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Fundamentals of Human Resource Outsourcing

Jul 3, 2008
Human Resource Outsourcing is growing at an enormous rate. It encompasses back office functions being outsourced offshore. These functions include HR management services and accounting services.

There are a lot of benefits that businesses can gain from outsourcing HR tasks. One of the most appealing benefits is the ability of a company to focus on their core business activities while still having effective HR policies.

Assessing Your HR Needs
Given that HR outsourcing is beneficial, unfortunately it is not for everybody. There are pros and cons in outsourcing and it all depends on the situation of a company. To better assess whether HR outsourcing is right for you here is a guide:

1. Do you feel comfortable letting other people (outside of the company) take care of the HR functions? There are people who just can't trust outsiders to handle any of the company's functions most often because of trust issues. This kind of thinking however is very much acceptable since it is possible that there are firms that take advantage of their position.

2. Does the company have enough resources to take care of HR functions? If a company has the ability to handle their own HR functions, then there is no need to outsource. This is most especially true in big companies. But if you lack the resources and HR representatives to do the job effectively, then you may opt to go for HR outsourcing.

3. Which is more costly? It should be evaluated whether outsourcing is more cost-effective than having your own staff for the HR functions. It is true that HR outsourcing usually costs less but there are some situations wherein this is not the case.

Processing Your HR Needs
There are 4 stages that cover the process of outsourcing.

1. Strategic Thinking - In this stage, the philosophy of the organization when it comes to outsourcing activities is developed.

2. Evaluation and Selection - In this stage, the company decides on what projects are to be outsourced or not. Possible locations and the service providers to do the job are also discussed.

3. Contract Development - Everything is put into black and white so as to legalize the whole process. This includes service level agreement and pricing terms.

4. Outsourcing Governance or Management - This stage is for ensuring the refinement of the relationship between the client company and the outsourcing service providers.

The success of an outsourcing project depends on three factors: good and constant communication to concerned employees, executive-level support in the client company for the outsourcing mission, the ability of the client to manage the hired service providers. An outsourcing professional responsible for the client company and the service providers should be equipped with skills in different areas.

Such as project management, communication, negotiation, flexible to changes when the situation calls for it, ability to understand the contract's terms and conditions and also the SLA or service level agreements.

How To Choose An HR Firm - When you have decided to go for HR outsourcing, you need to choose wisely which HR firm to choose to avoid any complications in future.

Companies have different criteria when choosing HR firms. Some decide basing on costs, some companies look for companies that are committed to quality and there are companies that are strict on looking for both cost efficiency and quality.

First, you need to know the firm's offered services. Second, you need to know the level of expertise it has in terms of your line of business. Third, you should assess the firm's general HR experience. Fourth, there is a need to know there available resources and last but not the least, you need to be informed how flexible the contracts are.

An HR firm whether outsourced or in-house is considered as an extension of the company so you need to have one that fits your image. That is why you also need to consider the kind of HR firm you want to hire. An HR firm specializing in law firms and financial institutions may not match your new business. It is possible that it will not be able to know and understand your needs.

Types of HR Firms - There are basically two types of HR firms: Professional Employer Organization (PEO) and Hybrid HR firm. Professional Employer Organization is for companies who are comfortable with handing over the whole HR functions to a 3rd party organization. However, if you have any inhibitions about letting somebody else take care of the HR functions, then you may opt to go for the Hybrid.
About the Author
Paul Hata is active in various social and community programs aimed at providing equal access to education,health and jobs to all.Paul has over 10 years experience in managing a multi-million dollar advertising company.Paul can be reached at - TradePlanets.com
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