Should Your Business Outsource HR or Hire In-House? Here’s What You Should Know

As a business grows, its owners often face the issue of not having enough manpower to deal with HR functions. Hiring in-house HR managers come with the benefit of knowing that you work with people who understand the culture you’ve built your company around. 

Sometimes, however, it just makes more sense to outsource HR. If you can’t decide which direction your business plans should take, reading this article on Jobandedu can help you resolve your dilemma.

How Outsourcing Works

Should Your Business Outsource HR or Hire In-House? Here’s What You Should Know
How does outsourcing work? Source: Unsplash

When you outsource your HR management, you’re allowing another company to take on all or some of the responsibilities of your company’s HR department. HR companies specialize in a broad range of tasks, which can be compiled into 4 different categories: employee benefits, payroll administration, human resources, and risk management. Here is a short list of services that these four categories commonly cover:

  • Payroll and report processing and generation
  • Talent recruiting
  • Background checks
  • Drug screening
  • Company policy manuals
  • Compensation programs
  • Contractor compliance
  • Employee relations
  • Affirmative HR plans
  • Staffing management 

If you own a small-to-medium business, you may be able to retain control over some of your company’s HR functions. To allow companies to grow, certain HR management firms often let businesses keep working on some of their own functions, including business and strategic planning, organizational development, performance, and internal HR management and talent-seeking.

Signs That You Need to Outsource HR

The exponential growth of your business is probably the first sign of needing to outsource HR functions. As you employ more and more staff members, their number may outgrow what an in-house HR team could handle efficiently. The more employees you have, the easier it is to lose track of current employment laws and regulations. A company that deals with all employment-related things will have no trouble ensuring you are abiding by all the employment laws in your state of residence. 

If you are still in the process of expanding your company, you may need help with attracting skilled professionals that can help your brand grow. If you hire an in-house HR team for this, you need to ensure they possess the necessary aptitude for discovering and retaining talent. They would have to know to ask the right questions from each candidate and watch out for potential weak links within the company.

HR is indispensable when it comes to business industry, sending it to a list of top career options that will be relevant as long as humanity exists, won’t it?

Advantages and Disadvantages of Outsourcing

One of the major advantages of outsourcing HR is minimizing the risks. When you’re contracting a separate company to manage your company’s HR functions. This allows you to redirect your resources and, as illustrated on this site, lets you spend more time handling your actual business than HR. Your managers don’t have to waste your time managing employee interviews, reviews, development, time-off schedules, and team building.

However, for some businesses, the same benefits represent a significant drawback. This is a recurring issue in small companies where managers and owners are used to handling HR functions on a personal level. There is also the issue of the lack of communication between employers and employees.

Advantages and Disadvantages of Hiring In-House

In-house HR has the benefits of running certain HR functions easier – particularly when it comes to smoothing over errors. Since they have continuous access to all the information within the company, an in-house team will be more likely to notice payroll errors or any changes that need to be made in the HR department.

An in-house HR team requires staffing and resources your company could use more efficiently. While most HR departments start out small and inexpensive, over time, they may expand so much that maintaining their functions may become too overwhelming. To save money, business owners often try to take on some of the HR tasks, which cuts into the time they could spend on growth and development.

Factors to Consider When Outsourcing HR

Not just security system management but outsourcing HR or in-house hiring are the cornerstone of the company’s development. Even if you notice some of the signs that suggest you may need to outsource HR, there are still some considerations to take. The two influences you should factor in when hiring human resources management companies are the costs and the size of the department they need to manage.

Costs

Depending on the services you need, outsourcing HR can be costly – and even more so for smaller companies. To reduce and contain your costs, consider which services you need and how many employees HR needs to manage. If you are a small company looking for benefits administration and payroll, your expenses will likely be higher. 

Make sure to watch out for any hidden expenses as well. When signing an agreement for outsourcing HR, verify that the amount stated on the contract includes all the services you need. It’s a good idea to consult with an attorney with experience in handling these types of contracts to avoid hidden fees and other issues.

Department Size

Different HR companies offer different services, and some may have a limitation on the number of employees they can manage. Before hiring an HR company, see how much work you’ll have for them. For example, if they need to take over the entire HR department of a large business, you’ll need a company that can handle this. 

On the other hand, if you only need the company to handle a few teams or team leaders, this can even be managed by a smaller HR business. A part-time agreement where a firm lends you over a few of their employees from time to time may also be a viable solution in this case.

That being said, the more work you have to outsource, the more it makes sense to do so. If you need HR services for more than 40 hours a week, it’s always a good idea to hire a company that can take over so you can focus on other aspects of your business.

Department Size
Think the strategies through before started! Source: Unsplash

Deciding whether you should outsource your HR management or not is not an easy decision. There are several crucial factors to consider, including the size of your company, the costs, the risks you’re willing to take, and whether you’ve any specific requirements for employee management. Whichever solution you opt for, make sure you take your time before making a decision. 

If you aren’t sure you’ve made the right decision, just start with a few roles and see how it works out. Check with your accounting teams to see how it affects your finances. If the initial test doesn’t work out, you can always switch to the other option.

Catch up with a series of Career Advice here!

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