Find out how organizations with reduced or non-existent HR departments survive

Fewer small- and mid-sized companies are using a completely centralized HR system. More are embracing a structure that combines a corporate HR entity with relatively independent, localized HR functions, according to Society for Human Resource Management data.

To encourage a flat management approach and increase efficiency, other organizations are, as a 2014 Wall Street Journal article noted, doing away with HR departments entirely

Reducing or eliminating an HR department can have a pronounced effect on employee experience and management.

Companies may be able to put a system in place to process paperwork fairly easily; addressing management, employee relations and other concerns, however, can be more complicated.

Handing those tasks off to a service provider might help. A number of organizations are currently outsourcing HR services; the amount is approaching 50 percent — and 32 percent plan to increase their efforts to outsource some HR functions in the future, according to a Deloitte global survey.

Through 2022, the global human resource outsourcing market is expected to experience a compound annual growth rate of nearly 9 percent, according to a recent Techanvio report.

While some organizations may be hesitant to incur an additional cost, outsourcing can provide several benefits — particularly at organizations where there’s no HR.

Subcontracting one or more payroll, recruiting or other services may help companies meter some of the following effects:


Overloading employees with additional responsibilities

Accounting may be able to pick up some of the payroll and benefits tasks; committees can be established to focus on employee recognition and other incentive programs — redistributing work to employees in other, non-HR departments, though, will undoubtedly add extra time to their day.

Employee burnout, according to 95 percent of HR leaders, is sabotaging workforce retention efforts — and 64 percent blame burnout on either an unreasonable workload or too much after-hours work, according to a Kronos Incorporated and Future Workplace study. Handing HR tasks off to a service provider could keep employees from reaching a point of exhaustion.

Asking employees to handle sensitive HR tasks they aren’t trained to deal with

Reallocating responsibilities to other individuals, instead of a service provider, because there’s no HR department could mean the work won’t be performed properly. Sixty-six percent of mid-sized companies and 54 percent of large organizations cited external partners’ knowledge and expertise as a key advantage of outsourcing HR services in an ADP survey; 65 percent of mid-sized businesses and 60 percent of large organizations say outsourcing is beneficial because it helps ensure they’re compliant with laws and regulations.

Draining small HR departments by trying to handle everything internally

With HR increasingly playing a role in more initiatives, depending on their size, departments may struggle to address all of their responsibilities. ADP found 55 percent of mid-sized companies and 64 percent of large organizations felt outsourcing HR services — specifically certain benefits work — results in more cost-efficient administration. In addition, increasing employee productivity was the third most compelling reason companies said they’d consider outsourcing HR services.

A growing number of businesses are embracing the need to transform their HR functions — yet more than half (59 percent) say they don’t even have a basic business case in place for HR tasks, according to a 2017 KPMG survey involving executives from 48 countries.

For tips on defining — and defending — HR’s beneficial work, view our blog posts on singing HR departments’ praises, how to work with a recruiter, creating an ongoing talent pipelining program — and three steps to successfully outsource HR services.