In business, outsourcing is the contracting out of a business process to a third-party and has become increasingly popular with businesses small and large in the United States since the beginning of the 21st century. Not always popular with those whose functions are being outsourced, the practice is receiving continued interest from business owners and executives across all types of industry. Companies outsource to avoid certain types of structured or fixed costs that are associated with non-core activities. Among the reasons companies elect to outsource include the avoidance of regulations, high taxes, high energy costs, and costs associated with defined benefits and taxes. In today’s business arena it is getting increasingly rare to find a company that is not outsourcing at least one non-core competency function.
Human resource (HR) departments oversee employee payroll and tax filing as well as employee benefit and health administration, legal compliance, file and records maintenance, and oversee training and development. For many businesses, the various functions of the HR department are too comprehensive and complex to maintain in-house. Businesses that outsource HR functions receive several advantages that support the company’s bottom line and allow them to focus on managing their core business.
HR outsourcing firms help businesses minimize the risks that is associated with employment and labor law changes and can be very important to ensure employers remain up-to-date on regulations that affect the workplace. HR firms also maintain and audit company policies and practices to ensure the organization and its employee’s best interests remain protected.
Reducing the cost of maintaining nonrevenue-generating expenses has long been a priority of businesses that are experiencing a steady decline in profit margins. Costs associated with supporting non-productive efforts are an attractive target for reduction or elimination. Outsourcing costs are variable and can be reduced when business needs warrant.
Maintaining an efficient and productive workplace is critical in today’s highly competitive environment. Advanced human resources technology utilized by outsourcing providers help streamline important HR functions and helps employers and managers spend less time doing paperwork and more time dedicated to improving the efficiency and effectiveness of the workforce.
Training and Development
Training, developing and monitoring employees is a critical part of any successful business, but maintaining a full time dedicated staff is expensive and out of reach for most small to mid-sized companies. Outside providers can implement performance management plans to ensure employees comply with company policies and procedures, establish training and personal development programs and monitor employee performance to ensure compliance with organizational goals and objectives.
When outsourcing internal services, a company’s confidential information t such as payroll, personal employee information, computer and proprietary business processes is exposed to outside subcontractors, so care should be taken to protect unauthorized distribution of proprietary information. While outsourcing is not always a popular strategy it is often a very necessary decision in order for companies to be successful in this ultra-competitive environment.