HR Outsourcing Myths: Debunking 8 Misconceptions About Outsourced HR

‍Long-held misconceptions about HR outsourcing in Australia could be holding companies back. Read on to see which HR outsourcing beliefs need a rethink.

Business Owners, Leaders, Professionals, HR Managers
Apr 2024

Outsourcing is now common practice in many industries in Australia, but there are still some key myths and misconceptions that swirl around the outsourcing of human resources functions. These pervasive myths can keep companies from considering all available solutions to their HR challenges, and from the full potential of outsourcing HR benefits.

So - let’s separate the fiction from fact when it comes to outsourced HR.

Myth #1: HR outsourcing only slows internal processes down

The reality is that the right outsourced team will align with your culture and ways of working to complement your internal processes, rather than hinder them. In fact, the right outsourced team can help reduce your overall workload. This is possible through the day-to-day freeing of in-house employees from non-core processes. But there are broader efficiencies to be found too. 

If you’re facing complex HR issues or roadblocks, external HR experts can provide a fresh, neutral perspective to quickly pinpoint the heart of the issue. And an HR audit at any time can help you trim unknown inefficiencies and ensure your systems and processes follow best practice.

With proper planning and coordination, outsourcing HR functions allows companies to focus their internal efforts, ultimately enhancing overall efficiency. So, this myth is easy to call busted.

Myth #2: HR outsourcing impacts employees in a negative way  

This myth tends to consist of two parts: first, that HR outsourcing costs jobs, and second, that HR outsourcing will step on the toes of your in-house team. Let’s address these both individually.

The myth that HR outsourcing costs jobs

Companies that outsource HR range in size from shoestring start-ups, to multi-nationals with extensive HR teams already in-house. This in itself shows that outsourcing doesn’t mean shrinking or eliminating your HR department. 

On the contrary, outsourcing can actively foster job creation. Once they can unburden those non-core tasks, in-house teams can focus more on big-picture thinking that contributes toward growth, innovation and a workplace culture that people genuinely want to be part of. Your in-house employees can do what makes them, and your workplace, thrive.

The myth that HR outsourcing upsets the employee experience 

At any company size, HR teams have an increasingly diverse and challenging workload. There’s everything from recruitment, to payroll, to onboarding and performance management – oh, and don’t forget to stay up-to-date on compliance across it all. It’s a lot to manage, which is why thoughtful outsourcing can be welcomed by employees. As modern management leader Peter Drucker once said, "Do what you do best and outsource the rest."

HR outsourcing can free your employees from tedious and convoluted processes, allowing them to dedicate more energy to their core purpose. Often, HR teams may be relieved or excited about the prospect of outsourced support. Consultation with your team is of course vital, to ensure that outsourcing will be put to its best potential.

Myth #3: Outsourced HR is a rigid commitment

HR outsourcing certainly can be a long-term solution – if that suits your business. But you can also use it for short-term and project-based purposes if that’s what you need. Companies that instantly dismiss HR outsourcing as an inflexible and ongoing cost can often overlook its potential for business agility.

Consider these scenarios:

  • The workplace investigation
    You need help in navigating a complex workplace investigation immediately. You know compliance is vital in this high-stakes situation, but your team has never dealt with something like this before.
  • The major transition
    Your company’s about to go through a major change, such as a merger or organisational restructure, which is a new experience for your in-house HR team. You know an integration strategy will help ensure a smooth transition, but you’re not sure where to begin.
  • The need for coaching
    You recognise the value that leadership coaching could bring to your team, yet there isn’t enough demand to justify an expert in-house. 

In all of these cases and many more, HR outsourcing can bring you flexible support. You can treat your outsourced team as your external HR department, or work with them for a single project as it suits. Leveraging human outsource solutions brings you flexible expertise without the complexities or costs of permanent hiring; particularly so where permanent hiring simply doesn’t suit your needs.

Myth #4: Outsourcing HR is done only to cut costs 

By now it will be clear that this simply isn’t the only reason companies outsource their HR functions. Some companies certainly do look to HR outsourcing for cost improvement, and to reduce HR overheads such as software licensing and salaries. But there are many other reasons to outsource, including: 

  • Access to niche skills, technology and expertise.
  • Freedom to focus on core aspects of the business and HR functions.
  • Scalability: for example, if the business is growing rapidly and needs quality support fast.
  • Compliance management – particularly for specific and high-stakes needs like workplace investigations.
  • Perspective to help guide culture and employee engagement changes. 
  • And as we already covered, lessening workload and finding new efficiencies.

In Deloitte’s 2022 Global Outsourcing Survey 49% of executives said they use outsourcing primarily to gain access to new capabilities, while 51% use outsourcing primarily for business strategy and operating model shifts.

It’s all about finding the solutions to help you achieve your unique strategic business goals.

