Outsourcing your HR or keeping it In-House? Which way to go and why?
By Kim Osborne, Partner, Chemistry Consulting Group
HR outsourcing is an arrangement through which a business owner hires a third-party consulting firm such as, Chemistry Consulting Group, to oversee some, or all, of their HR functions. HR outsourcing is a smart business strategy that many small and medium size business owners overlook while assigning HR functions to their accounting or payroll staff, managers who oversee a team, or worse, trying to do it themselves off the side of their desk. Entrusting the HR function to employees who are not properly trained in HR practices or who do not have current knowledge of federal and provincial employment legislation or human rights law exposes the company to a high level of risk, which in the end may cost profoundly. Business owners attempting to manage HR off the side of their desk inevitably take valuable time away from overseeing the general operation of the company and its bottom line.
HR plays a critical role in any size of business. Research out of the University of Ottawa – Tefler School of Business Management shows that 70% of businesses outsource all or part of their HR needs allowing business owners to focus on their core competencies. In fact, one survey indicated that 81% of small business owners handle the HR on their own – and more than 45% were not entirely sure they were doing everything correctly or according to legislation and Employment Standards. Most business owners don’t realize how exacting the rules and legal precedents for HR can be until they run into a problem, which then may lead them to a lawyer to help resolve.
By outsourcing the HR functions, business owners can put their trust in professionals who focus on HR and will know when rules and regulations change within Employment Standards. Certified HR professionals can also help protect a business and its employees to mitigate risks and ensure all disputes are properly handled. Additionally, outsourcing the HR function is the most cost-effective and fastest way for growing startups and SMEs to scale-up.
It is time to consider outsourcing the HR when:
- You do not have access to the expertise you need.
- Your current HR processes and documentation are outdated or not in line with legislation and Employment Standards.
- The administration of HR is slowing down productivity.
- You are scaling up rapidly or rebuilding after a downsize.
For an SME, the most important services to consider outsourcing are the following:
- Employment Agreements / Contracts
- New Hire Documentation
- Onboarding and Orientation Processes
- Employee Policies and Procedures
- Recruitment and Executive Search
- Performance Management
- Disciplinary Processes / Termination
- Health and Safety
- Workplace Wellness and Culture
Although larger companies will typically keep strategic HR functions in-house, they will often outsource administrative and tactical projects to an HR consulting firm. Frequently outsourced functions for larger companies include:
- Executive Recruiting
- Executive Coaching
- Strategic Planning
- Launching Organizational Development Projects
- Change Management Consulting
- Specialized Training
- Implement New Technology such as an HRIS
- Terminations and Downsizing Assistance
Outsourcing HR enables lean organizations to continue to utilize the expertise of an HR department, without the added costs of employing one. A best business practice is to align yourself with an external HR team that sees themselves as your business partner, who understands and represents your business brand perfectly while recruiting your new top talent or while overseeing the day-to-day functions of your HR.