Before I explain the reason for outsourcing HR let me explain that in general terms HR means Recruitment i.e hiring people.
But this is only partly right. Recruitment is one vertical of HR. There is much more than simple Recruitment in the Entire HR wing.
HR includes the designing of Systems and Processes for the entire life cycle of employees which has the following stages:
1. Manpower Planning
2. Interview & Selection Process(Talent acquisition)
4. HR Policy
5. Compensation and Benefits
6. Retention Strategy
7. Performance Management System
8. Reward & Recognition
9. Employee Exit
Generally, a big company has an in-house HR Team because they can afford it and more importantly they have work volume for all six days a week and 8 hours a day in a week. So even HR people can have job satisfaction, good exposure, and statutory benefits along with timely salary.
At the same time, SME company has cost constraints, challenges to attract the right talent, retain talent and grow with organized setup.
Such SMEs can have outsourced HR company – on board for a couple of reasons.
1. They get experts to guide them.
2. Experts provide solutions rather than coming back to the owner with questions or problem which generally happens with an in-house HR person.
3. The outsourced company provides flawless service as they will not resign or disappear as employees do.
4. SME can afford fees of Agency compared to the fixed high salaries of inhouse Managers.
5. Retaining talent is not an issue as the agency is outsourced and has to provide services as per agreed scope, duration, and charges.
6. SME needs systems and wants to grow. They can actually make a foundation very strong by having an HR system in place from the beginning and have the right kind of culture.
If there is only one company to design all the above seven modules, handhold in implementing and monitoring the same, it can be a blessing for the business owners. This does not happen if the in-house HR team keeps on changing.
A lot many times Business Owner is only working as all heads like Business Development Head, Production Head, IT Head, Accounts Head, R & D Head, HR Head, and Admin Head. At such time if some HR experts can guide them to be at Owner place and develop second-line or have such experts on board, Business owners can really concentrate on Business Growth rather than getting busy with routine things.
So summarizing: looking at cost, availability of time and long term uninterrupted service and support it is always advisable to have outsourced Agency on board.