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Global HR Practices

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5 Disadvantages Of HR Outsourcing That Every Business Should Be Aware of

Running a business involves plenty of work. While growth remains the focus, employees often find themselves juggling multiple tasks.

The HR department of any business struggles with multiple functions and most of them are time-consuming. Exhausted and overwhelmed, businesses generally find an easy way out – outsourcing HR functions.

While outsourcing HR may seem the easiest and quickest solution, it’s not all sunshine and rainbows. There are several disadvantages of outsourcing HR functions that you may not be aware of. These issues make outsourcing HR a not-so-perfect approach for many organizations.

This blog will provide you with 5 disadvantages of outsourcing HR that are a must-know for all businesses. So, let’s get started!

5 Disadvantages of Outsourcing HR

Here are some of the widespread disadvantages that you may experience while collaborating with an HR outsourcing agency. Let’s take a look:

1. Data Security at Stake

The business world runs on data and you cannot risk offering sensitive data into the hands of others. One of the saddest disadvantages of outsourcing HR functions is data insecurity. When you outsource HR, your data privacy and confidentiality are at risk. With the increasing cybercrime rate, this is one of the biggest HR outsourcing issues today.

Why is this a challenge?

This disadvantage of outsourcing HR poses insecurity threats. Sensitive data like employee information or in-house company data may endure the risk of being shared improperly among the HR vendors.

How to solve this challenge?

To every lock, there’s a key to counter every disadvantage of outsourcing HR, there’s an appropriate solution.

Before handing over all your HR details:

  • Check on the HR vendor vitals.
  • Be certain of their reputation in the market.
  • Check if their name is associated with any prior HR outsourcing scams.
  • Don’t forget to ask how they’re handling sensitive information.

You should only sign a contract if you are confident about the company. Also, don’t forget to mention your protection spells in the contract!

2. Handling Cultural Changes Can be a Lot

Another excrucitaing disadvantage of outsourcing HR is handling cultural change. When you outsource a function, an outsider handles workplace issues, which may not be acceptable to all employees.  They may feel disconnected and it may disrupt the overall productivity of the business. So, this disadvantage of the outsourcing HR function is quite tough to deal with.

Why is this a challenge?

This disadvantage of outsourcing HR is something that directly affects employees. It often becomes the sole reason for their low morale. Cultural change is by far the biggest HR issue in international business as it broadens communication gaps and there are differences in opinions.

How to solve this challenge?

Upsetting your work culture is not cool. So, make sure to work with a vendor who understands and respects your business culture. Assuring that the vendor is flexible enough to adapt to your work culture will help you tackle this disadvantage of outsourcing HR.

Also, reassure that the HR vendor does not directly impact your employees. This will ensure that your employee workflow isn’t interrupted.

3. Are you Losing Control?

Losing control is another global HR issue that many companies face. Obviously, your HR staff knows what makes your employees happy and how your workplace operates. In short, you remain in full control of your workflow.

One of the disadvantages of the outsourcing HR function is lacking control. When you outsource, you may give up a certain extent of your control and this stands to be one of the biggest issues of HR outsourcing.

Why is this a challenge?

This disadvantage of outsourcing HR comes with the obvious concern that you no longer can direct the workflow as you prefer. Plus, you may not have the access to every information which, in turn, may hamper the process of making informed decisions.

How to solve this challenge?

The main reason behind choosing to outsource your HR operations is to ease the burden on your employees. So, remain the decision-maker in all matters. The work of the HR vendor should be limited to providing options and recommendations. It will be your decision as to whether you want to implement them or not. So, keeping this control over company matters will help you overcome this disadvantage of the outsourcing HR function.

4. Is Employee Turnover Increasing?

Another exhaustive disadvantage of outsourcing HR is frequent employee turnover. When you outsource your HR functions, you will most probably be communicating with a representative. This HR representative will, over time, become familiar with your work culture, dynamics, and other HR issues.

However, like the other uncertainties in business, this person may take an exit without making an effort to support your business.

Why is this a challenge?

This is a common disadvantage of the outsourcing HR function. While your HR consultant may understand your work dynamics well, if they leave, you might be confronted with the challenge of being assigned to a new representative. That means you’re back to square one.

How to solve this challenge?

Although this is a common HR issue in outsourcing, there’s no direct solution to it.

Your HR provider must manage employee turnover and they are supposed to work in the same manner regardless of turnovers. That means, they may not adopt a data-driven approach and focus on the right employee retention strategies that could reduce employee turnover. That’s definitely not the ideal way to handle this issue. So, make sure you check with a vendor’s reputation. Ask their clients about how committed they are, make quick follow-ups and investigate the vendor’s capability to handle change.

5. No Cost limits

One of the biggest disadvantages of outsourcing HR is to balance cost and performance quality. While you may find affordable HR service providers, there’s always the risk of decreased performance quality.

HR is one of the most important functions within a business. So, in case of a poor performance from the provider’s end, your business may have to suffer the loss. Finding a quality HR provider within your budget is a struggle. Budget issues are one of the thorniest issues in international business to deal with.

Why is this a challenge?

This happens to be one of the most common HR outsourcing issues faced by several companies. The challenge here is to find the right HR provider who fits your budget. A combination of the right cost and quality is difficult to achieve.

How to solve this challenge?

To overcome this disadvantage of outsourcing HR, you need to be cost-effective. But how?

Well, start small. You can start with small HR services to be outsourced and add services gradually as you need. You can also choose to bring an HR vendor to provide simple support to your in-house team.

Pick and choose a few HR functions and outsource them to the HR provider. Since you get to choose the services, you can also control the costs.

Streamline HR Outsourcing with Multiplier

If you are looking for an HR outsourcing company that can help you with:

  • 100% data protection
  • Complete data ownership
  • Inclusive HR operations
  • Assured affordability

Choose Multiplier – over 50 brands are working with us already. Want to explore further? Click here for a free demo!

Binita Gajjar
Binita Gajjar

Content Marketing Lead

Binita is a Content Marketing Lead at Multiplier

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