The Human Resource Management (HRM) department of companies provide an array of services, including recruitment, workforce planning, processing and administration of employee benefits and conditions of service, maintenance of sound labour relations, employee performance management and development and payroll processing and administration. In performing the various HRM functions, companies must ensure compliance with various employment and labour laws and keep abreast with changes in such laws.
In order to maintain sound labour relations and labour peace in the workplace, the in – house performance of these HRM functions requires a HRM Department that has skilled, knowledgeable and experienced employees. The required skills mix not only has significant salary and cost implications for a business but also requires investment in systems, infrastructure and technology. Managing different aspects of the employee management processes on a day – to – day basis is a complicated task – one that requires a substantial amount of energy, time and expertise which small to medium sized enterprises do not always have.
Businesses, big and small, have over the recent past began outsourcing various in – house functions that can be done more efficiently, effectively, competently and at a lower cost by a professional external service provider. Globally, the trend for companies to outsource part or their entire HRM functions is on the increase.
Outsourcing HRM functions is a model for smaller companies to get expertise without recruiting additional support employees or investing in HR systems at high costs. For larger companies, compliance, with employment and labour laws, can be an enormous risk, so outsourcing helps them to minimise such risks and, for example, the huge penalties for non – compliance to legislation such as the Employment Equity Act, 1998, as amended.
The Society for Human Resources Management (SHRM) conducted a survey of hundreds of companies globally about their outsourcing habits. Click to read The 6 most common reasons for companies outsourcing their HRM Functions.
The benefits of outsourcing HRM functions include the following: - Cost Savings:Overhead costs associated with performing HRM services are typically significantly high. A fully-functional HR department requires additional office space, highly trained and experienced HR employees and technology. Many small businesses simply cannot afford this expense and find that it’s more cost - effective to outsource HR functions. Outsourcing HRM assists in reducing a company’s costs and helps you avoid trying to financially maintain non – revenue generating back-office expenses. In addition, HRM outsourcing costs are variable and can be reduced when business needs warrant.
- Redirection of Saved Resources: The time, resources, effort and energy saved through the outsourcing of HRM activities can be redirected to core business activities that are critical to business success.
- Access to Expertise:Outsourcing HRM functions provides a company with access to the expertise of an entire HRM partner. For many small and medium sized enterprises, outsourcing their HRM functions is the only way to gain expertise around legal and compliance HRM issues, as well as best practices that ensure employee satisfaction.
- Increased compliance: Legislation such as the Basic Conditions of Employment Act, Employment Equity Act, the Skills Development Act and the Occupational Health and Safety Act, places enormous burdens on companies in terms of compliance. Companies, especially small to medium sized enterprises do not always have the resources to employ experienced and knowledgeable HR employees that are familiar with compliance requirements of such legislation. By not complying, companies expose themselves to risks, not only in the form of penalties and fines, but also reputational damage. HR Consultants are not only familiar with labour and employment law requirements but are able to implement policies, systems and processes to ensure that companies comply and are able to report timeously.
- Flexibility: There tends to be much greater flexibility with an outsourced HR consultancy, than a company would get with in-house HRM staff. As an HRM consultancy is reliant on the business, they will, in all probabilities, be willing to work in the evening, weekends and at different locations, to suit the needs of the business. Such flexibility may not be possible from those employed within the business, and in terms of prevailing employment and labour law. This degree of flexibility can offer up new opportunities to grow the business, which may not be possible otherwise.
- Risk Management: Companies are becoming increasingly aware of the necessity of a more integrated approach to managing business risks. They are realising that HR risks must be considered in every business decision and that if they fail to manage HR risks, the sustainability and continued existence of their companies are under threat. Process to identify risks and to implement strategies, policies, processes and systems to mitigate against these risks is a huge task that not only requires expertise but also a substantial amount of energy, time and expertise which small to medium sized enterprises do not always have. HR Consultants have the expertise to identify and put in place measures to mitigate against HR risks, thus freeing time, resources and energy which can be re – directed to core business activities.
