In a country like India, where SMEs typically contribute to 50% of the industrial output and 42% of the exports, the HR Function has a very important role to play. The HR Function has to be superlative and dynamic as the expectations from HR are growing. However, unfortunately, the function is still in technological backwaters. The HR Manager is too stretched as he has too many things to do. In an SME environment, an HR function can be divided into Core Functions and Non Core Functions as follows:

Core Functions :

1. To create awareness of the organization Policies and Process among the Employees

2. To build organization brand value amongst the Employees

3. To assist Organization in Career Development Plan

4. To assist various stakeholders in Training Plans

5. To assist Management in Recruitment Strategy

6. To work closely with different groups in motivating employees and improving Employee Relations

7.  To assist organization in Performance Appraisals

8.  Interviews and Interview Report

9.  To assist organization in Staffing Plans

Non core Functions :

1.  To maintain Employee Database

2.  To ensure correctness of Leave & Attendance Database

3.  Maintaining Statutory Compliance Records

4. Payroll processing or assisting the accounts department in Payroll Processing and disbursement of salaries

5. HRMIS Reports such as Attrition Reports, Statutory Compliance Reports, Project wise Costing Matrix, Certification & Skill Set Matrix etc.

Looking at the functions closely, it is clear that the Core Functions are vital to the existence and development of an SME whether labour intensive or otherwise. It is crucial to align the Core HR functions with organization objectives. But, core functions may leave no room for the HR Manager to pay attention to non core activities like leave and attendance, payroll processing etc. And if the HR tries to justify his role by focusing on non-core functions, then the HR gets so much immersed in addressing the issues associated with non core activities that it fails to focus on the strategic issues in the business where it can have a real impact.

As has been convincingly observed in SMEs, Core functions tend to take 80% of the time of an HR leaving little or no time for Non-core activities. Not being able to cop up with too many things, HR comes under pressure resulting into inefficiency and distraction. The problem is not HR's alone; organizations often fail to challenge the traditional role it plays within their business and are accepting of mediocrity in terms of the value and effect HR delivers.

Non core functions too need a systematic approach. HR has too much on his platter and he needs someone to share the challenge. Is outsourcing all or part of the HR function a solution - well, yes and yes. It is wise to join hands with a highly qualified professionals team for Non core activities.

It has been laid down in the Pareto principle, also known as 80:20 rule, that in business, dramatic improvements can often be achieved by identifying the 20% of customers, activities, products or processes that account for the 80% of contribution to profit and maximizing the attention applied to them. HR should realize where it can create value and where it can outsource! Non-core functions can be easily outsourced as Outsourcing Service Providers have an infrastructure for easy and complete transition. In fact, by outsourcing you get more specialized and personalized service. Outsourcing imparts superior competency and focus and economies of scale.

The BPO\KPOs today have evolved into having a very strong infrastructure. They have also introduced better technology such as employee ‘self-service' systems that have not only improved information retention and communications but also reduced the administrative burden of paper based systems beloved by HR traditionalists. ESS has many modules such as Leave and Attendance Management, Expense Claims management, employee directory, online referrals and bonuses etc. More modules can be added as ESS can be easily customized. ESS helps employees and mangers perform key human resource activities themselves, greatly reducing the need for human resources professionals to play a strategic role in their organizations.

The ESS has two interfaces, i) Employees and HR Managers ii) BPO\KPO who process the data entered by Employees or HR Managers to process salaries or generate HR Reports. Ready reports which can be customized according to the organizational needs can be made available in a jiffy. To name a few, Attrition Report, Promotion\Raise Report, Project wise Costing Matrix, Statutory Compliance Reports, Management/Organisation related Reports or Certification & Skill Set Matrix.

Truly speaking, even if we keep aside the need for the HR Manager to focus on core functions, the advantage of outsourcing Payroll Services is in itself a good reason to go for the same. It is said that let everyone do their business. Payroll Processing, Compliance and Reporting is a specialized branch of BPO Services today. It is a task that takes up a lot of time and demands painstaking effort. Precision is the key, all calculations have to be done on time, the correct deductions made, taxes deposited and returns filed on time. And if payroll calculations are delayed or are incorrect, businesses end up paying stiff penalties - something SMEs cannot afford. In fact, the Indian Revenue estimates that one out of every three employers has been found guilty of making errors in computing payroll figures. What's more, everyday the laws are changing, new rules and regulations are coming in. Naturally, it makes sense to outsource payroll processing and get it done by payroll specialists. As a matter of fact, the arguments for outsourcing HR are the same for oustsourcing other functions such as IT, maintenance and cleaning. SMEs with employee headcounts of less than 300 often lack access to expertise, technology, capital and resources that larger organisations take for granted. Outsourcing Payroll Services puts SMEs at par with larger organizations in technology.

To conclude, the advantages are manifold and the cost minimal

1.  HR can focus on Core functions to contribute to the real organization objectives with an impact, viz attracting and retaining talent, establishing a Performance Management System etc etc

2. Lower costs - Outsourcing Payroll services not only saves the organization from unforeseen costs or damage. The cost of outsourcing is typically lower than in house Payroll processing!

3. Access to specialist Labour Laws, Tax Laws and accounting expertise, a small violation of the law may incur additional costs with legal fees and fines.

4. Flexibility - Outsourcing enables employers to buy the Payroll services in the quantity and format it requires, as the business environment dictates.

5. Better technology - Leveraged benefits from Information Technology can be gained. Clients get customized solutions which are dynamic to their changing needs.

6. Any attrition in the in-house payroll team does not affect the payroll function nor throw open the organisation and the rest of the employees to payroll delays or errors.

7. Typically by outsourcing payroll many of the administrative aspects of Employee doubts, questions etc get better addressed and contributes to good employee morale.

The case for outsourcing Payroll Services has never been stronger. The best will see outsourcing as an opportunity and not a threat to the complacent environment many of them work in. 

Issue BG75 June07

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