Why Do Companies Outsource their HR Management?

Why Do Companies Outsource their HR Management?

John R. Commons, an American economist, first gave the concept of human resources in 1893. Since then the human resource management has traveled miles to take the contemporary form. The concept of outsourcing the entire HR function – originally emerging in 1970 – has deepened its roots in the corporate world. Even small and medium enterprises have plunged into the same practice. Many organizations have entrusted HR functions to modern HR management companies. However, HR outsourcing in Pakistan is passing through its introductory phase. The usual benefits of HR subcontracting may include:

  • Shifting the focus to other revenue-generating business activities
  • Saving on costs pertinent to paperwork and time
  • Acquiring more qualified and diversified talent
  • Having consultancy regarding labor laws and management
  • Maintaining employee record: payroll, advances, leaves
  • Achieving a performance-based work system

Simplification of in-house functions 

Every business venture manages diverse functions. HR management, production, and marketing, and sales are the core business functions. Modern conglomerates prefer outsourcing their HR management to specialized companies. It is a sort of collaboration that simplifies and streamlines thorough functions of a business while putting the responsibility of HR management on the shoulders of an external company.

Distribution of legal burden  

From interviewing to welcoming the employees on board, there is a lot of legal procedures involved in the processes. The progressive companies focus on maximization of revenues and minimization of costs. Letting some outsourcing company manage the whole fabric of human resources appeases the legal burden of the corporates and SMEs. HR outsourcing in Pakistan is mainly adopted by technology companies to achieve cuts in costs. 

Enhanced efficiency through multicultural workforce

Today, multinational companies collaborate with the best of HR management groups for a few commercial and philosophical reasons. A multicultural workforce brings diversity in work style, innovation, efficiency, and resilience. Managing the multiethnic workforce is a huge task, so the companies rely on outsourcing of HR departments to:

  • Hire employees and manage their payroll
  • Regulate visa and travel needs of employees
  • Save time and contingencies
  • Avoid litigation of HR-related matters

Negation of unwanted employee unions

Apparently, the purpose of employee unions seems to be legitimate. Employee unions are formulated to safeguard the interests of the labor. Sadly, a great deal of politics nurtures under the veils of labor unions. Outsourcing the HR functions saves a company from such headaches.

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