Outsourced HR may help SMEs

A SLOWDOWN in the outsourcing of human resource functions at the big end of town may have a positive spin-off for small to medium size businesses (SMEs) seeking to coordinate their growth or simply improve staff relations.

The contracting out of various human resource management functions is popular overseas, mostly with larger businesses and the public sector, and has experienced significant growth in recent years,

Its effectiveness brought about a reduction in large in-house human resource departments.

These in-house human resources cutbacks, coupled with an increasingly savvy or perhaps a more litigious workforce, have attracted many HR practitioners into the consultancy market.

According to the Australian Human Resources Institute about 10 per cent of AHRI’s members were HR consultants in 1995.

At the start of this year that number had almost doubled.

As a result, HR consultants are now offering more services to a wider market.

AHRI past president and Murdoch University human resources director, Chris Jeffery, said specific HR outsourcing still had a place, but there was now a tendency for larger companies to look at their in-house resources.

Mr Jeffery said there was a rush to look into outsourcing a few years ago but many businesses had been less than satisfied with the results.

“There is a lot of over promising and under delivery,” he said.

Mr Jeffery said outsourcing limited companies’ internal HR capabilities and put them at the mercy of the outsourced HR manager, who can change the goalposts, which he said invariably meant the bill.

A recent decision to outsource Murdoch’s salary packaging service had failed to produce the desired results, Mr Jeffery said, but a new occupational health and safety function shared with Curtin University of Technology was saving Murdoch thousands.

The Murdoch HR department services about 1,250 full-time equivalents with a total staff of almost 2,500 at the university.

Perth employment and industrial relations lawyer Stephen Kemp believes there is scope for outsourcing in smaller SMEs because, in many cases, HR management is virtually non-existent. But this depends on the nature of the business, he said.

A medium-sized professional firm might have less of a need for someone in-house than a business with a high turnover of staff, according to Mr Kemp, who said a more informed workforce was responsible for the increased use of professional HR services in SMEs.

“More and more small businesses have been running to me over the last four years with unfair dismissal claims,” he said.

According to the WA Industrial Relations Commission, unfair dismissal figures increased from a low of 938 in 1999-2000 to 1,137 last financial year. This year a cost increase of $45 in lodging each claim is believed to have pushed claims back down to 856.

Mr Kemp said many businesses’ HR problems stemmed from a lack of time or experience on behalf of the employee who has taken on the HR role.

“From there, two things happen,” he said. “The union suddenly pops up or  . . . there is the other problem of senior management and recruitment,” he said.

“Really all it requires is some regular time spent with a professional pumping up HR.

“If they had access to some professional HR, half the claims would have never arisen.”

Porter Consulting Group markets itself as HR facilitators, helping SMEs without an internal HR function to deal with HR issues on-site and developing HR tailored to their business.

Porter has just developed an HR program that allows SME companies, from eight to 50 staff members, outsource their HR component (to varying degrees) to Porter, which helps coordinate a structured program.

“The ability to effectively manage and measure staff performance is important for growing businesses and we offer SMEs the flexibility to outsource these components to HR Professionals,” Porter managing director Kristy Kelly said.

Shann Family Lawyers principal Ian Shann is preparing to hire Porter Consulting Group’s services.

Mr Shann said the firm had grown in recent years from just three to 14 staff but could afford to put on a full-time HR manager.

However, given the myriad employment compliance issues these days, Mr Shann said it would be more cost effective to have company procedures correctly established and properly maintained.

“There is just so much one has to comply with these days. You only have to avoid one non compliance these days to make it worthwhile,” he said.

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