Why Do Companies Outsource HR Function?

Why are companies choosing to outsource their HR function in today's evolving workforce? HumanX unravels the tangible benefits, emphasising the human-first approach over HR software and the strategic advantage companies gain.

Business & HR Managers
May 2023

As a HR agency, this is a question the partners at HumanX have heard so many times. What’s the benefit? Why do companies outsource HR rather than use software? What’s the difference between in-house and outsourced HR functions?

As with every hire, every option has its own set of benefits and strengths. However, right now, in this current working environment of flux and change, so many companies are choosing to outsource their HR function. Check out why, here:

Relieves individuals and entire teams of additional resource

Resourcing is always going to be a contributing factor when deciding to outsource any function within a business. Even when companies outsource HR for other reasons, their internal skills and availability will always be a factor in the decision making process.

For example, developing SMEs tend to be more focused on ‘hard skills’ hires whilst they are getting started. This is common as it allows an organisation to focus on output and deliverables before looking internally. As a result, the function of HR tends to sit with a general manager, operations manager, CFO or finance manager. There will come a time when the person who has been handling HR already has a very full plate, as a result of growth or simply because their role has become too blurred and diverse. This is when a HR agency can help. Companies are able to outsource the HR function for support, but also strategic business guidance.

Our HR consultants are able to manage the day to day of HR, whilst also working closely with the leadership team to develop internal HR or support networks, through role design and organisational design.

Human resources management takes time. It’s important that you are able to dedicate hours of the day to listen to your employees, to implement their feedback and to consciously build a better, positive workplace experience.

Access to expertise that’s not achievable with one hire

It’s hard to hire for HR. You want the perfect personality that aligns with your culture and values and can be an advocate for your company. But you also want someone with strategic and operational HR skills, suitably qualified (often with legal and compliance qualifications for certain roles), experienced in reporting to boards and working with executive teams and the soft skills to manage the tactical day to day HR requirements.

If your job ad looks a little like that, you’re trying to hire an entire department and not an individual. Remember, everyone has their unique personality and strengths. A shopping list of requirements for your candidates is going to repel them.

However, it is often the case that you need to hire the diverse skills and minds of an entire department. And that's why strategic companies outsource HR - getting access to all the minds, skill sets, different minds, big picture thinkers and detail orientated do-ers.

Outsourcing HR is better than HR software

HR software automates and speeds up the most basic functions, typically, it can work quite well for calculating payroll. It can send automated reminders for check ins, manage holiday or personal leave requests and a place to digitally store HR policies.

All software is rule based; it follows a formula which can be ideal for some organisations and it is only as good as the people using it. However, HumanX are workplace experience specialists. We believe in a human-first HR approach. Outsourcing HR to a team like ours rather than deploying a software allows for nuance, empathy and creativity!

Software cannot be an advocate for culture, cannot manage a workplace investigation or develop HR frameworks - it cannot engineer workplace culture and develop growth by developing and linking the HR strategy to the organisation’s strategy and goals - outsource HR experts can do all of these things and so much more!

Nimble companies outsource HR functions

Companies choose to outsource HR because it is a strategic business decision. Outsourcing functions gives a company financial flexibility; it keeps committed overheads, like salaries, lower. You can budget for a HR project as a one off, or choose to keep your agency flexible, without commitment. You can outsource the project or HR function to a HR agency and continue doing what you do best without having to take your eye off all the tasks that you are juggling.

Demonstrate impartiality and procedural fairness

Companies that outsource HR do not always exclusively do this. More often than not, HumanX HR works alongside internal HR teams and managers. So why do companies still outsource HR?

In many situations or scenarios, it is advantageous to demonstrate that you are bringing in external consultants. For example, in any situation of conflict or termination, introducing someone that presents impartiality and promotes fairness between all parties can help protect a company. This can actually promote faith and morale throughout the teams. These situations can be quite high risk for any organisation - additional minds, experience and different perspectives can help to protect the company against potential litigation.

Moreover, you want to be able to consider sensitive scenarios from all angles: how will conflict be perceived by the wider team, how can we resurge employee engagement after dismissals, what are the compliance obligations of redundancy whilst still driving business growth. You’ll need a hive of thinkers to create effective, dynamic HR strategies and deploy them.

Quick access to the support you need

It’s a rough game trying to hire right now for any role, but particularly for HR.

Think about it: there are almost half a million job vacancies in Australia right now. So, there’s a push for recruitment which is keeping HR managers busy. But, there’s also a huge drive to retain existing employees following workplace phenomenons like ‘The Great Resignation’ and Quiet Quitting. This is also keeping HR managers busy and in very high demand. Coupled with scary economical changes that make people nervous to leave their established jobs, it is an almost-impossible environment to hire experienced HR professionals right now.

That’s why companies choose to outsource HR. Working with a HR agency, your company gains access to the level of expertise you need, without a delay that could cause more strain and more stress.

At HumanX HR, our experts give companies the power to make confident decisions. Whatever the situation, you will have access to a specialist with relevant experience and entire teams of support.

Some companies choose to outsource HR health checks

A HR health check is always a good idea.

As we discussed when talking about impartiality, it’s a prudent decision to get additional eyes on your HR function. An Outsourced HR agency can audit policies, tools, performance management processes and run employee engagement surveys.

This may all seem run of the mill activity that you might not need critically, but these are the checks that promote healthy, thriving workplaces and protected, compliant companies.

Speak to our team of HR professionals to start your HR outsourcing journey today.

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