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The Outsourcing of Human Resources Functions

Outsourcing has received a bad reputation in the United States. But one must take care not to eliminate any consideration of outsourcing because of possible outrage against it. Most companies outsource and do it without taking jobs away from Americans and giving them to foreigners (the contested type of outsourcing). Outsourcing is commonly practiced so that a company can concentrate on what it does best, while letting experts take care of needed business tasks not related to this company�s primary purpose.

For example, a company that manufactures light bulbs has experts available in electronics, filaments and glass, light bulb specifications and standards and so forth. Since they don�t need a lawyer all year, they hire one from a law firm on those occasions they need legal assistance. In other words, they �outsource� their legal needs. The law firm exists, at least in part, to serve the needs of companies that either don�t need to hire their own full-time lawyers or wish to outsource their legal activities for efficiency purposes. The law firm has the experience, staff and knowledge to solve the company�s legal issues in a more quick and efficient way than the company would have been able to do itself. After all, its expertise is in light bulbs, not the law.

One area where companies both large and small commonly outsource large areas of responsibility is Human Resources. Although every hiring company has a Human Resources function, it is usually only the tip of the iceberg with regard to how much Human Resources work is really being done on behalf of that company.

Even our largest firms, who may have the wherewithal to hire a full staff, recognize the value of outsourcing. Most of them will outsource certain Human Resources functions such as payroll. In this case, the payroll company keeps a database of the company�s employees with all the necessary data to process their payroll, such as withholding rates, social security number and other deductions. Each pay period the company forwards relevant period information to the payroll company. This would consist of hours worked, vacation or sick time used, new or terminated employees, etc. The payroll company produces the checks or deposits for each employee. It takes care of the tax deposits for the company and sending any other deductions from payroll to the proper recipients. It then sends W-2�s to employees at the end of the calendar year and provides the company with various types of reporting.

This kind of work takes a bit of processing power and would require each individual company to invest in expensive software to track everything properly and legally. It�s more efficient for a 3rd party to do it for many companies. Outsourcing reduces overall costs and increases efficiency and accuracy.

Another Human Resources function that is often outsourced is hiring. This can be done in different levels. For example, one company may hire an employment agency to do the initial screening of candidates just to make sure everyone the company sees meets a minimal set of requirements. The company will take the next steps of interviewing and choosing the new employee. In other cases a company could hire the employment agency to do the entire process and present them with their new employee. This is rare for permanent positions, but is often used for temporary employees.

The initial screenings are the most time consuming part of the employment process. Depending on the job, there could be hundreds or even thousands of resumes received for a particular job. Going through these to ascertain the candidate meets the minimum requirements for the job is not difficult work, but is time consuming and tedious. Rather than spend its time and money on this function, the company recognizes that paying others to do it is the financially sound thing to do. At that earliest stage of the process, the outsourcing firm needs only to know about the company and the needs for this position and, with their interviewing expertise, can choose excellent candidates without first hand knowledge of the company or working environment.

Outsourcing is a necessary component of a profitable company�s business plan. By choosing wisely, a company can be more profitable and efficient by letting other companies take some of the load.

Michael Russell Your Independent guide to Outsourcing