All You Need To Know About Outsourcing Human Resources Functions: Pros & Cons

outsourcing human resources functions pros & cons

Almost everything in life and business has advantages and disadvantages. One of those is outsourcing. Human resources outsourcing (HRO) is no different. Outsourcing human resources functions have pros and cons too.

Companies outsource – or offshore – one or more of their HR functions because of the benefits third party HR consultancies and companies offer.

However, there are some disadvantages businesses need to be aware of. Similarly, some of these downsides can be the result of poor alignment between the client and HR firm.

In this article, we’ll be diving into the advantages and disadvantages of outsourcing HR functions and how to overcome those cons.

Types of HR outsourcing

types of outsourcing in hr

types of outsourcing in hr

When you think about outsourcing in the HR field, most people and businesses think about recruitment and payroll.

And they’re right. Payroll outsourcing, with or without recruitment, is one of the most outsourced services in the industry.

For a non-specialist in the HR field, payroll can be a tiresome task that eats into available time and reduces productivity.

HR and payroll specialists, on the other hand, are more qualified to handle this task and ensure salaries are transferred to employees. There are 6 main types of outsourcing in HR. These are:

The most widely-requested HR service. It pertains to employee salaries, absences, benefits,…etc. Many small businesses cannot afford to hire a full-time HR professional so they opt to outsource this task.

The second most-commonly outsourced HR service is manpower. It involves several employee-related tasks such as recruitment, employee benefits, and payroll.

BPO is the larger umbrella for outsourcing services. This means that, human resources outsourcing is a BPO service. Other BPO services include IT outsourcing and supply chain management and outsourcing.

This is the process of outsourcing your HR strategy. Creating an in-house HR strategy is both tedious and expensive. It’s also unlikely to be a fruitful endeavor. That’s why outsourcing your HR strategy is best done by an HR consultancy like Tawzef.

  • Single source HR outsourcing:

This involves a company outsourcing all of its HR needs to one third-party service provider who becomes like a partner to the company.

  • SaaS outsourcing:

Software-as-a-Service (SaaS) outsourcing involves using software to manage one or more HR functions.


Commonly-outsourced HR functions

So, what are the top HR functions that small and medium-sized businesses prefer to outsource?

Here’s a list:

top hr functions that can be outsourced

outsourcing human resources functions

  • Payroll processing
  • Recruitment
  • Salary benchmarking
  • Employee benefits
  • HR strategy
  • Call center outsourcing
  • Business planning
  • GAP analysis
  • Labor law compliance (this service is often provided as part of payroll outsourcing services)
  • Employer branding
  • Employee relations and retention
  • Performance management
  • Risk management
  • Salary surveys


Outsourcing human resources functions pros and cons

Now it’s time to look at the pros and cons of outsourcing human resources functions.

Pros of outsourcing human resources functions

pros of outsourcing human resources functions

pros of outsourcing human resources functions

  • Saves time

The main advantage of outsourcing your HR functions is that it saves your teams’ time.

  • Boosts productivity

When non-HR people are burdened with having to do HR tasks, they’re overloaded and are unable to perform their duties. But when you outsource human resources functions to experts, your team has more time to focus on their actual jobs and be more productive.

  • Saves money

Hiring a full-time HR professional can be costly for a small or medium-sized company. On the other hand, outsourcing your HR needs means you don’t have to worry about finding work for that person and you only pay for the services you ask for.

  • Provides you with many services

Third-party HR service providers like Tawzef offer a multitude of services. This gives you the flexibility to choose which services you want. As your business grows, so do your needs, which the HR service provider can easily give you.

  • Better benefits for your employees

Another advantage to outsourcing your HR functions to an HR firm is benefitting from their network.

HR consultancies like Tawzef have a large network of companies and service providers in various fields including medical insurance companies, banks, HR software, and more. Working with HR consultancy firms provides you with these benefits, making your company more enticing for current and future employees.

Cons of outsourcing human resources functions

cons of outsourcing human resources functions

cons of outsourcing human resources functions

Now let’s look at the downsides of HRO.

  • Might feel impersonal

This is probably the biggest fear among companies when they consider outsourcing one or more of their HR functions.

Employees often find it harder to deal with third-party employees, especially those that don’t work on their company’s premises.

The same applies to performance management and managing employee relations.

  • Changes and corrections may take some time

Another disadvantage of HRO, especially when you have an HR employee collaborating with your third-party provider, the process of making changes or amendments to payroll may take longer.

  • Potential hiring challenges

HR firms generally specialize in recruitment but it might be harder for a third-party provider to find candidates who fit your company’s culture.

There’s no doubt about their skillset but the culture aspect maybe lost during the recruitment process if you’re working with an HR firm.

Outsourcing HR functions with Tawzef

outsourcing human resources functions with tawzef

outsourcing human resources functions with tawzef

Companies worry about the abovementioned disadvantages quite often, making them hesitant to outsource. At the same time, conducting their HR needs in-house makes it harder and costlier for them especially in the long-term.

Tawzef has been operating in the HR field for over 15 years. Our experience encompasses human resources outsourcing and offshoring services, recruitment including hiring international employees, call center outsourcing, among other HR and BPO services.

Over the years, we’ve perfected our methods to ensure that the abovementioned cons of outsourcing HR functions are not a problem for our clients.

We’ve worked with companies across many sectors such as manufacturing, telecommunications, clean energy, banks and financial services, oil and gas, among others.


Wrapping it up

Outsourcing HR functions offers many benefits for companies. The disadvantages, however, are manageable.

Communication is an important element for any successful business and partnership. At Tawzef, we believe that communication is the foundation for a successful business relationship.

And it’s why we strive to ensure that our clients understand their needs and the services they are getting.

As an HR consultancy, we help businesses grow and in their growth we grow too.

If you need help ensuring your business is on the right track for growth, reducing turnover and retaining employees, or simply managing your payroll, get in touch with the Tawzef team and we’d be happy to help.

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