Why Your Business Should Outsource HR: How it Works, Benefits and Costs

You might already have HR staff, or perhaps a dedicated HR team within your organisation. Maybe everything seems to be running smoothly. So why outsource HR?

HR outsourcing provides value in a number of scenarios and in a range of different ways. From navigating complex workplace matters to bringing out the best in your team and leaders, it’s a far more flexible and universally useful service than you might expect. It’s worth understanding the purpose, benefits and cost structure of HR outsourcing so your organisation can take advantage of it as needed.

What does HR do?

As you likely know, Human Resources is a multi-faceted area that encompasses everything to do with an organisation’s workforce. That can include:

• Recruiting and hiring new staff
• Providing a human link between the organisation and its employees
• Analysing and applying HR data
• Managing and evaluating staff performance
• Training and development, and
• Strategic HR planning for the future of the business.

Effective HR supports both your employees and your organisation by optimising employee engagement and workplace morale. HR also plays a critical role in ensuring the organisation maintains compliance with Australian and state-based workplace laws.

What is HR outsourcing?

When an organisation uses HR outsourcing, it transfers the responsibility and management of particular HR processes to an external provider. You might choose to outsource just one HR process or project, or you might outsource all of your HR processes to a trusted provider depending on your organisation’s needs. So which processes can you outsource HR for?

HR business process outsourcing can be a powerful way to navigate through a number of complex yet common situations, including the following areas.

Managing compliance risks

State and national workplace laws set out a number of requirements across pay, working conditions and protection from unlawful or unfair employment terminations. Failure to stay compliant can spell serious trouble for an organisation, even if via an honest mistake. An external HR provider can help you carry out key HR processes in line with exacting compliance requirements, so you can be confident even complex matters are handled fairly and lawfully.

Developing policies, procedures, and contracts

Your employment policies, procedures and contracts all reflect the type of workplace environment you are offering to employees and new hires. Having guidance from an objective and experienced third party can help you to see the bigger picture and ensure your policies and procedures are lawful, accurate and competitive. HR outsourcing can also provide invaluable insights when it comes to developing, refreshing and fulfilling your wider human resource strategy via HR project support and HR project management services.

Recruitment and termination

At first glance it might not seem intuitive to outsource your ‘incoming and outgoing’ processes to an external specialist, but doing so can build you a rich source of quality talent and ease transitions when employees do decide to move on. In fact – handling onboarding, engagement and outboarding optimally can encourage even past employees to be enthusiastic advocates for your organisation.

Workplace disputes and complaints

Even in the healthiest of workplace environments, issues such as employee misconduct, conflict and discrimination can still occasionally arise. How you handle those matters? That matters a great deal. Outsourcing workplace mediations and internal investigation services to an impartial third party can be money well spent. Furthermore, the right provider can help you identify areas to improve and address broader issues that you might be too ‘close’ to see clearly.

Training and career management

When you outsource your leadership coaching to industry-leading specialists, you can supercharge professional development far beyond the knowledge confines of the organisation. This provides two key benefits. First, it maximises employee engagement and provides incentive for high-performing employees. Second, it helps you to identify and nurture leading talent within the organisation.

Why Outsource HR? The Benefits of HR Outsourcing

If the factors above didn’t already build your business case for HR outsourcing, the following advantages just might.

Freeing up time to focus on what’s important for your business

By partnering with an outsourcing team, you can forget about time-consuming functions such as payroll, benefits administration, background checks or leadership training. Your HR personnel can be freed up to spend more time on face-to-face employee relationships, broader HR strategy and overall business objectives.

Reducing overhead costs

If HR is freed up from those time-draining tasks with a clear HR strategy to work to, the organisation can reduce its overhead costs and deliver better numbers for stakeholders. You can also access specific HR knowledge as you need it at a fraction of the cost of maintaining that expertise in-house.

Navigating regulatory & tax complexities with expert advice

Your in-house HR team may struggle to stay across evolving requirements because they have so much to manage already. HR business process outsourcing allows you to access a depth and width of expertise that likely isn’t available within your organisation’s HR team: across law, compliance, performance management, coaching, leadership development and much more.

Streamlining recruitment and onboarding processes

A talented recruitment service can streamline and optimise your recruitment process so you can focus on the job at hand with the confidence the right decisions are being made. Certain providers can also help you to onboard and performance-manage new hires so they can hit the ground running.

Building a stronger team with higher quality-talent

From workplace culture design to onboarding, outsourced HR functions can help to boost your workplace morale, improve the calibre of talent in your team and support your growth as an organisation. They can also help you meet the ever-increasing demand for flexible workplace policies. Get the right people and policies in place, and be known as an employer of choice.

The Costs of Outsourcing HR

You might have these two questions regarding outsourcing cost structures:

• Can you outsource HR cost-effectively in Australia? And,
• How do you find HR outsourcing that will provide genuine value?

The costs of HR outsourcing will vary per month depending on various factors and your choice of provider. Even at the higher end, this can still come in well under the cost of employing someone in-house to fulfil those functions – and HR outsourcing can deliver more expertise and experience for every dollar.

Let’s take a closer look at what can affect the price and pricing structures for outsourcing.

Factors affecting HR outsourcing costs

When sourcing quotes for HR outsourcing, you may be asked about the following factors that can determine pricing:

• The specific HR services required
• Whether HR services are to be bundled or accessed individually
• The size of your organisation
• How many employees in the organisation, and
• The complexity of your organisational structure.

Outsourced HR fee structures

So how do HR outsourcing companies charge? This can vary from provider to provider, but you’ll likely come across one of the following pricing structures:

• A flat fee per service
• An hourly, monthly or annual rate
• An HR outsourcing cost per employee per month, or
• A percentage of employees’ monthly income.

Note: We work with our clients in either a fee per project or retainer arrangement.

Is HR Outsourcing Right for My Business?

Is HR outsourcing for you? If you’re reading this page, perhaps you’ve already been considering the value of outsourcing some or all of your human resource function. There is no one-size-fits-all answer based on your industry or business size. After all, HR outsourcing can provide value in different ways for:

• Small businesses
  So you can focus on business growth knowing your HR functions are covered.
• Medium-sized businesses
  So you can access support to manage increasingly complex HR needs and a bigger team.
• Larger businesses
  So you can maintain a high calibre of talent and improve your efficiencies.

There are some useful quick questions to ask that can help to identify whether HR outsourcing might benefit your business. For example:

• Are you feeling a little lost when it comes to your HR processes?
• Are you looking to improve workplace morale or culture?
• If you have an internal HR resource or team, do you have enough capability and/or capacity?
• Are you looking to grow your team significantly?
• Do you have complex HR challenges to address?
• Do you feel you’re yet to bring out the best in your existing workforce?

If you’ve answered yes to any of these questions, it’s most likely worth speaking with PerformHR about how we can support you.

Talk to the PerformHR team today

PerformHR has HR professionals located across Australia in Perth, Sydney, Parramatta, Melbourne, Brisbane and Newcastle. We offer an extraordinary range of specialist HR expertise and a tailored, detailed approach to optimising your HR strategy. To see if we’re the right fit for your organisation, book in your no-obligation 30-minute consultation today.