Coronavirus (COVID-19), HR Management & Compliance

Outsourcing HR

While HR is often seen as essential to business, some companies choose to outsource some HR functions. What factors should a business consider when deciding whether to outsource HR functions, and which functions are appropriate or best suited for outsourcing?

outsourcing human resources
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Considerations When Deciding to Outsource

Companies outsource business functions for a variety of reasons. Often, they lack the resources or expertise to perform those functions themselves or the functions are so far outside of their core competencies that it’s not an efficient use of resources to devote internal staff to them. When it comes to HR, all of these are applicable, but there are other factors that pertain to this particular role, as well.

For example, companies might outsource HR functions specific to investigating employee misconduct or employee allegations of misconduct against managers or the company itself. Outsourcing these types of investigations and disciplinary processes offers a neutral third party as an arbiter. It can also help avoid the awkwardness that can come with such proceedings in smaller companies where staff are familiar with one another.

Highly specialized and technical tasks like maintaining compliance with laws and regulations or administering employee benefits or employee assistance programs are also prime candidates for outsourcing.

When Outsourcing May Not Make Sense

On the other hand, HR functions that are closer to the core of the business are less suitable for outsourcing. These core activities are central to a business’s long-term strategy for success, so most companies prefer to keep them in-house. For example, employee development and succession planning are activities that are tightly related to a company’s long-term success and benefit from a close relationship between the HR professionals managing those tasks and the employees involved. Companies often find they prefer to have long-term, traditional employees manage these activities as opposed to contractors outsourced on a project-by-project or temporary basis.

Running a small business involves a variety of costly activities, not all of which necessarily require full-time staff. For these companies, outsourcing may make good sense. And, of course, even very large organizations often find legitimate reasons for outsourcing certain functions.

While HR isn’t always the first function that comes to mind when companies consider outsourcing, there are some broader aspects of HR that are legitimate candidates for contracting out.