The Impact of HR Outsourcing on Organizational Functions

This report delves into the multifaceted world of Human Resource (HR) outsourcing, exploring its significance and impact on organizational functions. The research addresses a key question: "What are the benefits and challenges that businesses experience by outsourcing the HR function or services?" The report meticulously examines the concept of HR outsourcing, its benefits, and the drawbacks. It draws from a literature review, incorporating insights from various authors to present a comprehensive understanding of HR outsourcing. The report outlines how outsourcing can enhance expertise, speed up processes, reduce costs, and mitigate risks for businesses. Conversely, it addresses potential challenges such as loss of control, time constraints, and disconnection among employees. The study also assesses the impact of HR outsourcing on organizational functions, emphasizing the importance of strategic implementation to maximize benefits and minimize negative consequences. The report concludes by highlighting the critical need for businesses to carefully evaluate their needs and choose the right HR outsourcing strategies to improve their performance and gain a competitive edge.

Business research

Table of Contents
TOPIC..............................................................................................................................................1
RESEARCH QUESTION................................................................................................................1
OBJECTIVE ...................................................................................................................................1
RATIONAL ....................................................................................................................................1
RESEARCH METHODOLOGY.....................................................................................................1
LITRATURE RIVIEW ...................................................................................................................1
CONCLUSION ...............................................................................................................................7

