10th November 2022

How Does HR Outsourcing Reduce Costs?

As a small business owner, the first thing you think about is, what will it cost to get a HR consultant?

As a business or a business owner one of the challenges you sometimes need to face is when you are trying to reduce cost but at the same time trying to maximise the operations.

So when the concept of outsourcing human resources functions comes up, many business leaders assume that it could be more expensive than keeping those functions in-house. You would be surprised at how little it will actually cost you.

However, outsourcing HR can almost always help businesses reduce their overhead, allowing them to invest those savings in other critical departments and areas, such as training, upskilling and systems.

I want us to look at some of the most common HR expenses that nearly every business has to consider, and then find out how some of those costs (and associated ones) can be reduced through the outsourcing your HR Department. 

What Are Common HR Costs?

There is a long list of costs associated with human resources functions, many of which you can probably name off the top of your head. We are only going to focus on a couple of them.

Training And Onboarding

Hiring new employees and “tossing them into the deep end” is a very old (and bad) method for bringing people into an organization. Nowadays the benefits of centralized, consistent onboarding and training efforts are obvious, especially in areas such as productivity and employee satisfaction. 

Developing a unified onboarding program, however, can be extremely time-consuming, which in turn takes focus and energy away from the daily operations of your business (and from innovating, creating, and finding new efficiencies.). This is one area where working with a dedicated, external HR provider can offer huge time savings, as well as cost savings thanks to freed up hours and improved new-hire orientation. 

HR outsourcing firms frequently have significant resources dedicated to training and onboarding, including programs and personnel specifically devoted to the task. Several HR organizations also collaborate with industry experts to develop and continually refine training and onboarding processes—yet another ongoing task that could very easily take up the full schedule of multiple staffers within your company.

Employee Relations

There are several functions that could be considered “employee relations,” but here we’re focusing specifically on the kinds of recognition that reward your employees for the great work they do, and which establish the foundation of your company culture. Far from being optional, these types of HR functions are actually critical to an organization’s success and are often identified as one of the key factors that contribute to employee satisfaction with their workplace culture and environment. 

Everything from clear communication with employees to service awards and recognition programs can be considered under the employee relations umbrella. Since there are a lot of tasks and options, however, this is another area where outsourcing to a dedicated HR firm can have benefits both for your employees and for your budget. Just as with the training and onboarding process we covered above, many HR companies have established programs for employee recognition and relations, as well as relationships with firms specializing in award and recognition programs, company events, and so on.


This may seem like the most obvious of the HR costs, but it is an essential one. Recruiting top talent is a difficult task even during the best of times, and it’s a function that can very easily chew up an entire organization’s time and resources. From posting the job information across multiple platforms to engaging with applicants and potential employees through text, phone, email, and social media, recruiting is a much different field than it used to be. That means it also requires different skills, knowledge, and tools to be successful at it. 

Not surprisingly, HR outsourcing firms are at the leading edge of recruitment, and many of them have harnessed tools and technology way beyond LinkedIn to do their jobs effectively. Building an in-house HR department with the same capabilities would be costly for any company, and especially small and mid-size businesses. As a result, recruiting may be one of the biggest areas to lower costs in, as well as increased effectiveness and efficiency.


What is Non-Compliance?

Non-compliance refers to an individual’s or business failure to act within stated boundaries or refusal to comply with such regulations or rules. Non-compliant behaviour can be both intentional or unintentional, depending on the situation.

Non-compliance with any of the laws within South Africa can have an undesirable effect on a workplace, leading to unnecessary drama such as, Criminal Charges, Reputational woes, Loss of lucrative opportunities. If you think about it being compliant is expensive, but it will cost you even more if you are non - compliant.

Companies in South Africa have been fined up to R900 000 for failing to comply with the Employment Equity Act (EEA).  This penalty highlights the seriousness with which the Department of Labour (DOL) takes non-compliance with the provisions of the act and shows that they will not hesitate to bring the maximum penalty against defaulters.

What is the fine for employing illegal workers in South Africa? The employer will be fined anything between R 7000.00 to R 50, 000.00 per illegal worker and as previously mentioned the employer can be arrested for 12 months or more depending on the severity of the case.

When it comes to a business’s taking on new hires, the employees must sign a contract regarding their position’s responsibilities, as well as the appropriate form of conduct within the company. A worker’s failure to comply with these stipulations results in a non-compliant employee.

Non-compliance takes many forms, from blatant disregard for a business’s workplace policies and outright defiance of orders to unintentional failure to comply with health and safety protocol.

And also, Non-compliance in the workplace refers to employees who do not follow the code of conduct, health and safety regulations, or any other set of guidelines required within the business. As a business owner or manager, it is your responsibility to deal with the failure or refusal of an employee to conduct themselves in the appropriate manner.

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