Top 3 Differences Between HR Outsourcing Services Vs HRMS

July 07, 2017

HR outsourcing services Vs HRMS has been a part of a bigger debate. There was a time when only large companies with sizable budgets could afford in-house payroll systems and HR processes to make things easier. The limited technology, staff, and the costly affair led smaller companies to deter from this arena. Such companies thought of this as an impractical approach, significantly too because of the money involved.

Come today, and we see a different picture altogether. Advancements in technology have not only made it feasible for smaller companies to go in-house, but there has also been a multitude of innovations in systems and processes, cutting down time and costs at the same time. With more affordable payroll and HR Software in the market today, your perceived costs of outsourcing have disappeared, which is not to mean outsourcing is not beneficial for your company

Although there have been advancements in technology, many small and mid-sized companies, especially those sprinkling now, still see HR outsourcing benefits, of which there are many. There is no middle ground when it comes to outsourcing or in-house functions. A large organization can outsource HR and a small company can keep it within the company, or vice-versa.

There are, albeit, certain differences between HR outsourcing services Vs HRMS and each of them have their fare share of advantages over the other. There is not one particular process that is beneficial to companies and certainly not so if you have just about started. Another important factor would be determining a “good” process for your HR functions, be it via an HRIS or even outsourced. A good process would mean you have all the systems set out, your payroll is compliant, and that you are hiring the right people. It is in these areas that there is a contrast.

1. The target organization

Something that sets apart HR outsourcing services Vs HRMS is the company they are targeting, which has quite a few variables to it – including the size of the company and what stage the company is at. While traditionally outsourcing of HR functions was considered an option only for large organizations which had the money to do so.

Because of newer technology, small and mid-sized organizations now depend on outsourcing even the most basic HR functions to help cut time spent on such processes which can now be put towards interacting with customers and investors. HR management systems and new HR Software brought about because of new technology can now be utilized by large organizations with employees in hundreds and thousands.

Another factor determining this, as mentioned earlier, is the stage of the company. A company which has just started off and raised some money, with a bare minimum of employees, could benefit vastly from HR outsourcing because of the limited amount of time available. This eases off some pressure, thus resulting in better efficiency.

If a company has matured, thus meaning it has many employees, an HRMS would make sense for better and quick processes, thus keeping it all in-house.

2.Cost associated with both

A primary differentiator is a cost that comes with HR outsourcing Vs HRMS, and also the cost savings associated with both of them. Both, the costs and the savings, largely depend on the best fit for your company. A small enterprise would be better of outsourcing their HR needs since everybody’s time is already thinly stretched and taking up more responsibilities would only result in inefficiencies and poor functioning, affecting every other function in the company.

A small company does not have the knowledge or the talent to manage HR in-house and stay in compliance with every law there is. Hiring professionals for such matters would only result in money bleeding from the company, which is otherwise saved when such functions are outsourced. On the other hand, for a larger organization, outsourcing could be more of a snag simply because of the sheer number of employees.

Outsourcing payroll, interviews, onboarding and offboarding, and various other functions would result in higher costs. And since these functions are usually outsourced to one single company, handling tens of hundreds of employees would only result in chaos for that company, which would eventually lead to failure and inaccuracies. With an HRMS in place, large organizations cut costs and time spent on useless processes, while also keeping it within the premises. Hiring HR professionals with knowledge of such systems would mean a better use of technology, adding up to saved costs.

3.The process – HR Outsourcing Services Vs HRMS

With more flexibility being offered, an HRIS has all of its processes automated with minimal human interference. This extends to payroll functions too. While outsourcing HR is just shifting the focus from manpower to manpower, HRMS automates many of these functions, thus placing the process along the pipeline. HR outsourcing requires you to transfer these processes to external agencies which have guidelines set in motion to perform such processes, as they have in the past.

Human error too makes it more convenient for companies to set up HRMS, which reduces the error risk and also helps in accountability. Technology has played a crucial role in setting up such processes, if not altering them already. While an HRMS is independent, outsourcing your HR needs to companies might have a blend of both – human and machine.

The benefits of both these approaches are countless but to each its own. While outsourcing your HR needs helps in cutting down manpower costs, getting an automated system to do the same will also help you reduce such costs. With outsourcing, your compliance is improved because industry professionals would be handling your requirements, while with HR software, you are on the right side of the law automatically. Data security too becomes a concern, and with HR systems in place, a holistic approach can be seen, while outsourcing agents handle employee data delicately.

Automation has affected many industries and sectors, including HR. When compared between HR outsourcing services Vs HRMS, with changing trends, many organizations are now shifting to HRMS systems rather than upgrading their processes. Because HR requires essential human skills, HRMS cannot completely take over this industry, which is where outsourcing comes in.