TOPIC
OUTSOURCING HUMAN RESOURCES
RESEARCH QUESTION
“What are the benefits and challenges that business can experience by outsourcing the
Human Resource function or services?”
OBJECTIVE
 To find out the concept of outsourcing human resource functions
 To determine what benefits company is getting from outsourcing
 To understand the drawbacks behind these outsourcing functions
 To find out the impact of HR outsourcing on an organisation functions.
RATIONAL
My main reason behind choosing this topic was to identifying the importance of HR
outsourcing in the organisations and how does it impact the organisational activities. My
personal reason to conduct this research was to improve my analytical skills, Literature review
skills and data interpretation skills.
RESEARCH METHODOLOGY
This is the secondary based data collected on the topic “What are the benefits and
challenges that business can experience by outsourcing the Human Resource function or
services”. This is because researcher was asked to take help of literature review on conducting
this research (Abdul‐Halim and et. al., 2016).
LITRATURE RIVIEW
Literature review termed as in depth study of subject area or some information which is
related to the researcher' s topic. This is already discussed and published data or text, these
literature review include government pamphlets, scholarly articles in the form of summary of the
related topics. This is also termed as old already assisting argument of the source (Berber and
Slavić, 2016).
The concept of outsourcing human resource functions
According to Amitabh Kodhwani. (2007). Outsourcing has become a new option for
business world and it is becoming a new buzzword for the organisations. According to the
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author, every sector and every size of business is using this mantra for their HR related activities.
Kodhwani says that around 85% of the companies having benefits from outsourcing as their
competitive edge is enhancing. There are different organisations some of them are outsourcing
completely while other are doing it partially. In human resource outsourcing, organisations hire
outsiders for performing the HR activities of the company or to take that responsibilities for the
business. Payroll is the major reason for which organisations opt for this mantra because it it is
very time consuming activity as well as it require so much of specialisation in performing that
activity. Other activities included in HR outsourcing are administration of health benefits plan,
retirement plans, workers compensation insurance other than this hiring, training and legal
expertise. Author says that, small enterprises are more into it because they outsource almost
everything. HR outsourcing is having positive impact on Australia's economy because it is
helping small and medium business to compete in the market and take benefits from these HR
firms. Other than this, it is reducing the overall business costs which is reducing the prices of
products which is making their customer' s happy. It is also providing company more profits
which in return allowing firms to enhance their skills in the market. As per the Author there are
three different type of HR outsourcing companies available in the market which organisations
can take advantage of. These are human resource organisations, professional employer
organisation and administrative service organisation. Some of the important factors which should
be kept in mind while selecting the HR outsourcing company are a good track record of the
company, cost of serves they are charging, guarantee of their services and flexible contracting
options. While planning outsourcing things that to be very clear are what functions company
want to outsource and to whom they should outsource. Author says that instead of spending time
and money on business owners and managers they should better spend it on outsourcing human
resource so that business can perform better.
what benefits company is getting from outsourcing
According to Nash Riggins. (2017) HR outsourcing is one of the best idea for small
business organisations to improve their quality of work. Author also says the these outsourcing
has some disadvantages too and is not fit for every situation. Some of the benefits of HR
outsourcing according to Nash are-: first is company get more expertise because may their team
is good in many task but it is not possible for them to be good in every tasks. In that type of
situation, outsourcing is very important for the organisation so that they can get new talent who
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work for them is different ways. This improves performance of organisation by drawing on the
niche skills of experts. Second benefit is that things will get done very fast in small business
because when the company is working on small scale , they can get time consuming things done
quickly by passing some lengthy works to freelancers and other agencies. Third benefit is that
company is in situation to share some risk because with the help of outsourcing planning ability
get enhanced and mitigate potential risks. Fourth one is that it helps in reducing cost of the
organisation because outsourcing HR for some time is cheaper than hiring a permanent full time
staff for the company. Not just money. But company will also save their time in recruitment and
can focus on other important works.
As per the Lee Bruce. (2017). There is no harm in ignoring HR side of the organisation
when operations are happening smoothly. Human resource department is the important part of
the business organisation as it include many important activities like employee payroll, tax filing
and health administration. According to author this department is also engaged into the legal
compliance, supervision and training. As per the Lee, it increases the efficiency in HR
department by outsourcing Human resource functions. When company outsource HR activities
they get more time for focusing on profits and other core activities. Second advantage according
to the author is flexibility which ensures that HR operations are getting done without any hurdle
and if business is facing any influx of information they can fulfil it immediately with the help of
HR . Easy risk management, management of employees performance, organisational
development are some other benefits according to the author which company can avail if they
choose for human resource outsourcing. Author says that HR outsourcing is related to the partner
roles which in house HR department is trying to assume.
To understand the drawbacks behind these outsourcing functions
According to Wanda Johnson. (2016). there is a rapid changes going on in the business
organisation which require professional people so that operations can take place without any
problems. As per the author, staff of business organisation also increases which in return rise the
requirement of human resource professional presence in the organisation. Johnson says that
every coin has two sides i.e. there are some disadvantages of HR outsourcing, according to
author some of the drawbacks are-
Time- HR outsourcing require much time as compare to company's own HR. This act as the
drawback because business organisation has to put so much of time and efforts in hiring
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professional. Some time it become very difficult for the company to find a good HR on time,
Because of which they hire someone who is not apt for the organisation. This HR outsourcing
also distract managers and leaders from their important jobs or tasks and they get engaged into
something else.
1. Control- Author says that this is the drawback of HR outsourcing in which organisation
start loosing control over their employees. Like because of outsourcing, company does
not have any information related to their employees which in return affect the
communication between them. Because of which miscommunication take place and lot of
confusion get create among workers of the company.
2. Knowledge- This affect the knowledge of the organisation's people because it leads to
knowledge deficit because HR of the company is not directly involved so they end up
knowing very less about their staff. Because of which frustration and conflicts take place
among the employees and as return turnover rate start increasing in the organisation.
According to Wendy Reynolds. (2017). HR outsourcing plays an important role in saving
time and money but it make employees disconnected from each other as well as from the
company which is not a good sign for the organisations. Author says that most of the activities
of HR that companies are hiring is background check, employee assistance programs and flexible
spending accounts etc. Author wants to say that before deciding the activities of outsourcing
company has to weigh the disadvantages of such activities. Loss of of human factor is one of the
drawback that company face according to Wendy, in which face to face interaction get lost and a
result dissatisfaction among workers increases because they want to share their issues with
familiar faces. When company outsource HR professional, employees become uncomfortable
feel awkward in sharing their problems, it also result into conflicts or tension between workers
which reduces their overall performance. Accuracy also act as the drawback of HR outsourcing
because vendors use their own software or hardware which may malfunctions because of which
benefit accounts does not get ready properly. In this type of situation, deposits and pay checks
are also lie on the risk slab. Author says that this happen because Outsourced HR does not
understand the requirements and operation methods of the company properly because of which
company face errors. For example if company decided to change their structure of paying
commission to sales representative, but they does not discuss it with the vendor because of which
vendor may make some mistakes.
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To find out the impact of HR outsourcing on an organisation functions
As per the Malik Sharrieff. (2019). business leaders should try to grab all the advantages
and try to exploit the opportunities to ahead in the competitive business environment. Author
says that there are many companies which are trying to reduce the impact impact on their human
resource department by outsourcing HR activities. This will produce benefits for the company
and author also says that business owner should be very careful to implement any such strategy
so that they can fulfil the requirements of the organisation. Author says that follow the process to
identify the requirement outsourcing, first step is conduct an analysis of company's Human
resource department to identify the requirements or functions that need to be outsourced. After
completion of this analysis, managers has to calculate the cost associated in it so that they can
take steps to reduce it which is impacting the HR department of the company. After this author
says that pick out those activities of HR outsourcing which can be done independently and
without any supervision. This is because it will save the time of the company and they will not
be require to help the contractor as well as desired result will get achieved. Next step is company
has to evaluate the costs and benefits associated in the each outsourcing activities. Research is
needed to be done to know what each contractor is charging for the functions company want.
After comparing and contrasting each contractor and what costs and benefits company is
getting , they will decide the one to hire. Author says that company should take proper time to
evaluate each and every task for which they want to outsource HR, as per the Malik view
outsourcing activities will loosen the entire control of company on their HR department or
human resource functions.
According to the Dean Mathews. (2018). there are many reasons because of which
company outsource HR functions. These are the decisions based on the responses to the
demand of reduced costs of HR services. This is a good way through which organizational
politics can be bypassed as well as improve efficiency in organisational activities. Author's report
says that HR outsourcing is the fastest growing segment of HR services . On the other hand if
vendor who is outsourced perform poor it will bring lower quality services and performance of
employees will also gets down. Author also says that there was a time when it was very difficult
to imagine a company without in house HR department because it is a major function in any
business and it can not live without HR department. But in today's time, business organisations
are outsourcing these activities instead of maintaining g their own in- house HR departments.
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This is positively as well as negatively impacting the performance of the company as it saves
time and bring efficiency in the activities. On the other hand it is loosing the communication
between employees with the organisation's managers or HR professionals.
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CONCLUSION
From the above research, importance of the human resource Outsourcing has been
analysed. Other than this, some of the advantages and disadvantages of Outsourcing is also
discussed in the above report which is helping the company as well as putting negative impact on
it. This study has helped in finding many valuable things and shown an understanding of the
impact of HR functions in the company. As per the findings company is require to produce
higher competitive advantage as well as employees need to be evaluated closely so that it can be
decided properly that which HR function has to be outsourced.
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Nash Riggins . Advantages and Disadvantages of Outsourcing from Your Small Business. 2017.
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Lee Bruce. benefits of outsourcing HR services. 2017. [Online]. Available
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Malik Sharrieff. Outsourcing Impact on HR. 2019. [Online]. Available
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Dean Mathew. How outsourcing has changed the HR department. 2018. [Online]. Available
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