Skip to content
Market Insights SEEK Employment trends HR outsourcing practices: Should SMEs jump on the bandwagon?
HR outsourcing practices: Should SMEs jump on the bandwagon?

HR outsourcing practices: Should SMEs jump on the bandwagon?

As most SME business owners do not have the luxury to spend time and resources on non-revenue generating tasks, the option of outsourcing their HR functions is beneficial in many ways.

Human resource outsourcing was once an option that is popular only among multinational corporations (MNCs). The small and medium-sized enterprises (SMEs) on the other hand traditionally preferred to manage HR functions in-house. Over the course of many years, we see a shift in this trend. HR outsourcing is made more accessible to smaller companies due to the rapid growth in the gig economy. This is further fuelled by the growing demands of outsourcing as well as the ever-increasing necessity to save costs.

As most SME business owners do not have the luxury to spend time and resources on non-revenue generating tasks, the option of outsourcing their HR functions is beneficial in many ways. Some of these outsourcing services benefits are:

  1. Greater focus on productivity ⁠ ⁠While administrative human resources functions are necessary, some of these processes can potentially slow down the productivity of a company. Outsourcing these administrative HR tasks can effectively free up the limited manpower that SMEs have. This will allow SME business owners the flexibility to focus on generating more sales and products. ⁠

  2. Reduce business expenditures ⁠ ⁠Maintaining an in-house team of HR professionals requires an allocation of funds for business expenditures. This could be a costly affair for SMEs. Outsourcing HR tasks would mean reducing the need to invest in various assets. An external human resource management company will be able to take over responsibilities like HR software, office space, database management system or even a permanent HR staff entirely. That way, SME business owners can focus more on investing in core business activities. ⁠

  3. Recruit quality talents ⁠ ⁠Apart from recruitment, the HR department in SMEs often have other responsibilities. These include managing payroll and tax filing, oversee legal compliance as well as other administrative tasks. This gives them less time to focus on recruitment. Hence lowering the chances of hiring the right talent. Outsourcing the recruitment process will increase the chances of getting the right hire. This is because third-party recruitment agencies are trained professionally to hire quality talents for clients.

⁠SMEs that outsource their HR functions generally enjoy the above advantages compared to those that don’t. In addition, SMEs looking to outsource their HR functions should also take note on some of the HR outsourcing trends:

  1. Online payroll ⁠ ⁠There are many considerations when outsourcing payroll to a third-party agency. For example, there are risks involved when communication lapses. You might face difficulty in checking for information if anything goes missing. This is why more and more businesses are now turning to online payroll solution. The online solution helps to streamline the payroll system and reduces downtime. It also enables both you and your third-party agency to manage and track all your important information anytime, from anywhere. ⁠

  2. Selective outsourcing ⁠ ⁠The ongoing trend of selective outsourcing is the process of outsourcing specific operations to third-party agencies. At the same time, SMEs retain the rest of the HR functions in-house. For example, SMEs can opt to outsource one of the hardest HR functions; recruitment. Finding the right talent can be time-consuming as it involves sourcing, shortlisting, interviewing and plenty of researching. Do your business a favour and consider outsourcing your recruitment tasks to professional third-party agencies. ⁠

  3. Switching to the cloud ⁠ ⁠As more and more businesses outsource their HR functions, the adoption of cloud computing is also gaining momentum. For example, a cloud-based solution allows a third-party agency to securely access the HR data they need anytime. Thus increasing collaboration and allowing work to be done from anywhere. A survey report from Information Services Group, a leading global technology research and advisory firm, revealed that “more than half of all enterprises will rely on cloud-based or hybrid solutions for their HR systems by 2020.”

The trends in HR continues to gravitate towards outsourcing, forming a need for SMEs to continue following the footsteps of the MNCs. There is no doubt that HR outsourcing will soon become an essential extension for companies aiming to save time and grow their businesses.

So, have you started outsourcing your HR functions yet?

This article is either written or edited by JobsDB HK. If you would like to publish it on other website or publication, please contact us by email: [email protected]. JobsDB reserves the right to take legal action against any person that infringes the copyright.

Subscribe to Market Insights

You can unsubscribe from emails at any time. By clicking ‘subscribe’ you agree to our privacy policy