Human Resource Management (HRM) goes far beyond hiring and firing staff. Today, the HR department provides a vital connection between a company’s human resources and the organisation’s objectives, strategies and goals. Essentially, HRM drives the company’s culture, advances innovation and optimises performance, leading to a distinct competitive advantage.

It’s fair to say that HRM is a complex entity with a diverse range of responsibilities, all aimed at moving the company forward. Having said this, companies also have other goals, namely to save money and use their employee’s time wisely. These two goals have led to a growing movement for outsourcing HRM – but is this strategy really a smart business move in a competitive market space?

5 Benefits of outsourcing HR

Many of the essential functions of HR can be outsourced, including recruitment, firing, onboarding and training of staff. Employee relations can also be outsourced, as can the management of payrolls, benefits and tax obligations. Outsourcing these functions provides five key benefits to SMEs (small to medium sized businesses).

outsourcing HR for success

Fewer HR staff required:

A company may maintain a core group of HR personnel to oversee and supervise the outsourced HR workers. Whether they outsource 100% of their Human Resources Management or only a percentage of the work, a streamlined in-house HR department results in significant cost savings.

Reduced infrastructure costs:

Outsourcing means that all the infrastructure required to run an efficient HR department is no longer needed. The company that provides the outsourced staff will provide all these resources. From office space to computers, internet access, printers, multimedia devices, software and stationary, everything is provided; none needs to be purchased or maintained by the company. This further reduces costs and may even provide an opportunity for a company to relocate to a smaller space with lower leasing costs, further reducing costs.

Refocus on core activities:

Due to their organisational structure and limited finances, many SMEs employ staff who take on a variety of roles within the company. Often, this type of multi-tasking doesn’t optimally leverage an employee’s skill set. It can also divert staff from spending valuable time on the company’s core activities. Using an external firm for HR consulting frees up these employees, allowing them to refocus their efforts on their company’s core activities and can also give them a feeling of satisfaction, because they are performing work that matches their skill set.

Flexible business model:

Fluctuations in markets can mean that a company’s HRM requirements wax and wane, but in-house staff still need to be paid. When HRM is outsourced however, the number of workers can be increased or decreased very quickly with no financial consequences. This offers companies a very flexible business model that can quickly respond to market factors, allowing them to expand and contract their operations on an as-needed basis.

Increased efficiency:

HR Outsourcing leads to a more streamlined organisation resulting in greater efficiency within the company. Staff can focus on the company’s core activities, whilst HR activities continue without interruption. Increased efficiency leads to better opportunities and greater company profits.

In response to changing market forces, SMEs need to reassess their business models, focusing on efficiency, flexibility and cost savings. Outsourcing HR is one way that organisations can work smarter within this competitive environment.