Why Outsourcing HR Functions Leads to Greater Productivity


Your business may be focused on your customers, but it is your team that determines the quality of service or the products they deliver. The Human Resources department is traditionally seen as a core business function. However, there are a number of reasons to consider outsourcing part or all of the HR work. If you didn’t think of outsourcing yet, you need to know the benefits of doing so and how it can affect your output and bottom line. Let’s learn more about why outsourcing HR functions leads to greater productivity.

Your Improve Your Legal Compliance

Many small businesses lack an in-house Human Resources officer, though they may have someone managing payroll for them. Outsourcing HR functions allows you to ensure that you’re in compliance with a wide range of regulations that apply to you, whether you have contractors or employees.

For example, when you outsource HR, you are handing the task of running background checks and employee screening to experienced experts. You can also ask them to create or update your employee handbooks and policy manuals so that they’re in line with the latest government regulations. A side benefit of HR outsourcing is that it helps you avoid the hefty penalties that come with non-compliance.

Consider working with a contractor management service if you’re going to be hiring people in another country. Contractor management outsourcing companies like New Horizons Global Partners help with things like managing payments between business partners and locating specialized talent required for a given project. They’ll ensure that you don’t make common mistakes related to tax compliance or legal contracts that were drafted by someone unfamiliar with local laws.

It Frees Up HR Personnel to Deal with People

When you outsource HR functions like payroll and benefits processing, you free up human resources personnel so they can focus more on your existing team. For instance, this will allow your HR team to dedicate themselves to resolving workplace conflicts or mitigating legal risks. Or they might be able to spend more time on follow up and building training programs.

Outsourcing HR is an invaluable time-saver if you need to conduct high-volume recruitment, whether you’re building a new factory or need to double staff ahead of the holiday retail rush. Then your HR staff can focus on training new hires and monitoring their performance.

You can outsource specific HR functions such as recruitment and hiring while freeing up in-house HR to focus on long-term resource planning. For example, outsourcing payroll to an HRO allows sales management to direct their attention to product design or coming up with a better compensation plan. You can also reduce the workload of your in-house HR team by letting a contract management organization oversee the personnel at a temporary site.

In the case of small businesses, it frees up the business owner to work on growing the business instead of sorting through resumes and scheduling interviews. This has a major impact on the business. One study found that the average business owner only spends a third of their time on actual business, though they’re working 50 or more hours a week. Outsource HR functions, and you’ll be able to focus on your own core competencies.

It Can Save Your Company Money

One of the biggest reasons why companies of all sizes outsource human resources functions is because it reduces costs. It is cheaper to outsource payroll than pay several payroll clerks who aren’t fully utilized. They tend to be dedicated professionals, too, who are more productive than average.

The typical small business cannot afford to hire a dedicated human resources professional, but you’ll have access to their expertise when you work with a human resources outsourcer. Furthermore, you will generally be able to leverage software that your company otherwise wouldn’t be able to afford. You don’t have to buy expensive HR IT systems or maintain them.

There’s also no need for many businesses to have someone in-house that’s focused solely on HR. Working with a third party allows you to pay for what you actually need instead of having to try to find ways to use your HR team. Small business owners often also don’t have the skills needed to truly make the difference between a good employee and a time-waster. Which brings us to our next point.

It Can Help You Attract and Retain Better People

A human resource outsourcing firm is an excellent choice for finding and recruiting hard to fill positions. A side benefit of outsourcing HR is that they have the time and expertise to recruit the people you need. They tend to reduce hiring and training costs without sacrificing quality. Improved training is correlated with improved employee retention.

More importantly, a human resources outsourcing organization may be able to offer you access to better benefits than you could otherwise offer your employees along with improved service to your employees. You could do this through a PEO or professional employer organization. They can negotiate better rates on health insurance and other benefits than a small business could. Or you could let the HRO coordinate benefits and handle claims.

Allows You to Avoid Potentially Expensive Mistakes

One survey estimated that around 80% of all business owners handled their HR themselves. Out of this group, 30% admitted that they didn’t know if they were doing a good job at it or not.

This is very serious as HR is about more than finding the best employees. It’s also about compliance, regulations, and tax obligations. Simple payroll errors can lead to very serious consequences and very few business owners can say that they have the expertise needed. This is not something you’re likely to have to worry about with an outsourced HR solution. They’ll also assume liability if anything happens, which will give you more peace of mind.

More Cohesion within the Group

Perhaps the biggest benefit to having professionals handle HR for you is that you’ll simply have a better team as a result. A good HR team will sit down with you and take the time to learn about your company and its culture. They will then be able to screen prospects accordingly from the very beginning. They’ll be able to convey what kind of employees should apply and do the follow up necessary to make sure that you waste as little time as possible.

Eventually, all of this will lead to less turnover. Less turnover means a more experienced team rather than one that relies on a few seniors. This then leads to a team that’s not only more productive but is also better prepared to welcome new people and integrate them. Policies and procedures are passed down, and engagement goes up.

You’ll then have a whole team of experts who know every procedure in and out. These will also be able to help your organization come up with ideas to make processes more efficient.

While your people are the lifeblood of your business, human resources outsourcing is a good way to increase the productivity of your team. It has the side benefit of keeping costs down while giving your company the flexibility you need, so make sure that you consider the option if you’re currently struggling with doing it yourself or feel like you’re paying too much.