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What is HR Outsourcing and How Does it Work? | AugmentHR
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In today’s competitive business environment, organizations must take any advantage they can get. For those seeking an edge, HR outsourcing can be an excellent option—one that comes with plenty of benefits.

WHAT IS IT?

HR outsourcing is exactly what it sounds like: outsourcing a business’s human resources functions. Many firms are realizing that they can gain massive advantages from outsourcing non-core HR functions to specialists. Rather than keeping a number of HR employees on staff in-house, HR outsourcing provides employers with flexibility and maneuverability in administering everything from payroll to benefits.

WHY OUTSOURCE?

There are clear advantages to outsourcing non-core HR functions. First and foremost, you’re contracting with a specialist provider, which means that you’re tapping into a talent network with expert skill and knowledge. That means fewer mistakes and more streamlined processes, which can cut down on your costs. Imagine a payroll error that accidentally paid your employees too much, and you then had to claw back payments—and your HR staff had to spend their time fixing the mistake. That means lost productivity and higher costs for you. While mistakes can still happen, specialists are more likely to have the know-how and the tools to keep errors to an absolute minimum.

Next, outsourcing non-core functions means you can keep a smaller HR contingent in-house. That means costs savings for your business, as you have fewer staff members and fewer benefits to pay out. Subcontracting some HR functions also means more flexibility for you; during busy times, the specialist can devote more resources to your business—and they can pare back when things are slow. For most businesses, scaling up during busy times and scaling back during slower periods can be hampered by cumbersome hiring and firing processes, which can make it much more difficult to maneuver in an ever-changing business environment.

WHAT ABOUT COSTS?

Most businesses are, understandably, concerned about the costs of subcontracting their HR functions. But outsourcing is often a more cost-effective solution. First and foremost, you have more flexibility, which means scaling up and down is simplified. Your cost commitments are often less for outsourced HR than if you had an expanded HR department, in part because you pay for staff based either on a flat fee—which means you pay the same even when you’re busy—or based on the resources you’re using, which means paying more when business ramps up and less during lull times. You also don’t need to pay for benefits, which can rack up on your bottom line.

There are also cost-savings in terms of productivity. Outsourcing non-core functions means your in-house team can focus their attention on core functions—and get more done. The subcontracted specialist also uses more streamlined processes and makes fewer errors due to their specialized tools and knowledge, which translates into higher productivity for you.

WHAT TO OUTSOURCE?

Many companies look to outsource non-core functions such as payroll, benefits administration, and even tax filings. Many of these processes are complex and even well-trained HR staff may encounter difficulties—which can mean spending lots of time and effort on one task, and making costly mistakes. By outsourcing, you allow your staff to focus on the organization’s core competencies. You may even opt to outsource recruitment functions since the applicant search process can be so intensive.

SHOULD YOU OUTSOURCE?

The move to outsource HR functions—whether it’s the entire department or just a specific function—is a big decision for most businesses. Nonetheless, outsourcing offers many benefits, from cost-savings to higher productivity, which can mean big bonuses for an organization of any size.

Felicia Smith

Felicia is the manager of human capital solutions at AugmentHR. With over six years of recruitment experience coupled with multi-faceted HR roles, Felicia is an expert in matching people with the right role and environment. She has worked in many different industries, including investment banking, HR consulting firms, medical, and commercial. Understanding people is one of her strengths, and she has recruited at every level, from directors, project managers, and engineers to operators and general labourers. Her ability to network and develop relationships has been a key tool to her success. With approximately two years of experience managing people and creating a positive work environment, Felicia’s diverse skill set makes her a well-rounded individual. Her business education and background help her identify different business needs and human capital solutions.

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