HR Shared services— Advantageous with some disadvantages

Everybody knows what HR shared services (HRSS) mean. It is not something, which is very new to the human resource (HR) fraternity. But for some who are still unfamiliar with the concept, HR shared services are those services which are outsourced from an external vendor, for instance, services such as payroll processing or recruitment. While outsourcing HR services or adopting new HR technology, companies tend to forget that nothing is perfect in this world. The same goes with the HRSS as well. It comes with great advantages, but sometimes when the implementation is not right it can pose some serious challenges that can heavily impact the overall business.

Talking to some HR leaders in the industry, HRKatha has drawn up a list of advantages and disadvantages that come with HR shared services.

Advantages of HRSS

Reduces cost – It can be very effective and beneficial for smaller companies because the maintenance cost of a large team of in-house HR professional will be very high. A small organisation, which has a small budget can hire HR services that can look after their day to day tasks. This eliminates the need to hire multiple people for the same task. As the organisation grows, HR shared services can further reduce the total cost of the company.

Allows focus on strategic things – Earlier, the HR department was stuck with the administrative part of the work. With HR shared services taking care of the day to day formalities, such as payroll processing, recruitment, leaves and other legal formalities, the HR department is now free to focus more on talent management and increasing productivity through employee development.

Gains from specialisation – Companies can benefit from the expertise of other vendors who are experts at their jobs. For instance, a payroll processing company can be better than an HR employee at handling issues with banks and deposits. A recruiting company may have various contacts in the industry, which can provide some great talent. Sharing his views on the same, Mangesh Bhide, head-HR, technology & FTTx business, Reliance Jio Infocomm says, “I like to see repetitive work being taken over by HR shared services, especially when there are specialised vendors who are experts in the domain.”

“I like to see repetitive work being taken over by HR shared services, especially when there are specialised vendors who are experts in the domain”

Manages risk – There have been cases in the past where the relations between employees and employers have soured, and a number of lawsuits have also been filed. In this changing environment, there are many acts and labour laws which keep on changing. Therefore, it gets very difficult to keep track of such amendments. This is where the shared services come to the rescue to help keep track of such developments.

Ensures consistency – When an HR shared service is hired, most of the HR functions are centralised and there is a consistency in the process. Consistency can impact the business in a big way and thus, it is very important to maintain it, especially when considering the importance of compliance.

Enhances employee experience – HRSS allows better and quick service. Employees’ grievances and complaints are answered quickly and fast. This helps maintain a great relationship with the workforce and hence, enhances the employee experience.

Disadvantages of HRSS

De-humanisation of HR – In today’s times, employees love to have a face to face interaction with the HR personnel to discuss their problems. With the introduction of HRSS and other HR technology, these things are now handled through phone calls or other impersonal means which can impact the overall employee experience.

Global implementation – In case of a global company operating in different markets and geographical areas, a centralised HR shared service may be difficult to implement. In this case, it may require different HR services centres in different regions to operate smoothly. Sharing his views on the same, Sharad Sharma, CHRO, DHFL Pramerica Life Insurance says, “Talking about the global services when you are working in 30 different countries, the question is whether you are going to follow a system of ‘one size that fits all’ or whether you will have customised policies for different businesses in different markets.”

Morale of existing employees – Pay cuts, job losses and less wages are also a side effect of outsourcing HR services. This can heavily impact the morale of the employees and hence, the overall productivity. It can also develop a rebellious feeling in the minds of the employees.

“Shared services add a lot to the efficiency and productivity, but on the other hand there is no value addition in terms of innovation. It just remains to be a processing arm of the company”

Lack of understanding of a culture – Being an outsider, it may be difficult for the vendors to understand the culture of the company and fulfil the needs accordingly. Just like in the recruitment process, understanding the culture of the organisation is very important before taking in talent. It is essential to see whether the candidate is a culture fit or not.

Confidentiality – While outsourcing some HR function, there may be cases where some vital employee and customer data is leaked to the consultancy company. Vital information, such as bank account numbers, medical information or other government-provided documents are at risk in such cases.

Loss of control to extended agencies – HR executives may depend too much on the HR provider’s services. This can be very damaging for the business, especially if outsourcing is no longer an option or the vendor changes the terms and conditions of the contract.

Apart from the above mentioned points, Sharma believes, “Shared services add a lot to the efficiency and productivity, but on the other hand there is no value addition in terms of innovation. It just remains to be a processing arm of the company.”