It’s Halloween season, so here are a few spooky predictions (well, spooky for HR professionals, at least):
- In ten years’ time, there won’t be internal HR departments.
- Key business functions like payroll will be outsourced.
- Any backend services not related to revenue will disappear.
Far fetched? No, as it turns out. Elements of this vision are already coming true. You need only look at the fact that the payroll outsourcing industry is expected to reach a value of $10.336 billion by the end of 2023, with a constant growth rate of 4.4%, to understand how quickly this transformation might take root.
But why exactly is this happening? In this blog, we’ll take a closer look at what’s going on to answer the question: are the days of HR numbered?
Taking stock of the situation
Let’s first ensure we understand what we mean when saying HR. In this case, we’re talking about internal HR departments responsible for running payroll, handling insurance policies, organizing benefits, processing expenses, and so on.
So why might these departments be shrinking? Partly it’s because there are trends putting the squeeze on all white-collar departments—not least the AI revolution. The WEF expects a whopping 85 million jobs to be displaced due to AI between 2020 and 2025. As a result, more easily automated roles within HR’s remit, like talent acquisition, might be the first to go.
But that’s not the smoking gun for disappearing HR departments. After all, other functions across a company are equally vulnerable to AI transformation.
All risk, no reward
An issue much more unique to HR is its vulnerability to outsourcing. Now, it goes without saying that every company needs a way of running payroll and other associated processes. Lose that capability, and you lose your workers. What’s far less obvious is why this function should be in-house.
It’s a topic that came up during our recent interview with Multiplier founder and CEO Sagar Khatri. “HR Ops is a department that every company requires,” Sagar explained in The Debrief. “But even if you run it amazingly well, you aren’t rewarded. If you get it wrong, however, it leads to many issues—such as wrong salaries, delayed payments, and ultimately employee dissatisfaction.
“So while every company needs HR, it’s costly, compliance-heavy, clunky, and doesn’t add value to your main product or service. In short, it needs to be replaced by a solution. That’s why we’re building towards a time when the entire HR service can be bundled and provided by one vendor.”
Doing more with less
When it’s instead outsourced to professionals and fully automated, compliance risks, costs, and the threat of dissatisfaction among employees become things of the past.
You don’t need to just take our word for it. According to PwC, companies that outsource payroll management save 18% more on average than companies that deal with it in-house. Significant, right? And that’s just the tip of the iceberg regarding the productivity gains on offer.
“Anything that doesn’t add value to your business shouldn’t require any time spent managing it,” said Sagar. “As a CEO, if you can get away with managing one less person or one less department, you can spend that energy on building a great product or service.”
So, are the days of HR numbered? It’s certainly looking that way.
But none of this means that HR professionals themselves will disappear. It’s more the case that individuals will be empowered to do a lot more thanks to the help of technology—meaning 20-person departments will no longer be necessary.
As Sagar put it: “Back in the day, every company had its own server rooms and IT department. But these have completely disappeared with the rise of AWS, Microsoft Azure, and other cloud services. In the same way, mid-market HR departments will cease to exist.”
If you’d like to learn more about Multiplier’s effort to build a global and bundled system of record, check out our full conversation with Sagar in our latest edition of the Debrief. And if you’re ready to get ahead of the curve and take advantage of the exceptional global talent out there waiting, talk to our experts today!