Editor’s note: This article was first published in April 2012, during Spain’s economic crisis. The outsourcing figures it attributes to Adecco’s third outsourcing study come from an undated survey of that period.
We live at a time when companies are choosing to outsource some of their services, above all with a view to cutting staff costs. Outsourcing provides flexibility and cost optimization at a time of crisis, and it increases companies’ productivity and competitiveness.
We’ve always talked about human resources in terms of recruitment, motivation and people development within companies. But this area of the business also covers administrative matters: processing payroll and contracts.
To begin with, outsourcing a service means delegating all or part of its functions to a service company that provides the technical and human resources to properly handle professional work that does not generate profit for the company commissioning it.
What do we outsource, and how?
The administrative side of human resources is essential and easy to delegate to third parties. Payroll, dealings with the tax authorities and Social Security, and new contracts are relatively easy to manage through a service company hired for the purpose, which handles and prepares this administrative work with its own staff.
The advantages are lower costs, avoiding problems with sick leave and Social Security, and having external staff trained in the latest legislative changes, without adding training costs or the risk of our own employees’ knowledge falling out of date.
People development, and especially recruitment, is easy to outsource. Many companies specialize in selection processes: they keep their candidate databases up to date, they spare our company image problems arising from its own commitments, and they offer a guarantee period in case the selection turns out to be wrong.
Training employees is a significant annual cost for companies, although it’s also true that it can bring substantial training subsidies. In both cases it’s easy to outsource. Subsidies come with an administrative burden that calls for an employee dedicated to these tasks, and there are companies whose business is recovering the money you invest in training.
The trend towards outsourcing HR
Here the data speak for themselves. According to Adecco’s third study on the outsourcing of services, more than 50% of the companies surveyed tend to turn to third parties for some of their services.
Specifically, human resources is the third most outsourced area, at 24.73%. Ahead of it are production and general services. After it come sales, marketing and finance.
On the other hand, 33.3% of the companies consulted have not opted for this kind of arrangement, and almost 40% of those that do use it say it has enabled them to develop initiatives or projects they wouldn’t have managed on their own.
How effective is outsourcing?
Cutting costs and staff aren’t the only notable effects of outsourcing in the business world. The transition period means some work runs in parallel, and in some cases outsourcing has led to expenses or mistakes that may have caused additional costs, despite indemnity agreements.
In recruitment, there’s one thing that never quite gets passed on to the external consultancy: the company’s own values and its most intimate profile, the qualities it looks for in candidates that don’t show on the outside but make up the company’s character. And that… can’t be outsourced.
Featured image: Dow Chemical Company, Public domain, via Wikimedia Commons.
