To Outsource your HR or not? The HR and You Ltd Truth Guide
As a HR Outsourced (HRO) provider in the UK, we bring you our truth guide which covers the elements of outsourcing and whether it would be a benefit to your business. HR outsourcing (commonly known as HRO) is where the process of sub-contracting human resources (HR) functions to an external supplier (outsourced provider) takes place.
How do you decide to Outsource your HR?
When embarking on the decision to outsource more than likely a review of business processes will have led you to decide that it makes sound business sense to ‘sub-contract’ some or all of the non-core HR activities to outsourced specialist providers.
As business owners when making decisions, HR is a non-profit function/area and therefore is an ideal choice for outsourcing.
What can be outsourced?
There are many ways in which outsourcing your HR can be achieved with success, let’s take a look at what exactly can be outsourced:
- Business process HR outsourcing (commonly known as BPO), in this instance it happens where the outsourced provider manages discrete HR activities, such as recruitment, or payroll administration. In many instances, the business will outsource the whole HR function.
- Shared service HR outsourcing happens where only the administrative or transaction elements of HR’s activities are subcontracted out. This also may involve direct involvement with Employees.
- Application (and facilities) service HR outsourcing happens when outsourced providers look after the technological (and physical) infrastructure to support HR activities.
Are there risks involved in HR Outsourcing?
Outsourcing your HR which may mean some or all of the processes are dealt with by the outsourced provider can be a huge business decision, it will be cost-effective, there is no disputing that, but ahead of making any decisions, consideration should be factored in as it undoubtedly introduces new elements of risk, these if not considered especially when making the correct choice of provider for your own business may include:
- Failure to deliver cost benefits
- Inflexibility in ways of working
- An internal loss of control
- A negative impact on internal relationships
- Failure to meet legal or regulatory requirements
- Internal industrial relations issues
Failing to prepare when choosing your new provider wisely is preparing to fail.
What are the benefits of HR Outsourcing?
We have identified already elements that can be outsourced which in a nutshell, can be anything from HR Administration, to outsourcing the whole HR function. HR Outsourcing can deliver tangible benefits to you; this can be achieved by freeing up your and others’ time, this can then be spent developing your business performance and driving your growth. There are many advantages of HR Outsourcing, once you have carefully chosen your provider you should see:
- An overall reduction in costs
- An increased efficiency
- Improved access to HR professionals (not available internally or at a level required, due to a skill/experience gap)
- Increased flexibility and speed of response
- An improvement in the reduction of risk element
- Access to free HR resources to operate more strategically
Who should I choose and why?
Above we have touched on the word ‘chosen’, it is imperative that your choice is made wisely. It is safe to say there are hundreds upon hundreds of outsourced HR providers, most of which proclaim to offer much the same, our sincere advice is to shop around, by doing so you should find the provider that is right for your business, needs, culture, growth strategy and meets your budget.
let’s take a closer look at the do’s and the don’ts when making your choice in provider below:
Don’t reinvent the wheel
If you are already doing something really well then don’t outsource it, or that element, maybe you have a payroll provider or use software to track time and attendance, if that’s the case then don’t outsource that element. Why, in essence, your new provider will only need to subsequently offer another solution, this will be at a cost and ultimately it may not be the most suitable from your perspective either.
Always worth remembering, outsourcing your HR does not mean you are absolved of good people management practice, nor does it mean you relinquish all responsibility for the provision of HR, as an Employer you still have a duty to comply.
You should base your choice on your needs and wants, if you have or are inexperienced in HR then you perhaps need to consider what level of advisory support you will receive, this is crucial when choosing as some providers will only offer a basic service, this will leave you frustrated in time, and lead to the agreement being not for purpose.
Don’t’ agree to unfavorable contractual terms
It really is not unusual for outsourced providers service agreements (contracts) to be 5-10 years in length, it is advisable prior to entering into any agreement (contract) that you have a clear and concise overview not just of your internal business current and future business strategy and potential changing business, including any risk and also that you are more than happy with your chosen provider; this will help you avoid being tied into unfavorable contractual agreements.
