To Outsource or Not to Outsource HR and Payroll

chillibreeze writer — Saroja Krishna

For companies that look for a competitive advantage, especially and during the periods of their rapid growth, outsourcing is one of the key considerations in their business plans. Review of Business Processes have led many organizations to believe that it makes business sense to concentrate on its core strengths and spend valuable management time on future strategies for growth and subcontract all or some of the non core functions to a specialist.

Human Resource Function today has assumed the importance and stature it deserves. Earlier, HR scored poorly compared to other businesses as the focus traditionally has been more transactional and administrative in nature focusing mainly on employee welfare, IR, Trade Union related issues, and statutory compliances. Today, HR has assumed a key position/role in the Management Committee of any structured organization. Companies have realized the importance of hiring, training, retaining and rewarding their employees. People Management plays an important role in delivering organizational performance. In today’s knowledge based economy, this is more crucial than ever before. The entire gamut of HRM can deliver the right mix of core and non-core HR services effectively & efficiently.

Companies face two options while incorporating HR Operations. Whether to keep the HR in-house, which will mean investing in expensive appropriate IT infrastructure, and keep skills within, or choose the outsourcing route, which will do away with some of the routine unproductive time consuming operational issues. The choice to outsource is a crucial one and should be carefully researched before a decision is taken.

Why Outsource

Outsourcing can be the answer to the many woes organizations face. It relieves skills shortage, improves efficiency, saves cost and if the right vendor/partner is chosen, ensures specialist attention to the sensitive HR and Payroll functions.

There are some core HR functions like OD intervention, Appraisals, HR Policies& Programs, Talent Hiring, HR Strategies,etc., which are industry specific, sensitive in nature where the ‘empathy’ factor comes into play and preferably kept within the ambit of in-house HRM.

Advantages of some of the non-core HR functions that could be outsourced are:

Payroll: time consuming &tedious rids the HR & Finance from operational work and allows the company to focus on high-end work...

Benefits Management: Employee Benefit is a complicated process as it has to be tax compliant and in tune with various governmental laws. By outsourcing this function governance is improved as the outsourcer ensures legislative changes and legal obligations are met as they have a wealth of knowledge in this area and the required expertise.

C&B (Compensation & Benefits): Most mid size and large companies also outsource this function as it involves competitor information, market trends & research which is a time consuming repetitive process, to be abreast with the ground realities and arrest attrition. Competitors are comfortable sharing sensitive information to a third party rather than the internal recruitment staff.

The Recruitment Process: Most organizations regardless of their size normally outsource this function to Search Consultants who have a large database and network of available talent pool. Organizations find it cost effective to pay the search consultants on a case-to-case basis and reduce the overheads. The search consultants facilitate the entire recruitment process although the final decision rests with the organization.

Outsourcing has now become an accepted management tool for strategizing, restructuring and refocusing, the way an organization runs its business. Hiring a Specialist Human Resource Company ensures that the client organization get all the latest platforms, technologies, strategies that can be obtained. There are many tangible benefits that include focus on core activities, reduced overhead, cost saving, freeing HR Professionals to support management on growth strategies and policymaking, thus moving the HR up the value chain to maximize efficiency.

The success of outsourcing for any company regardless of its size is to find an outsourcer who is the right fit for the organization. The company should choose an outsourcer who will understand its corporate culture and the overall objective of the organization. The communication channel has to be excellent so that there are no communication gaps. A clear well drafted SLA (service level agreement) which is an extremely important document/contract needs to be negotiated with great care. The SLA ensures timely delivery of outsourced functions, an exit strategy that would highlight on what grounds the contract could be terminated, expected standard performance, penalties for non performance by both parties. A company that has looked into all aspects carefully while choosing an external expert can greatly benefit from outsourcing its non-core activities.

Editor's note: Most articles submitted to Chillibreeze go through a selection process. Only 30 percent of submitted articles are accepted for publication on the Chillibreeze.com featured article list. All accepted articles are edited and proofread for glaring errors of punctuation and grammar. Sentence structure is changed in certain cases and sometimes, entire sections are rewritten. If you notice any errors that have slipped through the cracks, do let us know! (Email us at info at chillibreeze dot com).

Chillibreeze's disclaimer: This is a contributed article and was published on Chillibreeze in July, 2011. The views and opinions expressed in this article are those of the author(s) and do not reflect the views of Chillibreeze as a company. Chillibreeze has a strict anti-plagiarism policy. Please contact us to report any copyright issues related to this article. The relevance of the facts and figures cited (if any) could change after a period of time.

More on Chillibreeze.com

Other popular articles on Chillibreeze

Social Media Monitoring – Listening to Your Audience
How to Choose the Best Distance Learning Course for You
Traveling With a Sense of Adventure
Overcoming Academic Snobbishness
Kabini Calling

Out of 5 “chilies”, our editorial team gave this article...

—About our writer:

Saroja Krishna holds a PGD in Public Relations and Mass Communication. She has nearly 25 years of work experience in one of India’s premier executive search firms as consultant/practice head handling business development, CRM, entire recruitment cycle, C&B inputs and more. She currently runs her own recruitment firm that caters to a few select clients for their talent sourcing at the middle & senior levels in the non-IT segment.

>> Read more articles written by Chillibreeze writers:

More resources for Writers on Chillibreeze.com

Chillibreeze offers Indian writers the opportunity to work on customer projects. We are also India’s biggest writer network and a one-stop shop for Indian writers and editors. The writers’ section on Chillibreeze offers freelance writers and editors a variety of tools to advance their careers. Resources for writers include:

Assessment of your writing, editing and proofreading skills

Writing courses

Expert Feedback on your article

An opportunity to promote yourself on our website

Top websites for Indian writers

Tips and resources for Indian freelancers

Book Publishing services

And more………………..

Explore our writers’ section using the links on our left-hand side menu.