Industry Information

The company clearly has HR, so why use it?Human resource outsourcing？

In recent years, what entrepreneurs discuss most is nothing more than "people and matters": companies are advancing, transforming, Internet+, mergers and acquisitions, financing, internationalization... But with every step, it was as if facing a formidable enemy, with a heavy heart. New markets, new resources, new affairs, new industries—the demands on arrangements and talent are almost exclusive, even forcing the boss to become the company's top HR officer. Does it work? Perhaps there is; Can it last? Not necessarily; Is it just a symptomatic treatment? Of course not.

Human resources management refers to a comprehensive and integrated advancement of Western management studies after entering Chinese enterprises, broadening (HR operations are no longer just HR tasks), deeper (HR operations are no longer just about payroll distribution), and more systematic (the establishment and operation of HR systems must align with the company's strategic development).

Simply put: HR handling is becoming more professional and more chaotic.

Today, we want to comment on perhaps the least paid attention to entrepreneurs, yet highly practiced, minimally visible, and very down-to-earth — human resource outsourcing.

At the same time, it answers a common question: why does my company have an HR department, an HR team, and so many people recommend I give it a try?Human resource outsourcing？

Human resources operations are fragmented

There was once an HRVP at a Fortune 500 foreign company, a private company CEO who jumped into HRD for nearly ten years, and a CEO who has been deeply involved in the HR industry for over twenty years. All of them have commented on similar issues with me. Human resources management is becoming increasingly professional and chaotic. Can we provide a logical breakdown? It is necessary to be able and must do it. Human resources operations may be differentiated as follows:

1. Strategic HR

Strategic human resources management believes that human resources are the most dynamic resource in arrangement and an indispensable part of the planning strategy, encompassing all aspects of the company's direction through "people": to achieve strategic success, such as R&D talent, marketing talent, production talent, financial management skills, etc., all must ultimately be implemented at the people and in human resources.

Therefore, strategic human resource management emphasizes the intention of achieving competitive advantages through planning, policies, and practical application of human resources; Emphasize the high alignment between human resources and strategy; Emphasize the agility of strategy realized through human resources handling; It is emphasized that the intention of human resources management is to realize the company's policy... The strategic aspect of human resource management is to systematically and closely integrate people and enterprises, establishing a unified and adaptable human resources management system.

2. Process-based HR

It focuses more on the implementation of various processes within the human resources management system, similar to key process lines cut down from the "strategy," such as: recruitment, training, performance, audits, talent pipeline plans, team building;

A mature human resources handling system is formed by combining and connecting multiple processing steps.

3. Transactional HR

This is what we commonly refer to as "personnel" operations, which are the most fundamental, mechanical, and easiest to standardize in the human resources management system. For example: handling labor relations, paying social insurance and housing fund, calculating payroll, and distributing salaries.

Therefore, transactional human resources operations create the smallest "added value" for enterprises. But nowadays, many companies' HR departments simply do this one thing, even merging administrative affairs into a "Human Resources and Administration Department".

The focus of human resources operations for ambitious enterprises

1. Focus on the center

Through these differentiations, we can clearly confirm that, for long-term enterprise development, strategic and process-oriented HR can create more sustainable added value for the company. They can be placed within the scheduling system to maximize scheduling performance, requiring business owners to truly focus on and invest more time and resources.

If a company's human resources department has two core tasks and has achieved significant results, then we can say this is what an ambitious company should be, the human resources department should be.

2. Placing the non-center

Transactional HR is the easiest to replace, so we define it as non-central. Although it is a non-central task, the people, money, and materials it costs cannot be ignored. The content involved is trivial and repetitive, with rigid procedures and standards, emphasizing time and accuracy (including laws, policies, disputes, archives, salaries, prudence, taxes...) ), As the company expanded, the demand continued to add dedicated personnel.

Most companies' HR departments are basically handled by "human resources" and do not require the company to "handle it personally."

In fact, whether it's strategic HR, process-oriented HR, or transactional HR, all can be "outsourced." The first two outsourcing methods are called "external brain-style," which commonly refers to consulting firms and outsourced consultants, while transactional HR outsourcing is often referred to as "entrusted approach," which is the HR agency and personnel outsourcing we will discuss today.

Motivations and intentions for enterprise human resource outsourcing

Although we say companies use it selectively,Human resource outsourcingIt is beneficial and beneficial. However, if business owners still understand "outsourcing" at the level of "simply reducing costs," then cooperation with outsourcing service providers will miss out on many "strategic" implications.

Human resource outsourcing services, besides "reducing costs" (perhaps just "small gains" in the short term), will become a strong support in all aspects such as enterprise resource equipment, system establishment, business layout, and risk avoidance.

1. Assist enterprises in establishing or optimizing HR frameworks

About startups: Outsourcing service providers can help them quickly establish a legal and effective personnel framework.

For companies developing rapidly: During expansion, HR staff shortages and limited resources are insufficient, so outsourcing brings in relevant resources to fill gaps or deficiencies in the existing HR structure.

For enterprises that need to be standardized at a certain stage: Some companies are forced by the objective environment to be formalized (such as financing, mergers, listings, etc.), but previous non-standard practices and HR capabilities and formats are very limited. After relying on professional outsourcing service providers, these are organized and optimized.

2. Provide local support for nationwide transactional enterprises

Regarding setting up subsidiaries in multiple locations nationwide: headquarters find it difficult to handle them uniformly, and the nature and stability of local HR personnel also affect the interests of employees and the company. Choosing a local outsourcing service provider (with unified and professional services, synchronized and shared data) can improve professionalism and stability.

Regarding nationwide affairs but no branch offices: Operations are spread across multiple cities but each has few staff, so there is no need to set up subsidiaries or hire full-time HR. Using outsourcing services can provide enterprises and employees with functions equivalent to those of full-time HR.

3. Transform opposition and danger on behalf of enterprises

Avoiding labor disputes: The enterprise (actual employer) and the outsourced employee (from the outsourcing service provider) have no labor contract relationship, which avoids labor disputes and saves the enterprise's handling resources. At the same time, as third parties, service providers' professionalism, scale, and service capabilities help resolve labor disputes.

Risk of scattered personnel employment: Companies select outsourced workers who can advance or retreat, move forward or down, and "employ people but not support them." Outsourcing service providers leverage their advantages in personnel and labor affairs to help enterprises reduce and differentiate human resource investment risks.

4. Helping enterprises externalize costs and internalize benefits

Reducing processing costs: Even as user demands continue to grow, companies no longer need to add dedicated personnel or organizations to outsource the workforce; the service provider fully handles the workload, significantly lowering processing costs.

Reduce routine HR handling expenses: for example, job advertisements, retirement severance, etc.

Lowering labor costs: Enterprises can flexibly adjust salary standards based on their own operations, job benefits, and market compensation prices. The overhead costs for outsourced employees are significantly lower than those for fixed staff (whose salaries can only increase, not decrease).

Reduced tax costs: According to the Tax Law, the portion of salary paid to employees exceeding the taxable amount must be subject to corporate income tax. The outsourcing method allows salaries and benefits to be forwarded by service providers while maintaining the same salary level. The invoices issued can be directly included as service fees in production costs, changing the nature of the enterprise's tax type and assisting enterprises in improving production cost accounting accounts.

Reducing change costs: For enterprises undergoing demand restructuring and redundant staff, using outsourcing can transform "hard layoffs" into "soft layoffs," achieving "job rotation without layoffs" and significantly reducing the settlement costs for restructured employees.