By J.D Ndungu
In the previous article, we talked about why small businesses should consider having a separate Human Resources (HR) department. It would be assumed that this function should be internal. However, that doesn’t necessarily need to be the case. Not only is HR outsourcing an option but could even be a great competitive advantage for your small business.
Outsourcing your HR function is a great starting point if you have no idea what your HR department should look like. The outsourcing partner can give you the structure and tools to:
- Ensure that you are compliant with employment law.
- Provide support on payroll processing, including remittance of salary and statutory payments.
- Administer benefits, including insurance management (health, worker’s benefits etc.), pension remittances and allowances (food, telephone etc.).
- Support the employee environment via general HR support.
Advantages of outsourcing your HR
Flexibility
Outsourcing companies, like Preferred Personnel Africa, can offer a variety of solutions that best suit your business’s needs. The biggest advantage that outsourcing companies offer is the expertise they have developed and offer to their clients at a fraction of the cost and risk of hiring the professionals directly. Because of this, using an outsourcing provider offers a certain degree of flexibility. Depending on the provider you choose, they will likely offer different selections of services; you decide how much of the HR function you are comfortable handing over. For example, you can decide how involved they are in the recruitment process. If you want to recruit on your own and then hand over to the outsourcing company for onboarding, you can easily do that. Similarly, if you want the end-to-end HR process where they recruit as well, it may be something that you can negotiate with your outsourcing partner.
Negotiating power
A major cost element in HR is benefits administration, with many insurance companies offering their highest rates for companies with smaller staff numbers. An outsourcing company will have greater negotiating power with these insurance providers because they likely have more employees on their books. As a result, you as the business owner may be in a position to offer your employees greater benefits at a more reasonable price, with the added indirect benefit of being able to attract your desired employees.
Compliance standards
Because an outsourcing company will be a collection of HR experts, they are likely to hold your company to a high HR standard. On the onset it may come off as overbearing as they are pedantic about the compliance issues, but this could save you from making costly mistakes further down the line in your business’ journey. For many small businesses, these are the costs that can get you in a difficult position. You would rather spend the money now on a reliable outsourcing partner and be saved the expense, time and possible damage to your reputation from an HR scandal later.
Concerns around outsourcing
When you own or are part of a small business, you tend to want to hold it close. It may seem daunting to give up control of such a crucial part of the business like your HR management. It is important to make sure that the partner that you select is one that is aligned with your values and business sense.
Is outsourcing cost effective? Choosing to outsource isn’t always the cost cutting solution that it is made out to be. While outsourcing can be cheaper than building the HR capacity internally, that should not be the only reason you decide to outsource. Sometimes cheap is expensive and it can be more detrimental to your business if you choose an outsourcing partner based purely on cost. When choosing a partner to work with, this is something to consider alongside the services that the outsourcing company is offering you. It is best to weigh out whether you value the services offered at the same level as the outsourcing company. Consider this in terms of time, effort and monetary value. Will outsourcing be overall the better decision for your business?
Do your research on potential providers and take the time to assess if they are the right fit for your business. They will be crucial in aiding the growth of your business. Check out our article on ethical outsourcing and things to look out for when choosing your outsourcing partner.
So should your outsource?
Outsourcing your HR is a great way to get the protection an HR department or professional would offer you with the additional benefit of the expertise and influence that they have. Save yourself the effort of building your HR capacity internally and focus instead on growing your business with the peace of mind that your HR function is sorted.
Every business is unique and so will be their HR needs. However, whether you decide to build an internal capacity or outsource, it is essential that you have a dedicated HR function to ensure that your business is supporting its sometimes undervalued, most important resource, people.
