Hybrid HR Services, Outsource HR, or In-House HR: Making the Right Human Resources Investment
A glance at the “Quick Facts” below makes it clear that there are advantages and disadvantages to both outsourcing and in-house sourcing HR services such as HR Management, HR Payroll Management, Recruiting and PEO or EOR services. For this reason, most workplaces are hybrid, depending on the scope of operations. In particular, International operations benefit from outsourcing HR services that are non-domestic. Is hybrid the best approach? Does it depend on scope and operations? What are the advantages of each approach? We answer many of these questions in this detailed overview of all three approaches
Quick Facts
- Outsourcing HR can reduce operational costs by up to 30%
- In-house HR teams offer more direct control over company policies and culture
- Hybrid approaches, supplementing in-house teams with oustource expertise, especially during growth, can reduce overall costs, while maintaining policy and culture input from internal management.
- In-house HR teams may struggle with scalability during rapid business growth (Forbes)
- Outsourcing HR provides access to specialized expertise and technology
- Hybrid supplementation during ongoing rapid growth and entry into new markets and technologies can help manage HR resources.
- In-house HR requires investment in recruitment, training, and retention of staff
- Outsourcing can lead to faster implementation of HR processes
- Hybrid approaches can reduce investment in fixed HR assets and dramatically increase adoption of new processes.
- In-house HR allows for more personalized employee support and engagement
- Outsourcing HR can improve compliance with labor laws and regulations
- Hybrid approaches can balance the two, with in-house management personalized support and outsourced resources managing compliance issues.
- In-house HR can be more aligned with the company’s strategic goals and values in the long term
- Outsourcing HR can provide more support and global reach for multinational companies
Breaking Down HR Costs: In-House Vs. Outsourcing
When evaluating the costs associated with human resources, one of the initial factors to consider is the affordability of keeping HR functions in-house versus outsourcing. In-house HR often involves expenses such as salaries, benefits for HR staff, ongoing training, recruitment costs, and administrative overhead. These costs can quickly add up, especially for small to medium-sized businesses that may not have the extensive resources of larger corporations.
On the flip side, outsourcing HR can offer a more flexible and scalable solution. You typically pay for the services you use, which means you aren’t necessarily on the hook for the same level of fixed costs. This model often includes benefits such as access to specialized expertise and compliance with rapidly changing regulations, which can be a significant advantage.
However, it’s not just about the financial outlays. Outsourcing HR can provide additional strategic benefits. For instance, it allows your company to focus more on core business activities by leaving complex and time-consuming HR tasks to experts. Plus, access to the latest HR technologies and platforms can enhance service delivery and employee experience, which is less affordable when handled internally.
Many Canadian businesses now use a hybrid model, blending internal and external HR capabilities. This approach permits them to maintain control over sensitive functions while still benefitting from specific outsourced services, offering a balanced approach to handling HR costs.
Average Percentage Outsourced and In-House by Type of HR Service
Compiling Data from Clutch[1], makes it clear that hybrid is common industry-wide:
HR Function | Percentage Outsourced in Canada | Percentage Kept In-House |
---|---|---|
Payroll | 62% | 38% |
Recruitment | 50% | 50% |
Training & Development | 35% | 65% |
Employee Benefits | 68% | 32% |
Performance Management | 30% | 70% |
Quick Stats
- Approximately 47% of Canadian companies outsource at least one HR function. (all sizes of company)
- Approximately 70% of small to medium-sized enterprises in Canada outsource at least one HR function
- Small to medium-sized enterprises in Canada report a 25% increase in efficiency when outsourcing HR tasks.
- In-house HR departments in Canada typically require 1.5 to 2 full-time employees per 100 employees.
- Outsourcing HR can reduce compliance-related risks by 20% for Canadian businesses.
- About 60% of Canadian businesses cite cost savings as the primary reason for outsourcing HR functions.
- Approximately 70% of small to medium-sized enterprises in Canada outsource at least one HR function.
- Canadian businesses that outsource HR functions can save up to 30% on HR costs compared to maintaining an in-house team
- Approximately 45% of Canadian businesses cite improved focus on core business activities as a primary benefit of outsourcing HR.
Canadian Business Perspectives: Local vs. Global HR Solutions
When tackling the question of local versus global HR solutions, Canadian businesses are poised at a unique juncture. Opting for a local provider often brings the advantage of cultural familiarity and regulatory alignment. This means Canadian HR firms may have a deeper understanding of local labor laws, market trends, and cultural nuances. This familiarity can translate into more personalized and compliant HR services.
On the other hand, global solutions offer scalability and a broader reach. This could be especially beneficial for Canadian companies with international aspirations or diversified operations. Such global providers can leverage their expansive network to offer diversified services and a wealth of experience gleaned from numerous markets.
For firms that prioritize sustainability and diversity, a local provider might better resonate with their organizational ethos and community-based objectives.
Ultimately, the decision between local and global HR lies in the specific needs and goals of your Canadian business. It’s about finding that sweet spot where cost-efficiency meets quality service, and where your strategic objectives align with the operational capabilities of your chosen HR partner.
Balancing Control and Flexibility in HR Management
Finding the right equilibrium between control and flexibility in HR management is crucial for any Canadian business. By choosing to keep HR functions in-house, you retain direct oversight and gain the ability to craft personalized strategies that align with your specific business needs and culture. This approach allows you to ensure that your HR initiatives are closely integrated with your overall business goals, fostering a cohesive work environment.
However, there are situations where outsourcing HR functions can provide the flexibility that a rapidly changing market demands. When you opt for outsourcing, you gain access to a broader range of expertise and technology solutions, often leading to innovative practices and efficiencies that might be challenging to achieve internally. This agility allows your business to adapt to shifting market conditions without bearing the full weight of HR management burdens.
Some Canadian companies are adopting hybrid models, leveraging both in-house and outsourced HR functions. This blended approach offers a well-rounded solution where you can retain control over core HR areas while benefiting from the specialized skills and resources of external providers. It’s about balancing the depth of internal understanding with the breadth of external capabilities, optimizing HR service delivery without compromising on either flexibility or control.
Building a Robust HR Team: In-House with External Support
Integrated HR strategies often yield the best results, combining the strengths of both in-house teams and external experts. By maintaining an internal HR team, you can ensure tasks are managed align with company values and culture. This personalized approach aids in developing tailored solutions that resonate across your organization.
However, augmenting this with external support allows you to access cutting-edge innovations and specialized skills your team may lack. This hybrid model not only enhances efficiency but also reduces risks, ensuring you are compliant with ever-evolving regulations.
For example, while your internal team handles day-to-day operations and cultural alignment, external experts can tackle specific projects, training programs, or legal compliance issues. This synergy often results in a more nimble and adaptable HR function, capable of addressing both immediate needs and strategic goals.
The key to this approach’s success lies in clear communication and balanced integration between your internal and external capabilities.
NOTES
[1] Clutch: https://clutch.co/ca/hr/outsourcing
[2] 47 New Outsourcing Statistics https://explodingtopics.com/blog/outsourcing-stats