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This article is featured in issue 97, but the website for plusHR is incorrect. Please see correct web address at the end of this editorial.

Sharon Crooks, Director, HR Services at plusHR, explains the essential factors to take into account when choosing an outsourced provider. Through outsourcing an organisation of any size can get up and running quickly with its HR function.

The true value of an outsourced service provider to its clients, whether delivering HR, finance, maintenance or IT, comes when the breadth and quality of their service surpasses what the client could achieve with an in-house team. An outsourced option allows companies to ‘have it all’, but only when and if they actually need it. When a HR department is growing organically, it takes time to set up people policies, procedures and processes whereas an outsourced service provider will already have these in place. A good service provider will also continually invest in its people to offer clients access to the latest skills, thinking and professional knowledge. This is increasingly important in an area such as HR, which has spawned a number of specialisms in recent years to meet the increasingly sophisticated demands of the workplace. These include reward, or compensation and benefits professionals, as well as experts in the field of diversity and HR technology.

Know what you want. Business owners should undertake due diligence when choosing an outsourcing partner. It is tempting to go out to the market place and adopt a shotgun approach, pause first and thinking hard about what level of service you will need

Know what you want. Business owners should undertake due diligence when choosing an outsourcing partner. It is tempting to go out to the market place and adopt a shotgun approach to researching providers. It is worth pausing first and thinking hard about what level of service they will need, and how much flexibility they want. Armed with the right set of questions to ask, it will be easier to find the right provider. If keeping track of employee records, and staying on the right side of the law is the main driver, a basic HR Administration service will suffice. If line managers are struggling with lots of people issues, and Tribunal claims are looming, the service should include HR Management and Employee Relations support. For some clients, payroll services are important, for others, not at all. There may be an in-house junior HR person who just needs occasional support or expertise. Every client is different and the best outsourced HR service providers will flex their offering to meet client requirements.

It is important to ask for client references and to quiz potential providers on key areas. A great HR function needs three things. Great people, simple processes and confidential data handling. Firstly, assess the quality of their HR professionals; do they have Chartered Institute of Personnel & Development (CIPD) qualifications? What specialisms do they offer? Are they a good cultural fit with the client organisation? Secondly, ask what administration processes they use, and how they will interface with the client. Ask for a demonstration of their technology and ask what the employee experience of the service will be. Younger recruits to the workforce, especially members of ‘Generation Y’ and the ‘Millennials’ expect to be able to book their holidays and access their payslips online. The technology offered by the outsourced provider will influence employees’ perception of their employer. Cumbersome administration processes irritate people, and the best outsourced providers have simple, streamlined processes that are easy to use. Employees must be confident that their personal data and bank details will be secure. Check the data storage and data protection arrangements, to ensure that confidential employee data will be handled responsibly. Ask about the administration team, who will be processing the data and dealing with employee queries and what quality assurance measures are in place? What qualifications and experience do the administrators have? As with any service, the quality depends on the people delivering it.

The most frequently cited disadvantages of outsourcing are a loss of control of processes and data, security risks and hidden costs. While business owners should be aware of these, a comprehensive service level agreement (SLA) can help to mitigate many of the risks inherent in outsourcing. In some cases, the outsourcing arrangement fails because the SLA hasn’t been specific enough in spelling out the responsibilities of both sides and/or the service delivered doesn’t live up to the client’s expectations. Business owners should ensure that the SLA is robust and fit for purpose, but they should also understand that engaging an outsourced service provider doesn’t mean absolving themselves of total responsibility for HR. They remain responsible as an employer. Any outsourcing arrangement has the best chance of success when there is a healthy and respectful two-way relationship between the client and the provider. With the right provider, outsourcing HR can give business owners peace of mind about legal compliance and control of their costs, freeing them up physically and mentally to drive the business forward.

Sharon Crooks, Director

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