High-powered public service review recommends HR outsourcing to underpin strategic focus

Modern businesses have been forced to explore, and implement, the outsourcing of a number of functions formerly considered ‘core business’.

Could HR be next? A recent Public Service review found the median size of the Australian Public Service (APS) HR function is “relatively large” compared to the peer group benchmark, and suggests the APS outsource transactional and some value-added services.

The Unlocking Potential: Australian Public Service Workforce Management Contestability Review by Sandra McPhee AM was released in April. It found that the APS HR function is comparatively large at a median of 3.11% of staff for APS agencies surveyed, compared to a peer group median benchmark of 1.87%.

Currently, around 21% of APS HR staff undertake transactional services, specifically payroll and conditions. Outsourcing these transactional services would reduce the APS median HR size to 2.31% of staff, still relatively high compared to peer organisations.

The Review suggests further reductions may be achieved by moving to expert shared services for some value-added services. Transitioning to this model would generally involve upskilling HR people with strategic skills such as data analysis and consulting. They will need to be “deep specialists” who understand business strategy, policy design, talent optimisation and behavioural economics, the report says.

HR Outsourcing Already Occurring Overseas

The Review cites examples where this has occurred successfully in both the public and private sectors. For example, over a period of six years, the core HR function in the UK Civil Service has been reduced by approximately 50% to 4000 people, which is around 1% of the Civil Service, with many functions outsourced. Similarly, private sector organisations cited have reduced HR functions by up to 60%, underpinned by outsourcing, with similar results. “Now that the (UK Civil Service) HR function is the right size and shape to deliver, the focus is on deepening capability and the quality of HR services”, the Report says.

In line with a “higher level” HR function, the Review also suggests that the APS should also ensure the HR function “has an equal seat at their executive table… alongside other significant strategic enablers such as the chief finance officer and the chief information officer.”

What HR Functions Can Best Be Outsourced?

Outsourcing HR is also highly applicable to non-government organisations, such as large, multi-site private sector companies. Some of these companies have a centralised HR department with a potential overreliance on busy line managers at site level to perform site-based HR tasks, leading to HR risks. Outsourced HR services in this instance can be an efficient, lower cost solution whilst also freeing up those line managers to focus on their departments and core responsibilities.

HR is a critical business function and most companies who formerly handled HR completely ‘in house’ are realising – like everything else in a rapidly changing business landscape – a ‘one size culture’ fits no one. Instead, some HR functions are better outsourced to a range of specialist providers (be it recruitment, dismissals, training or investigations) saving time and money.

Workplace Wizards can expertly and efficiently manage all of your outsourced HR work, partnering with your HR influencers to save you time, resources and money. We seamlessly handle all the employment-related administration, personnel and compliance matters, while you retain complete control of your team’s day-to-day operations.

Importantly, we will spend time on your site as part of our service to deal with issues face-to-face and align ourselves with your business priorities. Benefits of outsourcing your HR include:

  • Quick and easy access to high-level expertise on demand
  • Staff are freed up to focus on core business
  • Instantly obtaining up-to-date, best-practice systems and procedures
  • Enhanced compliance and reduced risk
  • Mentoring and support for your work teams
  • Improved service delivery

Outsourcing some of your HR functions may be the missing piece in your HR puzzle of how to offload admin and compliance based HR functions, whilst your internal HR team spends more time on strategic HR decisions and data, and being commercial partners to the rest of the organisation. Contact us to discuss whether HR outsourcing is right for you, or Download our Outsource your HR brochure for more information.

Mark Ritchie

Mark Ritchie

Mark is passionate about helping Australian businesses efficiently resolve their industrial relations issues. Mark has demonstrated proficiency advising managers, executives and boards of small to medium-sized enterprises, as well as some of Australia’s best-known companies, on both litigious and non-litigious matters.

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