A2 Blog Human Resources

Outsource or In-House?

Though the definition can vary by country and industry, in terms of their human resources, MSMEs can generally be considered as businesses with 250 employees or less. With most companies not incorporating a full-time HR position until about 50 employees, you may wonder whether managing in-house, or Human Resources Outsourcing (HRO) is best for your organization. There is no one-size-fits-all answer, but here are a few points to consider when deciding on your business’ HR approach.

Which categories of HR processes can be outsourced?
Many different HR functions are carried out in business, but 3 broad categories in which they can be grouped are:

  • Strategic HR: Developing and implementing your business’ long-term HR strategy, e.g. workforce planning.
  • Transactional HR: Managing your business’ daily administrative HR tasks, e.g. payroll.
  • Helpline HR: Consultancy for HR advice, e.g. labour relations and employment legislation.

Outsourcing Pros

  • Administrative Support: With the ability to manage transactional HR functions, HRO can lessen the amount of time that you spend on administration; thereby providing you with the opportunity to give more focus to core business operations. This is especially relevant to businesses with limited technology capabilities.
  • Cost-effective Expertise: Without an in-house HR Manager, the responsibility for HR functions will either fall on you or be shared amongst employees who may not have sufficient knowledge to perform tasks optimally. Outsourcing HR can provide access to the expertise of a qualified HR professional without having to pay out a full-time salary.
  • Risk Management: Regulation and legislative changes that impact HR can occur regularly, and having the ability to consult with an HR specialist in-tune with the changing environment can help you maintain legal compliance and avoid litigation.

Outsourcing Cons

  • Information Security: While every HR professional should have especially high respect for sensitive data, there is always some level of risk in sharing information with a third party. A few quick tips to mitigate some of this risk: exercise due diligence and do your research, ask for references, and include penalty clauses in contracts.
  • Accessibility: Any HR consultant worth their salt will ensure that there is an open line of communication and availability; however, there is no equivalent to having the ability to pop over to an HR Manager’s office. It should also be noted that while in-house HR is solely dedicated to your company, HR consultants are likely to have more than one client.
  • Control: When engaging HRO, business owners will necessarily remit some level of control over HR functions. Although transparent communication greatly aids mutual understanding, a reduction in the span of control is a factor that some business owners may find challenging.

Ultimately, only you can decide which HR approach is best for your company’s unique needs; but fortunately, no one knows your company better than you do. The key to making the right decision is in striking the correct balance that adds value to your business.