Outsourcing Human Resource Functions | Pros & Cons
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Outsourcing Human Resource Functions | Pros & Cons

January 24, 2018

 

Outsourcing Human Resources Functions Pros And Cons

 

Small to mid-size companies can really benefit by outsourcing their HR functions to an outside agency. Employers can free up precious time by allowing someone else to handle hiring and firing processes, worker comp, payroll, and recruitment. Companies with limited funds and manpower can see a significant improvement in workplace and productivity when using a staffing agency to handle HR responsibilities. But hiring an outside firm does come with disadvantages that an employer should consider. Each employer should examine this list of pros and cons to determine if outsourcing HR functions makes sense for their company.

 

 

The Pros

 

Risk Management

 

The best way to avoid accidents on the job and potential lawsuits is to be proactive. Keeping up to date with the ever-changing labor and employment laws can be a full-time job, and many small/mid-size companies don’t have the resources to stay on top of it. Staffing agencies are responsible for staying current on workplace policies and regulations, so you don’t have to be. Outsourcing HR can help you ensure you comply with the laws, which will help you avoid costly lawsuits.

 

Cost Savings

 

Hiring a staffing agency to handle day-to-day HR duties means you don’t have to have the extra office space and materials on site to accommodate a fully trained HR department. Companies save money in other areas when they use a staffing agency for HR duties, such as being able to secure the same worker's comp rates as a larger company. When it comes to recruiting and hiring, an outsourced HR department takes care of all of the costs that go with it. Placing help wanted ads and spending time conducting interviews costs money, not to mention what it costs to hire the wrong person. An experienced staffing agency will save you the trouble (and the cost) of recruitment and hiring. Another way outsourcing HR  functions reduces costs is by saving you on employees’ medical costs. By giving your employees access to better medical plans you not only have a better shot at retention, but it saves everyone money.

 

 

Increased Efficiency

 

When the workplace runs efficiently, productivity increases. Small and midsize companies benefit from the advanced technology, experience, and resources of the staffing agency when HR functions are outsourced. Employers can focus on aspects of the job that increase efficiency and effectiveness in the workplace instead of being bogged down with paperwork.

 

 

Training and Recruitment

 

Nothing is more stressful than spending time and money recruiting the perfect person for the job, only to find they aren’t the perfect person for the job. When an employee is fired or quits, employers have to scramble to find someone to fill their spot. This could result in hiring someone who is less than qualified for the sake of filling the spot. When you leave this responsibility up to an outside agency, they can quickly fill vacant spots with applicants who have already been interviewed and trained. This saves time and money and allows for less downtime in between the old employee and the new one.

 

Workplace Drama

 

When employees have conflicts with each other, it is up to the manager or HR department to settle the disputes fairly. Meetings, reconciliations and conflict management can take a lot of time out of a busy workday to handle correctly. When an employee has an issue with a manager, things get more complicated. When you outsource your HR department, an unbiased, third-party handles conflicts. They can help solve the problem quickly and professionally so that everyone can get back to work.

 

 

The Cons

 

While there are many positive aspects of outsourcing HR functions, the idea does come with a few drawbacks. Handing over some of the responsibilities also means handing over some of the control. Because HR is such a vital part of any successful business, outsourcing it means letting go of some of the critical decision-making that can affect your employees and your company.

 

It Can Be Impersonal

 

The role of the staffing agency is to efficiently fill vacancies, handle payroll, stay on top of workers comp and handle interpersonal problems in the workplace, amongst other things. They do this for many companies, and will not know anything about the corporate culture of your office or the set up of your business. They won’t have close relationships with you or your employees like an in-house HR department might. There may be practices that the staffing agency implements that work with other companies but just don’t fit with yours.

 

Distance and Delayed Communication

 

If an employee has an issue and there is an in-house HR department, they can speak to someone right away to resolve the issue.  When the HR department is outsourced, there could be a delay in communication and conflict resolution. This could make employees feel undervalued, and even worry that if HR is getting outsourced that their department may be next.

 

Loss of Control

 

When you outsource the HR department, you agree to let go of some of the control you have over the day-to-day activities of the business and trust someone else with it. It means that some decisions are made without you and that some policies may be put in place that you don’t necessarily agree with. A professional and experienced staffing agency will work with you to make everyone feel comfortable and secure in the handling of HR functions, but some things will just be beyond your control. For many small/mid-size companies, this “letting go” is well worth the time and money the save, and allows employers to focus on other aspects of the company.

 

 

Each company must weigh the pros and cons of outsourcing to determine if it is the right fit for them. For many, outsourcing HR has been the one thing that has saved them from going under. The pros usually outweigh the cons, and outsourcing provides business with the freedom and flexibility they need to focus on employee morale, productivity, efficiency, and profit.

 

 

 

 

 

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