A firm believer of “Everything Happens for a Reason”, Vikash has been writing on plenty of subjects for internet. Presently, he is associated with recruitment technology industry and sharing tips on the best HR practices through the use of HR technology and beyond that.

Most small companies are aware of the displeasure of spending time on non-revenue generating activities. Though human resources (HR) has become a  prime part of businesses today, small companies still hesitate to invest in developing a proper HR management services. Entrepreneurs can spend up to 40% of their valuable time on payroll, HRM, compensation & benefits which are important but time-consuming tasks. For small businesses where the owner plays a crucial role in the entire productivity cannot afford to spend time in  HR activities.

Therefore, the solution is—‘outsource the non-core activities’.

Here a question arises, when a company should outsource HR functions?

Outsourcing HR functions depend on certain aspects. Entrepreneurs, especially the ones managing small businesses, need to clarify certain questions/issues before making a final decision regarding HR outsourcing services. These questions usually comprise the following:

  • What is the size of your company?
  • What is the cost of HR outsourcing?
  • What is the intensity of control over HR outsourcing?
  • Percentage or amount of HR services you want to outsource

The subsequent paragraphs elucidate the above-mentioned queries pertaining to outsourcing HR functions:

Size of the company

Generally, we expect the administrative process of a company to be helpful for overall organizational productivity. But, when the very administrative functions begin to hamper the productivity,  it would be prudent to outsource HR services. However, this opinion depends on business to business and its expansion.

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Some HR outsourcing companies don’t work with small organizations which, have less than 10 employees. Once a company becomes bigger, it’s  easier to build an internal HR team. The configuration of employees in your organization is equally significant.

Cost of HR outsourcing

Possibly, one of the major concerns of start-up entrepreneurs is the cost of outsourcing HR services. Similar to other professional services, the cost of HR services varies subject to the company and task. The cost ranges from about 2% to 11% of wages as per the estimation of industry experts. The other way of expense is to charge on the basis of per employee.

Intensity of control over HR outsourcing

HR outsourcing companies act as business partners to the client companies. If an entrepreneur wants to regulate all the aspects of a business and is not open to ideas provided by the HR outsourcing agency, then outsourcing HR functions would rather prove beneficial for the organization. Businesses should be somewhat flexible and open to embracing new ideas when they choose to work with an HR outsourcing company. Suggestions from HR outsourcing companies can turn out to be fruitful for the business.

Percentage or amount of services you want to outsource

It’s crucial to choose the right HR outsourcing company depending upon your requirement as different HR companies specialize in different services. For example, some might excel in leadership training while another company’s forte might be a talent acquisition. On the other hand, there are some HR outsourcing who are solely involved with risk & compliance and legal aspects associated with HR.

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Companies must remember that each HR agency is dissimilar so are the services they offer. You need to understand what are the services which would suit your requirement and budget. Do remember to analyze your HR outsourcing requirements in details before you decide upon to finalize.

Hope that, the above-mentioned information has helped you get an insight into HR outsourcing and has also answered your queries to a great extent. So, if you are an entrepreneur and heading a  small business, and considering outsourcing HR services, you need to analyze your requirements. Only after a thorough analysis of your business requirement, you should approach a trusted HR outsourcing company to fulfill your needs. Only trusted agencies would be worth investing your money and able to deliver services with accountability.

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