HR Outsourcing: Advantages & Disadvantages

The HR function is so varied and becoming more and more demanding. Depending on your company size and structure, one single job role might be juggling everything from onboarding employees to performance management to inspiring company culture to managing organisational structure and change.

Business & HR Managers
Oct 2022

The HR function is so varied and becoming more and more demanding. Depending on your company size and structure, one single job role might be juggling everything from onboarding employees to performance management to inspiring company culture to managing organisational structure and change. It’s often a little unrealistic to expect one person to have all the expertise (and calendar space) to fulfil all of these requirements.

That’s why so many companies turn to HR outsourcing or HR consultants.

What is HR outsourcing?

HR outsourcing involves a company engaging third party consultants or a HR agency to carry out certain duties. Often, the company is experiencing transition as a result of growth, leadership change or development, but this is certainly not always the case.

Outsourced HR provides additional resources to a company, allowing them to continue with the day to day functioning of the business, without interruption as a result of understaffing or change.

It’s quite typical for the Outsourced HR team to adopt the more strategic role of a project, but again, this is not always necessarily the case. What you’d be introducing is options and support, but many companies still sit on the fence, delaying the decision as to whether outsourcing the HR function would be beneficial.

If this sounds like you or your company, keep reading.

Access to skills & experience to level up your team

The biggest practical advantage to outsourcing HR functions is that it will fulfil a need. Typically, businesses look for a HR partner or Outsourced HR team because they cannot facilitate the function in house any more. This could be for some of the following reasons:

  • The responsibility of HR is being fulfilled by an executive or leader who also has other demands. Often, this is the CFO or Finance Director who is becoming overloaded.
  • There is an existing HR manager or team in place but the company is transitioning, experiencing change or conflict which the in-house team needs resourcing and expert support with.
  • The company is looking to implement a special initiative or project. Perhaps this is coaching, organisational design or introducing an improved employee value proposition that the in house team does not have experience with.

Without outsourcing HR, the company would not be able to move forward efficiently within these scenarios. It can be particularly prudent to seek expert consultation if you are dealing with a scenario as time-sensitive and open to risk as workplace investigations and disputes.

When the HR function flails or lags, internal morale can slump. Employees' engagement can suffer because their confidence that the company they work for is equipped, can support them and cares about them drops.  

HumanX HR helps you diagnose and manage any scenario with an intelligent, human-first approach, but we also open your team up to expansion and education.

Our experts have decades of experience in dynamic, transitional HR scenarios. They bring thought-leadership, problem solving and fresh ideas. Working closely with your leaders, in-house HR teams and collaborating throughout the company, one of the biggest pros of working with HumanX as your Outsourced HR partner is that we help you grow. You get access to senior, executive level coaching, decision making and insights, without agenda and without delay.

Strategic Investment

Another pro of outsourcing HR that cannot be overlooked is that you can access the skill, knowledge and consultation of HR experts, without the financial commitment of taking another person in house.

Research indicates that it can cost almost $35000 to find and recruit a senior member of staff. The average salary for a human resources manager in Australia also ranges from $115,000 to $135,000. That number is also on the rise as a result of a shortage of qualified candidates making it their market.

The advantages to outsourcing HR is that you do not have this sunken cost of recruitment which you will have to pay out before you get any return. Not to mention the time that recruitment can take, especially to fulfil a role as sensitive and nuanced as in-house HR.

Outsourcing HR functions to an agency will give you immediate access and support. You also have no commitment to the agency once a project is over. This means that you have retained the upfront capital of recruitment, as well as avoided an ongoing salary unnecessarily.

When you partner with HumanX HR, you get access to our entire team. This means that you get to have an entire outsourced HR department with varied skills, specialisms and availability which would be almost impossible to find in one person.

Risk Management

It’s often advised, as well as advantageous to outsource HR or introduce external experts in certain situations. We have mentioned some of them already in this article, but consider any situation where your company might be open to a dispute or fine, primarily, workplace investigations or workplace health and safety.

In these situations, external teams demonstrate impartiality and promote procedural fairness. These are highly specialised and sensitive scenarios in which your in-house team may not have adequate knowledge or any experience. External expertise can help to mitigate the risk.

On a project-basis, a pro of outsourcing HR to run a health check or HR audit can give you fresh eyes, help you identify gaps that may be leaving your company open to risk. This could be within your HR policies, leadership practices and more.

Let’s talk about the cons of outsourcing HR

Many people believe that a con of outsourcing HR functions is that you will have to remove your existing in-house teams. It certainly would be a disadvantage or drag to do this, but it simply isn’t necessary.

At HumanX HR, our teams will collaborate with yours. We are a human-first agency, and act as an extension of your in-house team. We will always look to empower and educate your teams, introducing external support can motivate your own employees and actually give everyone the breathing space to play to their strengths.

One misconception we experience a lot is of executives or organisations expecting Outsourced HR to have hard conversations on their behalf so they don’t have to. We are certainly capable of doing this, but this is not our role.

We create the space to facilitate these discussions, we provide strategic thinking and coaching to help you manage these, to ensure they are the best route forward for your business goals. We help to grow the capabilities and experience of your team, not allow them to shy away from leadership. We like to improve communication and clarity in the workplace to build a healthy environment.

Another misconception that is considered a con of outsourcing HR is that it means something negative is about to happen. The sight of new consultants around the office can start whispers. Are you concerned about how this looks?

If this is a legitimate concern or worry you have, we should really talk. This would likely be a symptom of a lack of transparency and trust between employers, leaders and their teams. It’s perceived as a threat due to poor communication, perhaps a loss of culture or direction in the business. These are all areas we can look at, as your Outsourced HR partners.

HumanX HR is an agency with a unique approach. We put people first because we understand that people are your biggest asset. But we’re also able to consider the bigger picture.

Get in touch with our team if you want to know more about the advantages of outsourcing HR with HumanX. We’d love to tell you more about our approach and how we can help.

HumanX HR are HR consultants in Sydney, but we help national and multinational companies with their human capital and business development.

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