Outsourcing Human Resources Services
During periods of a leaner economy, business owners and managers take a more serious look at ways to reduce costs. One cost cutting method used by many firms is outsourcing certain services. Outsourcing is a "buzz word" for hiring or contracting with professional firms to handle a particular business activity.
Many organizations outsource a variety of services, such as accounting, legal, payroll, tax preparation, computer programming, benefit plan administration, security, landscaping, custodial and other services. Often, it is simply easier and more cost effective to use an outside service rather than to try to do a particular activity yourself.
This trend towards increasing outsourcing is also seen in the human resources area. According to a survey conducted last year by Buck Consulting, the number of firms outsourcing human resources related functions rose from 47 percent in 1997 to 70 percent in the year 2000.
Many smaller firms operate without an experienced human resources professional. According to a Foster Higgens human resources survey, an average smaller firm typically grows to about 125 employees before hiring a full time human resources professional.
The smaller firm typically assigns human resources responsibilities to one or more staff managers who perform these tasks when time allows, if at all. In these instances, staff try to handle the basic human resource issues such as payroll, benefits administration, keeping a few personnel records, and hiring when an opening occurs. Often, the more complex aspects of human resources management are not even addressed.
Typical problems include rushed hiring to fill a vacancy, limited benefits, reactive handling of compensation without careful planning, lack of training, minimal concern for employee relations matters and inadequate documentation of employment decisions. Such carelessness can lead to costly legal claims. A firm with just one employee is governed by many state labor laws and firms of 15 or more employees is subject to most federal labor laws.
When considering outsourcing a particular business function, the decision basically boils down to these issues: time, knowledge, experience and cost. If the manager lacks the time, knowledge or experience, it may be wise to outsource certain functions to an expert. Likewise, if you need expert assistance for an activity that only occurs once in a while, it is more cost effective to hire an expert for a one time project rather than to retain a staffer on a full time basis.
Outsourced specialists are best for complex or technical tasks or for handling time consuming repetitive tasks that may require specialized automated systems or personnel. Common examples of outsourced functions in the human resources area include payroll, benefits administration, executive recruiting, testing, training, computerization, and creation of human resources policies or pay plans. Outsourcing is also gaining favor in the use of human resources professional for providing ongoing support in personnel records maintenance and administration.
Many firms say that their employees are their most important asset; but their employee relations practices fail to meet the test. Take a close look at your organization's human resource practices. There are opportunities to make bottom line improvements!
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William S. Hubbartt is president of Hubbartt & Associates, a St. Charles, IL consulting firm specializing in employee compensation, employee handbooks, personnel policies and supervisory training. (www.Hubbartt.com) Mr. Hubbartt is author of The New Battle Over Workplace Privacy, published by AMACOM Books.
