Especially at times such as these when economic conditions are not at their best, organizations have to make the most efficient use of resources and take steps to minimize their various costs.

Outsourcing the work of either an entire department or just a portion of it can have a real impact on reducing overheads. In addition, the chosen external providers may well supply a range of skills that the organization can benefit from in the longer term.

When considering outsourcing, an organization has to consider what the reasons are for this step and the ways in which the decision will impact on its employees.



If cost is the primary reason for taking the outsourcing route then the true costs from an internal perspective need to be carefully considered so that the precise financial benefits of outsourcing can be pinned down. In this context the known costs are not the only ones that will need to be considered. Hidden costs like redeployment and redundancies of the staff members who are currently responsible for the work will also enter the equation.

Bringing in expertise

One of the most often cited reasons for SMEs to seriously consider outsourcing is a desire for access to better and more specialized levels of expertise, knowledge and experience. The pensions department for example is one that is commonly outsourced. Here, legislation changes and alterations in the regulatory rules have become so complicated that often a third party is brought in that has a more specialized knowledge of and expertise in that area.

HR is another department that is often outsourced in its entirety. A more specialized third party can often more effectively manage everything involved; pay and benefits, equal opportunities and organization development, to occupational and statutory terms and conditions of employment.

Equally, by outsourcing payroll functions a number of big overheads can be eliminated. In addition to not requiring paid staff to deal with those functions, none of the extra outlay that comes as part of managing an in-house department will be needed. There will be no need to train staff in the various packages or purchase specialized equipment and software.

Where to outsource

Outsourcing a department’s functions to an umbrella company is one very popular option. Instead of having to deal with government agencies, for example, in the case of a payroll department, this can all be handled by the third-party company. The complex administrative processes that are part and parcel of running an in-house department are thereby avoided. This will greatly reduce not only the costs of administration but will also save substantially on time.

An outsourcing company will typically specialize in delivering long- term efficiency, quality and accuracy in terms of processes such as dealing with government agencies, processing payments and handling all the necessary administrative duties.

Many small to medium businesses can therefore benefit greatly by outsourcing even parts of their core and peripheral functions. As long as the interests of employees and customers are taken into account an informed decision can usually be reached that will be to the advantage of the organization as a whole.