Companies failing to take advantage of outsourced HR benefits

Despite recognising the benefits of outsourcing HR functions, half of small to medium sized companies in the UK are not making the most of this opportunity whilst a fifth of large UK companies do not outsource any HR functions.

This was one of the key findings in an independent research study carried out on behalf of Northgate Information Solutions in which 100 senior managers were asked about the likely penetration and growth of HR outsourcing among SMEs and larger companies. Respondents were drawn from a number of industries including finance, distribution, retail, services and transport.

The report, called Outsourcing HR Functions, also revealed that this missed opportunity to outsource HR functions is costing the average small to medium sized company around ?94,000 a year and larger companies as much as ?658,000 a year as around 50% of valuable HR time is taken up with administering and managing day-to-day HR functions and training to keep up with statutory regulations. On top of this, an overall 36% of HR staff in companies of all sizes spend around a day a week in managing or handling recruitment.

Interestingly, 64% of large companies and 54% of smaller companies said that one of the key benefits of outsourcing would be the increased efficiency of HR managers as they are freed up from everyday tasks to work on more strategic issues. Both large and smaller companies also saw increased productivity as an important factor, 64% and 52% respectively.

Larger companies also appreciated the significance of having greater access to specialist HR resources and expertise concerning legislation affecting HR as an important benefit to outsourcing (60%) and the flexibility to pay only for the HR services used (54%). Smaller companies saw payment flexibility ahead of access to expertise.

Both sets of companies saw cost savings as a lesser benefit. However, when considering barriers to outsourcing HR, not surprisingly, cost was a much bigger issue with small to medium sized companies with 70% citing it as an important issue compared to 46% of larger companies. The chief concerns with HR outsourcing with companies of all sizes included loss of the personal element in the HR function, concerns of quality and commitment of external staff, losing control over critical HR functions and issues around privacy and data security

Malcolm Aldis, Managing Director of the HR Division at Northgate Information Solutions, said: "Companies both large and small seem to recognise the many benefits of outsourcing certain HR functions but at the same time are reluctant to make the change.

"Outsourcing isn't about taking away from internal functions, it's about supporting them so that they can be more efficient and productive. In the case of HR an outsourcing company could handle time consuming day-to-day functions like updating employee records or recruitment and leave skilled HR professionals to work more strategically for the future benefit of their companies and their employee.