Can a Small Company Save Costs by Outsourcing HR Tasks? Let's Discuss Feasibility

Do you think HR's routine jobs can be outsourced to a third-party company to handle it?

My company is new and planning to set up the HR department; our total staff is around 40-50 people.

- If I want to handle 40-50 staff, how many HR staff do I need?
- Can I just hire 1-2 HR staff and outsource the routine job to a third-party company? (My boss thinks that it can save costs if we outsource the job.)
- There is no specific scope at this stage; let's discuss the feasibility of this.

Thanks.

Nowadays, most of the HR processes are outsourced. Following are the areas that can be outsourced: Recruitment (Campus and Lateral), Compensation, Performance Management, Updating workforce data, Onboarding, Exit Interview, etc. I am currently working with a firm that works on these outsourced processes. Through this, the parent company can emphasize their core HR. However, you should have good software to cope up with this.

Only certain parts of the HR should be outsourced, not entirely. The outsourcing should be done for salaries, legal compliances, manpower recruitment, full and final settlements, and PF. Avoid outsourcing the following functions as this would have a cascading effect – training and development, performance management, induction and orientation, exit interviews. Please try to involve third parties rather than outsourcing wherever possible...

Hi, I wish a good day to all,

My views on placing third parties in administrative functions can be advisable, but not for HR functions because HR function is personnel function. We know the importance of salaries, PF, ESI, and other statutory aspects. For example, if we outsource the payroll, and if an employee loses one day's salary, what action will we take against the outsourcing person? There could be some administrative hurdles as well. If such issues occur frequently, we may need to change the outsourcing agent. Constantly changing year after year and from period to period is not advisable. Therefore, it is recommended to recruit a maximum of 2 HR executives.

Think about it.

Regards,
Selvam

Hi,

As per the current trend, all routine activities such as salaries, tax calculations, appraisals, etc., are outsourced so HR can focus on more quality work.

Regards,
Sukhada

I don't think HR outsourcing is rocket science. There are a few things you need to look out for before making a decision:

1. The experience of the outsourcer (How long have they been in business, how many clients have they served?)
2. The performance of the outsourcer (Customer feedback, reviews, etc.)
3. The vision and goals of the outsourcing partner.

I have been part of an outsourcing operation where we handled a large workforce for a North American client. They clearly appreciated it as it reduced costs and alleviated headaches.

Regards

Yes, I believe outsourcing is the way to go as it reduces the burden on HR and allows them to focus on core HR activities. Instead of hiring an HR professional over whom you have no control in terms of competence or accountability, a trusted outsourcing partner can take care of all your needs.

Regards,
Reuben.

Thank you all for your attention. Our company is based in Macau. Here are some of my ideas; however, I have not yet proposed them to my boss. I would appreciate your advice on whether I am on the right track. Thank you.

Recruitment:
- HR Manager x 1 (experienced)
- HR Officer x 1

Outsource Jobs:
- Policy & Procedures Design
(This involves consultant services to help establish company policies)
- Attendance & Absentee Management
(This task entails tracking and reporting employees' daily clock-in/out status)
- Payroll
(I am not familiar with this area, but I know it can be outsourced)
- Employee Personal File
(Assistance in scanning documents into soft copies, ensuring accuracy, and following up on any outstanding documents. Provide an accessible interface for retrieving records)
- Leave Management
(Support in updating and maintaining leave records, with an easy-to-use interface for employees to check)
- Compensation & Benefits
(I am unsure about this area; can it also be outsourced?)

Thank you.

Yes, Ben, whatever you have mentioned can be outsourced. Where in Macau do you work? I might visit sometime next year on my way to Singapore. I can work with you in Macau :-).

Hi,

In my opinion, you cannot outsource HR services. Generally, an HR professional works with and for other human resources within an organization. How can an outsider conduct performance appraisals? How will they assess motivation requirements? How can an outsider understand human resource nature and behavior without spending day-to-day time among them? How can an outsider consider employee development and organizational growth? What about welfare, grievances, and other daily employee issues?

On the other hand, you can outsource recruitment, training, related development, and any changes. PF-ESIC and other compliance terms can be outsourced to handle legal matters.

I hope this provides you with a brief idea.

Thanks and Regards,
Vikas Kumar

Dear Friends,

I don't think HR should be outsourced because the company will have to bear more expenses than what they would have paid to their own HR employees, and there will be indiscipline in how the agents will manage. These are all bogus things.