Why Small Businesses Should Outsource Their HR Operations

Why Small Businesses Should Outsource Their HR Operations
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The choice between keeping HR operations in-house, and outsourcing the job, must typically factor in variables like budget, business objectives and size of the business. Small companies generally stand to make tangible gains through HR outsourcing as it enables them to obtain access to quality services at reasonable rates which would otherwise be impossible to get. 

There are numerous arguments for HR outsourcing by small businesses as discussed below. As we shall see, service providers offer highly flexible plans and packages designed to cater to a wide spectrum of needs, making it easier for small companies to avail of their services.  

1. Compliance Issues

An HR firm can help small businesses fulfil compliance measures in relation to employment procedures including offer letter, job contract, salary, taxation, privacy policy, sexual harassment policy, leaves, overtime, grievance, corruption etc. Businesses typically need specific clauses to safeguard their proprietary products and services from infringement and theft by unscrupulous employees. Adding relevant terms and conditions to the contract could be beyond the scope of the management, where the services of an HR agency could help. 

2. Cost Savings and Flexibility

HR outsourcing allows you to leverage economies of scale to benefit from significant cost savings. In addition, HR service providers offer a wide range of packages in accordance with various business requirements. Several HR firms also offer boutique services encompassing a few select functions. Businesses can also hire the services of an HR firm for a specific time period or the duration of a specific project. Time-based or project-based campaigns in particular end up offering significant cost advantages compared to hiring new personnel for the job. The combination of cost savings and a high degree of flexibility create favourable conditions for small businesses to tie up with HR vendors to leverage important advantages.  

3. Access to High Quality Services

Besides economies of scale, HR outsourcing also results in significant improvements in the quality of service-delivery stemming from the domain expertise of the vendor. Such expertise may not be readily available to you without associating with a professional HR agency.   

One of the main ways this expertise is manifested is through awareness of employment-related regulations. HR firms provide services to several businesses at the same time which requires them to keep abreast of the latest regulations in hiring, administration, taxation etc. This puts them in an ideal position to provide your business with high-quality HR services compared to an in-house department in a small enterprise.  

Some HR firms also specialise in specific industries, such as logistics and finance. If your business falls in a niche category, a specialised HR firm could be more effective in the long run compared to both, in-house operations and general outsourcing services.  

4. Better Employee Benefits

HR firms can help you draft employee-friendly policies including rules regarding job bonus, leaves, work hours, work conditions, overtime, salary increments etc. They can also leverage their contacts with health insurance and social security companies to help you provide better benefits to your employees. Many health insurers and other benefits providers bar small businesses from accessing their best products due to limitations of employee size and budget. By grouping all their clients into a single cluster, HR firms can wangle a better deal for them compared to what each company would get by going it alone. Better employee benefits can lead to satisfied workers and also help your employee branding.  

5. Employee Training

Your outsourcing partner can help you design proper employee training manuals and work out effective schedules. Whether it is technical training, quality training, skills training, legal training, or managerial training, clients can easily utilise the skills of their HR outsourcing vendor to design and execute training modules. Apart from assisting in employee development, regular training leads to improved team bonding, cohesion and productivity. By associating with an HR service provider, you can overcome impediments like lack of time and limited financial resources that stand in the way of providing effective training to your employees.  

6. Employee Retention

A business grows only when it is able to retain its best employees. Although high salary packages are an important component of employee satisfaction, employee benefits, work conditions and organisational culture are also crucial. HR outsourcing can help with employee retention in two main ways. It can enhance overall employee satisfaction by improving the quality of HR service delivery to individual employees, and it can free up in-house HR personnel to concentrate on strategic matters related to employee retention, skill development, leadership planning etc. 

Best Quality Services at Affordable Rates 

A robust human resources function is considered critical to a business’ well-being. It sets the tone for the manner in which a business relates with people both internally and in the outside world. Smart entrepreneurs understand the importance of a robust HR department and its hugely significant impact on a business. With HR outsourcing, small companies too can enjoy best quality HR services at rates which are affordable to them. 

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