their productivity at work.