Myth #5: HR outsourcing means paying for unwanted services

It’s a common misconception that working with an outsourced HR provider will involve paying for a while suite of services, or an expensive retainer fee. But in reality, this is simply not the case. Our own HR outsourcing services begin with an in-depth discussion about which services will be most helpful to you, and a highly tailored delivery of services to help fill your needs. Think of it as an à la carte menu, rather than a set menu with more food that you can possibly eat.

In this way, you can access a large team of HR experts at a fraction of the overheads you might pay to maintain that expertise in-house. Need access to specialist expertise for just a few weeks? No problem. 

With HR outsourcing you can get precisely what you need, without paying for any of what you don’t.

Myth #6: Outsourcing HR leads to poor outcomes

Outcomes will depend on the choice of outsourced HR providers, as well as the working relationship. As such, choosing the right outsourcing partner for your company will be perhaps the biggest step you can take to ensure a quality result. 

So how can you outsource HR to the right team? This involves researching and vetting outsourced HR providers, and looking into their team’s level and areas of expertise. What problems have they solved for other clients? How much experience do they have within your industry? 

HR outsourcing can help you minimise organisational risk in so many ways, including against non-compliance and poor hiring choices. Select the right provider, and you’ll truly be able to depend on them for quality results and risk control.

Myth #7: Outsourced HR takes the ‘human’ out of HR

There’s a fear that outsourcing HR means dealing with a faceless entity that sucks the soul out of your company culture, but nothing could be further from the truth – providing you’re working with the right humans.

By outsourcing relevant HR functions to a people-centric service, you can support and improve human connections in various ways. First, when in-house HR staff aren’t bogged down by number crunching or data entry they have more breathing space to give face-to-face support to other employees. And second, external HR experts can offer a balanced viewpoint and human approach for human problems – whether this is for challenges in workplace morale, culture or leadership. 

It’s worth noting that software can sometimes be the first consideration when confronted with a new HR challenge. But software doesn’t have nuance or empathy (or at least, not yet!), and it can take more time away from humans who do. Software can be a useful tool, but only when applied thoughtfully in a way that serves people well. It’s worth being mindful of this any time you’re faced with a HR issue.

Myth #8: HR outsourcing compromises data security and compliance

Data security is absolutely essential when it comes to protecting employee information and handling confidential workplace matters. It’s only natural to hesitate when it comes to sharing those details with third parties, who might not treat data security and compliance with as much care as you do. And to be fair, this could indeed be a risk with lower quality providers. 

However, reputable HR outsourcing providers like HumanX will have robust data protection measures in place, investing heavily in the confidentiality and privacy of your company data. In addition, our compliance experts closely monitor regulatory changes so we can help you keep your own privacy processes up to date. 

The lesson here is – don’t let the data privacy myth hold you back from finding the solution to your HR challenges. Instead, ask the right questions of providers and find someone who meets your own high standards.

So - why do organisations outsource HR?

The reasons why organisations outsource HR functions are really as varied as the organisations themselves. 

But whether you’re facing conflict, challenges, or just have a hunch that things could run a little better, you’re in good company when you choose to outsource to HR experts. 57% of executives responding to Deloitte’s 2022 Global Outsourcing Survey said their companies use external service providers for HR business functions. 

What HR services can you outsource? 

You can outsource practically any element of your HR needs. These can range from the detailed, such as:

  • Workforce planning and strategic HR
  • Employee lifecycle management
  • Employee benefits and rewards
  • Learning and development
  • Employee Value Proposition
  • Employee disputes and workplace investigations
  • Performance management
  • Talent acquisition
  • Cultural management and re-engineering
  • Employment law and compliance

Through to the broad, such as: 

And what are the benefits of outsourcing recruitment?

Of course we’ve covered a few already, including risk management and access to specialist expertise. In general, the benefits can include: 

  • Optimised compliance
  • Greater employee engagement and retention
  • Improved culture and talent attraction 
  • Increased efficiencies
  • Better HR alignment with organisational strategies.

If you’d like to learn more of the advantages outsourcing can bring, as well as how to avoid potential pitfalls, our article on outsourcing HR advantages and disadvantages provides a handy run-down.

The bottom line on HR outsourcing in Australia

Now that these myths and misconceptions are cleared up, it’s worth asking: is HR outsourcing good or bad for your own company and challenges? If you do see the value of outsourced HR services for your organisation, you might begin your search for a switched-on provider. 

HumanX is an outsourced HR agency that focuses on building human-centric HR solutions for mid to large sized businesses. We're here to be an extension of your team as needed, and help you navigate the complexities of modern HR management. You can contact our expert HR consultants today for outsourced HR in Melbourne, Sydney, Newcastle, Parramatta, Perth and Brisbane.

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