How Outsourcing HR Can Optimise Your Human Capital Complex labour legislation is among the many reasons why more companies are choosing to outsource their human resource (HR) function to specialists while they focus on delivering on the core strategy.
Opinions expressed by Entrepreneur contributors are their own.
You're reading Entrepreneur South Africa, an international franchise of Entrepreneur Media.
Organisations of all sizes can benefit from going the outsourced route as it delivers good return on investment and reduces the risk associated with human capital.
Curbing cost and reducing risk
In fact, the main drivers of outsourced HR services are built around reducing the cost and risk of the following critical elements:
- Recruiting unsuitable candidates;
- Non-compliant employment contracts;
- Remuneration and deductions calculation errors due to non-compliance;
- Non-compliant policies and procedures;
- Non-compliance with the Employment Equity Act (EEA) which can see fines starting at R1.5 million;
- Flawed disciplinary processes and procedures; and
- Issues relating to the staff exit process.
When is the right time to outsource?
As soon as possible: Employment legislation governs the employer-employee lifecycle, so expert HR services are needed from the start;
When you are experiencing growth: As the business grows, so the compliance requirements become more complex. Once the employee count exceeds 50, or annual turnover exceeds the threshold for the industry the company is operating in, it must start complying with the EEA;
Regaining core focus: It is essential for the business to leave the day-to-day HR issues to the professionals so it can focus on its strategic priorities.
Selecting outsourced services
For an SME, the most important services are the following:
- Employment contracts;
- Policies and procedures;
- Performance management;
- Disciplinary procedures;
- Employment equity; and
- Workplace Skills Plan/Annual Training Report.
Procedurally, these can have a huge impact on the business if not done correctly.
Selecting a services provider
When selecting a service provider, use the following criteria to ensure you find a high quality partner:
Expertise: Ensure the service provider is registered with the SABPP (SA Board for People Practices), the professional body for HR practitioners in South Africa, as well as the quality assurance body for HE learning provision;
Pricing: You get what you pay for. The services might be affordable, but this is usually an indication that they are not comprehensive. Many clients end up at the CCMA because they chose to use a cheaper outsourced HR service. Ultimately, this will cost your business more money in the long-run.
Reputation: Based on testimonials from other clients.
Cultural fit: The chosen HR service provider must be able to adapt to your needs. The best way to do this is to "become one of their employees" to provide the service. They must develop a one-on-one relationship with each client, underpinned by a personalised service. Agility is key – the ability to fit in with the client's culture and systems.
Benefits for employers
There are several benefits of outsourcing your HR services for employers such as:
- Reduced risk and cost savings, with fewer CCMA cases and fewer penalties.
- Return on investment, with Skills Development Levy rebates.
Benefits for employees
The main benefit for your employees is that they will have access to a professional and impartial opinion when faced with HR issues, such as disciplinary hearings, which are chaired by a truly independent chairperson. This ensures that the hearing has a fair outcome and reduces the risk of the employee taking his/her case to the CCMA (which is also beneficial for the organisation).