Human resources (HR) is a crucial function for any successful business. But managing HR effectively requires expertise and resources that many companies, especially small and medium-sized enterprises (SMEs), struggle to provide in-house. This is where HR shared services come in. The HR shared service model allows companies to outsource some or all of their HR responsibilities to a dedicated shared services provider. This can deliver a range of benefits for UK businesses looking to optimise their HR operations.
What Are HR Shared Services?
An HR shared service model involves consolidating HR functions that were previously carried out internally into a new business unit or third party provider. This centralised HR team works across the whole organisation or group of companies to deliver services like:
- Recruitment and talent acquisition
- Payroll and benefits administration
- Training and development programmes
- Performance management
- Employee relations
- Regulatory compliance
While some strategic HR tasks like workforce planning may remain in-house, the bulk of transactional and administrative HR processes are standardised and managed by the shared services team. This model aims to deliver economies of scale, greater efficiencies and access to enhanced expertise for the organisations involved.
Key Benefits for UK Businesses
Adopting an HR shared service model can offer several important advantages:
1. Reduced Costs
Consolidating back office HR functions into a single dedicated shared service centre cuts down on duplication of efforts across business units. Shared services allow for savings through economies of scale and also greater workforce optimisation. According to one estimate, HR shared services can reduce costs by between 20-30%.
2. Improved Efficiency
By streamlining and standardising HR processes under one roof, shared services can eliminate complexities and inefficiencies. Shared services staff build specialised expertise by focusing on delivering HR services day in, day out. This can speed up HR transactions and free up the in-house team to focus on more strategic people management priorities.
3. Enhanced Service Quality
With dedicated HR experts and the latest cloud-based technologies, shared services often deliver superior service quality and accuracy. Shared services enable smaller firms to access a level of HR support they may not be able to replicate internally. The standardised frameworks provide more consistency in HR policy and practice across the organisation.
4. Increased Agility
Rather than having to build expansive HR teams to support new projects or international expansion, firms using shared services can scale up or down more easily. The centralised and nimble model of shared services allows HR needs to be met quickly as they emerge across the business.
5. Reduced Risk
Partnering with an established HR shared services provider reduces risks in several ways. Firstly, relying on their expertise minimises compliance failures or other HR-related risks. It also removes the burden of managing HR systems and infrastructure. And finally, outsourcing transitions elements of the HR operating model to a variable cost rather than having fixed internal costs.
Reaping the Rewards
While HR shared services adoption is already widespread amongst large corporations in the UK, smaller firms can enjoy many of the same benefits. For SMEs looking to optimise HR delivery, the shared services approach allows them to leverage economies of scale and world-class capabilities beyond what their internal resources permit. For many UK businesses seeking to relieve their HR headaches, shared services represent a strategic opportunity to add value company-wide.
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