What Is The Argument For Outsourcing Human Resources?

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There are several types of assets that a business has to protect and maintain in order for it to be successful. These can vary from plant and equipment to financial assets. However, in the increasingly competitive and fast evolving business environment of the 21st century, the argument can be made for the fact that businesses most important asset is its people.

Given that this is now becoming more and more accepted, how does business ensure that its human resources approach conforms to current global best practice? This is especially challenging for small and medium-sized businesses which may not be able to afford a full-time human resource practitioner.

The solution is to outsource the human resources function – but what are the advantages?

Of course the first is (as mentioned) saving money. Overheads for an in house human resources department can be extremely high. Aside from the cost of the human resource practitioner as an employee, there is also the cost of office space and support staff. Outsourcing reduces those costs – and allows the business to ‘downsize’ requirements as and when the business environment requires cost-cutting measures. Of course, the converse is also true.

It is also far cheaper to outsource elements of the human resource function. Some businesses may not require a ‘full service’ human resources department – but may require services for essential business functions such as the management of payroll and associated accounting. Outsourcing makes perfect sense in that sort of scenario.

Ignoring the requirement for a human resource function is a recipe for disaster in the fast-changing business environment of today. legislation and labor law change regularly. Outsourcing the human resources function provides an element of risk management. In the face of disciplinary issues or even litigation, a skilled human resource practitioner is worth their weight in gold.

One of the reasons that some business survive and win the marathon that is the business environment of today is because they outlast the competition. One of the competitive advantages that successful businesses have is their commitment to both employee retention – and the development of employees, as well as ensuring that employee performance is optimized. A skilled human resource company will set in place performance management and employee growth plans – and set in place initiatives (as well as monitoring them) to ensure that the competitive edge is maintained.

The question is not whether a business can afford to outsource the human resource function – it is rather whether it can afford not to.