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OUTSOURCING

When should a company consider an outside HR supplier?

Paul Binder, partner of Target Group: Outsourcing can be done at any stage of development. We see different ways how companies do it. Companies can ask themselves the following questions: Do I have the right expertise in-house? If yes, do I fully use the capacities of the persons dealing with a certain topic? If not, what is cheaper: creating the function in-house or buying the services on the market?

Paul Binder, partner of Target Group: Outsourcing can be done at any stage of development. We see different ways how companies do it. Companies can ask themselves the following questions: Do I have the right expertise in-house? If yes, do I fully use the capacities of the persons dealing with a certain topic? If not, what is cheaper: creating the function in-house or buying the services on the market?

It is always advisable for companies to check from time to time how the cost of services provided in-house compare to an outsourced solution. When an existing in-house expertise has to be maintained, that is also a cost factor. Or think of opportunity costs. Do the employees have enough time for their core activities? Pros and cons for outsourcing might change over time. Take the following example: an international company starts its business in Slovakia first with a small office and later establishes a big factory. At the beginning, they use an external accountant. When the business grows, they hire a chief accountant and later some additional accountants. Thereafter they decide to transfer the accounting services to a shared services unit, which provides all the accounting services for several subsidiaries.

Opportunity costs are quite often neglected. HR managers are a good example. Management thinks that HR managers have enough time to spend on recruitment. At the same time, other important HR systems are not working properly (e.g. motivation systems, career and succession planning), and they wonder about the high employee turnover rate.

Miroslav Poliak, partner of Amrop Jenewein Group: Employees were traditionally understood as a burden not as a basic asset. Today, successful managers know that human capital has a direct impact on the overall performance of the company. Making the right decisions in terms of HR can potentially increase productivity and profitability.

HR management can develop into an overwhelming task that requires considerable financial and knowledge investments as well as time and personnel resources. This may divert a company from its core businesses. In such an environment, outsourcing HR activities can become a way to effectively carry them out while freeing up capacities to concentrate on strategic tasks.

HR outsourcing is quite common in multinational companies, particularly manufacturing. According to a NelsonHall survey, HR outsourcing will continue to develop mainly in manufacturing together with the financial sector. There are significant opportunities for HR outsourcing in retail and government sectors, too.

As far as small- and medium-sized enterprises (SME) are concerned, they use HR outsourcing because they need specialization. HR managers of SMEs have to concentrate on the core business of the company more than their counterparts in big corporations. This is why they should use an external supplier to look after their employees.

Gerard Koolen, managing partner of Lugera & Makler: [HR outsourcing] is suitable for companies of all sizes. Some of our customers starting a greenfield [investment] ask us to outsource all their HR activities for the first half year, until they can take over with a newly hired team. Other companies outsource certain activities to cover shortfalls, like mass-recruitment, which will only be needed for a certain period of time. Growing companies - up to 100 employees - outsource many HR activities as they cannot justify having a full-time professional on board just yet.

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