Outsourcing HR: pitfalls and positives

OUTSOURCING has been gaining momentum for several years, but recently many more organisations have been considering this option in a bid to reduce costs and streamline processes. Outsourcing has won favour as it enables organisations to bring in specialist expertise to deliver non-core services, allowing the organisation to focus on delivering its services. Reportedly, it can also save costs of around 20%.

However, outsourcing is not without its drawbacks. Whilst the key to successful outsourcing is having clearly understood objectives and an excellent relationship, in reality the supplier is frequently selected through a tendering process which amounts to little more than a tick box exercise. In the same way that people can get good at IQ tests with practice, there is a knack to completing tender documents which means that often suppliers are chosen based on understanding the tender process, rather than ability to deliver.

Sharon Swift, Managing Director of The HR Experts, compares tendering to the recruitment and selection process, “If you were looking for someone to join your organisation, you would ensure you advertised in the right places. You would also include a range of measures and selection processes to make sure you choose the right candidate. Outsourcing is much the same – and you need to consider how you effectively measure what your outsource partner can deliver.”

What is more, outsource service providers should be experienced at handling the processes or services in question professionally and knowledgably. However, frequently cost savings come hand in hand with a reductive approach, in which processes are condensed to no more than transactions that can be monitored and billed. Rigid adherence to such an approach can leave managers frustrated from dealing with contact centre staff who are all too familiar with the ‘computer says no’ school of customer service.

“With this in mind, it is important to ensure that you achieve real value-add from the service you receive from your provider,” says Sharon. “Even though the outsource company may be cheaper than if you had the same support in-house, they should offer you a quality, responsive service. After all, it is in their interests to do so.”

Outsourcing should reduce costs of non-core activities allowing you to focus on the services you provide rather than investing in support functions. Like many other service providers, The HR Experts focus on meeting specific objectives set out by the organisations they work in partnership with. Being focused on key deliverables means that such providers are able to operate efficiently and effectively, through clear specifications which mean you get exactly what your organisation needs.

Outsource providers have specialist expertise, allow you to tap into economies of scale and must have the objectivity to review strategy and operations. There is considerable evidence that the private sector generally supply services at lower cost than the public sector. Competitive contracting out of services that have traditionally supplied by the public sector produce large savings, often of 20 per cent or more (Lundsgaard, 2002 and Bailey, 2002).

The major reasons cited for outsourcing are having access to specific skills and expertise, improved service quality and the ability to manage fluctuations in demand. On average, contracting-out HR services can bring savings in excess of 28 per cent. The top 3 reasons cited for undertaking outsourcing in the Chartered Institute of Personnel and Development’s (CIPD) 2009 Outsourcing Survey were access to skills and knowledge (71%), quality (64%) and cost reduction (61%). Other benefits of outsourcing HR include:

- Increased efficiency
- Improved people management information
- Access to HR expertise not available internally
- Increased flexibility and speed of response to HR problems
- Reduced risk as it is possible to scale up and down more efficiently
- HR resources can operate more strategically
- Access to improved HR IT systems without capital outlay

The HR Experts are a UK-based HR provider offering outsourced support and offer free initial consultations. Email info@thehrexperts.co.uk for more information or telephone (01709) 328864.


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Pre-Wedding Jitters??...Confusion Surrounding the Royal Wedding

The bank-holiday season is nearly upon us! Are you prepared?

The recent announcement of the Royal Wedding on 29^th April has left many employers confused. Uncertainty surrounds whether employers have to grant employees this extra day off and if so, whether this leave is paid or unpaid. Equally, many employees may be confused or misguided as to whether they have an automatic right to take this additional day off.

Entitlement

Under the Working Time Regulations 1998 the statutory minimum holiday entitlement currently stands at 5.6 weeks a year. For most full time employees this equates to 20 days plus the standard 8 days annual public holidays. (The addition of the 29^th April as a bank holiday brings the total number of bank holidays in 2011 to 9 days.)

An employee’s contractual position however may be different. For example if the employment contract states an entitlement to 20 days’ paid leave per annum plus bank/public holidays then this year they would be entitled to 29 days’ paid leave. However, if the employment contract states that they are entitled to 28 days per annum including any bank/public holidays then an employee’s entitlement would not increase with the additional public holiday. Employees on this contract would still be able to take the day off however this would be taken from their annual entitlement.

Part-time employees

Issues are likely to occur where part-time employees have their holiday entitlement rounded up to allow for their pro-rate bank holiday entitlement. For example, part-time employees who work three days a week and get the pro-rata equivalent (16.8 days inclusive of their bank holiday entitlement) will have to use some of their rounded up entitlement to take the time off as there will be no increase in entitlement for the wedding.

Most full-time staff have arrangements whereby bank/public holidays are on top of their annual entitlement. This may lead to part-time staff feeling they are being treated less favourably and may decide to claim against the employer. To avoid this, employers should offer a pro-rata increase to part-time employees too.

To pay or not to pay?

Many employers will be happy to give staff the day off with pay irrespective of their contracts. There are some companies however that have already informed their employees that the 29^th April is just a normal working day and if they wish to have the day off they need to take it out of their annual entitlement. Be careful though: this should only happen if the contract of employment permits it.

How about those employees who do work on the day of the wedding, should they receive additional payment?

As with any bank holiday there is no statutory right to additional pay or time off in lieu so again the answer lies in the wording of their contract. If the contract states that bank holidays are in addition to their annual leave entitlement and an agreement is in place for pay increments when working bank holidays, you should apply this as normal.

Making your decision

When deciding whether to grant this additional holiday you need to weigh up your options and decide what’s best for you and your company. Offering the wedding day as an extra holiday is a gesture of goodwill and a positive move for employee engagement. Conversely, in such times of economic downturn and with each bank holiday costing the economy £6 billion, it is not a viable option for all businesses. Individual companies (especially smaller businesses or those just starting out) need to seriously assess whether or not they can afford this.

Planning & preparation

If you do decide to take this day as a public bank holiday, remember employees will need only to book the three days off (26th-28^th April) to have an 11-day break. It is highly likely that demand for time off over that period will be high so you need to ensure that you manage those requests effectively! Whatever you decide, ensure that you communicate your intentions to your employees; they may not know what their entitlements are.

The best advice for businesses and employers is to be prepared and to check the employee contracts thoroughly before addressing your employees!!

As ever, if you have any questions on this or any other HR issue contact The HR Experts at info@thehrexperts.co.uk

Autumn is upon us, and the times they are a-changing

Well, there is lots of change underway in the UK. Anyone who has read a newspaper or turned on a news channel can't have failed to notice the sweeping government spending cuts.

Our clients who provide public services or services to the public sector are tentatively waiting to hear how this will affect them. And no doubt, you are tentatively waiting to find out exactly what the impact on you will be.

In HR terms, this means planning what organisations will look like in the future, which roles are critical and how the organisation will survive through careful people management and business planning. Too many businesses are making financial decisions without fully considering the risks, resulting in a rise in tribunal claims.

You see, being in HR doesn't mean that when the proverbial hits the fan, you have time to get out of the way. Rather, you have to be there to explain why it's happening and then clean up the mess afterwards. Not that I'm moaning, I'm quite happy to do it. It pays my bills after all.

It's starting to happen already and I'm busy making sure that the fan is still working in the aftermath. Personnel Today are reporting that HR professionals still aren't being consulted early enough. Otherwise, we in HR are not so much saying, 'I told you so' but rather, 'I could have told you so, if only you'd asked.'