Find the right fit for you
With so many providers it can be hard to choose, you should choose based on your personal preference, this means can you work with them?, are they aligned to your own goals?, it may be they are a call centre and that is not your preferred choice, if so look for a provider who offers a 1-1 service, discuss internal service levels and how they are achieved, many providers advertise they are open at times and days when they are not, let’s say you don’t operate 9-5 Monday – Friday, and you have a HR disaster, in the evening or weekend, can it really wait until Monday morning…
Establish the size and qualifications/experience of the team, it may be they cannot handle your requirements.
Do they cover all the elements you need, for example; if maybe you have an ongoing requirement to TUPE, it is advisable to investigate the provider’s knowledge and experience in the field and also any additional fees involved.
Location, Location, location
You may want to consider the location of your new provider, many advertise they are in your area but where are they actually based? this may not be an immediate issue, but it may be you need a site visit, in that case, how much will that cost you.
Worth remembering, location can also be a deal-breaker in some cases there may be a loss of local knowledge, processes, culture, language, and legislation.
Templates or Bespoke
Be clear from the outset what your needs are, many outsourced providers will issue template documents, this would include, handbooks, contracts of employment, and should you require correspondence for your Employees that would be the same is this something that you want, templates will lead to your internal processes being repeated by yourself and not in line with your preferences.
Should you have the option for bespoke documents, we advise you to choose this option but ask for evidence of what they mean by bespoke or templates, that is if you or they are unsure, this will be far more cost-effective and free up your/HR time.
Avoid cheap deals
You will have heard this before many, many times, ‘you get what you pay for it really is true though. Our suggestion is you check out what the provider/proposal is offering you, that you look out for hidden fees and costs, these will be elements such as extras for site visits, bespoke documents, calls, and email responses ‘out of hours’ or over your cap and extra services.
If a deal looks too good to be true it often is, it can cost more in the long run. On a final note here, if the provider doesn’t send you a full outlined proposal then question why?.
The power of true testimonials
Whilst many providers have reviews/testimonails in some cases these leave a lot to be desired, if you do some digging you may find the connection and it may not be a true client relationship. We suggest you ask to speak directly to a current client, that way you will find out the real truth behind the provider and whether they will be a good fit for you.
Try before you buy
If you are hesitant, why not try out the new provider for a period of time, if they have a Pay&Go service you could access this for documents or advice and guidance, that way you can test them out first.
Should I have an agreement with my new provider?
The operation of any HR outsourcing arrangement should be governed by a service level agreement (the contract); it defines the required standards of performance by both parties and should be inclusive of penalties for non-compliance, it is a crucial document, it maybe you need to negotiate this to any of the risks we have covered.
Here to help you
At HR and You Ltd we offer HR Outsourcing at its absolute best, our overarching aim is to bring out the absolute best in your people, we offer a range of packages which are tailored to your exacting requirements, why not take a further look at our website, you never know we may be a good fit for you.
You can contact a member of our HR Team at any time on 0333 006 9489, we offer Pay&Go support should you want to ‘try before you buy’.
This article contains a general overview of information only. It does not constitute, and should not be relied upon, as legal advice. You should consult a suitably qualified lawyer on any specific legal problem or matter.
HR and You Ltd, owns the copyright in this document. You must not use this document in any way that infringes the intellectual property rights in it. You may download and print this document which you may then use, for your own internal non-profit making purposes. However, under no circumstances are you permitted to use, copy, or reproduce this document with a view to profit or gain. In addition, you must not sell or distribute this document to third parties who are not members of your organisation, whether for monetary payment or otherwise. This document is intended to serve as general guidance only and does not constitute legal advice. The application and impact of laws can vary widely based on the specific facts involved. This document should not be used as a substitute for consultation with professional legal or other competent advisers. Before making any decision or taking any action, you should consult a HR and You Ltd Consultant or a member of our legal team. In no circumstances will HR and You Ltd, or any company within HR and You Ltd be liable for any decision made or action taken in reliance on the information contained within this document or for any consequential, special or similar damages, even if advised of the possibility of such damages.