What are HR shared services?

HR shared services are centralized support services that help organizations manage employee data. By consolidating employee information into a central hub, shared services can streamline HR processes and reduce administrative burden. HR shared services can also help to improve data accuracy and ensure employees have access to the information. By providing a single point of contact for all HR inquiries, shared services help improve communication and reduce costs. You can use HR shared services at many levels of an employee organization, including:

• Payroll
• Employee data management
• Benefit and leave administration
• Relocation services (international and domestic)
• Recruitment
• Employee training
• Reporting and analytics

Benefits of using HR shared service

The benefits of using HR shared services are greatest for large or fast-growing businesses. However, small businesses can benefit from the increased efficiency these services offer. Here are some of the benefits of HR shared services:

1. Cost reduction

While an HR shared service requires an initial investment, it saves money in the long run. By automating and reducing the number of manual tasks, companies save on labor costs. This leaves time for skilled HR professionals to attend to more difficult tasks that can’t be automated.

2. Saves time

With many processes automated, employees don’t need to wait for an HR manager to help with a query. Additionally, HR managers can focus on core issues. While a few minutes here and there may not seem like much, it compounds into a lot.

3. Improved employee experience

Many HR managers have to deal with stressful situations daily. With so many human resource issues to wade through, there’s not enough time in the day to give everyone the time and attention they need. By automating processes and making a consistent and easy-to-navigate system, employees will have a much better experience.

An indirect benefit of improving the employee experience is that it contributes to employee retention. With fewer employees leaving, you’ll spend less on training newcomers to overtake their roles.

4. Scalability

For companies with a large or rapidly growing workforce, shared services allow companies to easily add new users without incurring significant additional costs. Additionally, the economies of scale HR shared services achieve can help further reduce costs. As a result, shared services are an attractive option for companies looking to improve their HR function while controlling costs.

5. Continuity

As businesses grow, continuity becomes increasingly important. You can carry out processes consistently by using a shared services approach for HR. The successful onboarding of new staff is a prime illustration of this. This way, you onboard every new employee with the same qualifications and expectations as their predecessor.

By contracting the services of a reputable HR shared services provider, you can be confident that there won’t be any interruptions or disturbances when people come and go. While employee turnover is expected, it doesn’t have to negatively impact your business.

Instead of the drawn-out process of integrating new hires and retraining them, delegate it to an HR shared service provider. It already possesses the skills and knowledge to perform HRIS software tasks, saving you from interruptions that might result from employee turnover.

6. Data utility

By using an HR shared service as a centralized hub for all HR data, your company will be able to use that data to identify potential issues or gaps in efficiency. For example, if more than one employee complains about a particular issue and has filed complaints with different HR managers, it’s unlikely that those managers will communicate on the issue.

However, by storing this type of data electronically, identifying patterns in employee complaints will be easier. As such, your company will grow more efficient at dealing with underlying issues that cause your organization to function sub-optimally.

7. Consistency and compliance

When companies outsource their human resources needs to shared service providers, they can reap benefits in terms of consistency and compliance. Perhaps most importantly, outsourcing HR can help to ensure that all you treat your employees fairly and consistently in accordance with company policy. This is because shared service providers are experts in employment law and are up-to-date on the latest changes in legislation.

Shared service providers can also help to streamline the HR process, making it more efficient and consistent. This is often vital for small businesses that do not have the resources to invest in a dedicated HR team. Finally, using HR shared services can help companies avoid the cost and hassle of dealing with noncompliance issues.

What are the challenges of HR shared service?

Despite having many upsides, there are also some potential challenges with using an HR shared service. These challenges don’t necessarily need to be a deal-breaker, and you can mitigate them simply by being aware of them.

1. Transition difficulties

The initial transition to using HR shared services can cause company-wide disruption. It might take some trial and error before you establish a proper division of tasks. Alternatively, you could consider preparing for this transition by working with your HR service provider to anticipate transition difficulties. Once you identify potential issues, create a system for handling them. It may also be worthwhile to host a company-wide conference informing everyone of the change.

2. Lack of variability

While every company can benefit from using an HR shared service, each has its own unique challenges. HR shared services often employ a one-size-fits-all approach and may not account for the variability of needs.

3. Initial investment

It can be difficult to justify the initial investment, especially if company cash flow is a delicate issue. It helps to understand how your company can benefit from switching over and estimate how you’ll save money in the long run.

4. Less collaboration

With HR managers free to handle more fundamental company issues such as employee relations, they may collaborate less with the HR department that manages the shared service. This may cause hiccups when employees have problems that require the skill set of both teams. If you think this will be a problem, anticipate how you’ll handle it prior to switching over.

5. Need for a digital roadmap

As with any company that increases in-house digitalization, it can spark challenges for everyone involved. While most working people are sufficiently tech-savvy these days, big changes may cause interruptions to their normal work process. The lack of accessibility to human assistance may be frustrating for some people, especially if they’re dealing with complicated issues.

A good way to mitigate potential frustration is to make sure employees can always chat to someone if the HR shared system isn’t enough to deal with their needs. The whole aim is to improve employee experience, not make it worse.

HR shared service best practices

As the workplace continues to evolve, so too must the role of HR. To stay ahead of the curve, HR professionals must continually seek new ways to add value to their organizations. One way to do this is by implementing HR shared services.

When done correctly, shared services can be a powerful tool for HR. However, you should follow a few best practices to ensure success with your HR shared service partnership:

1. Define the scope

Before starting, know how your business can benefit from using it. It may help to do an analysis of your current HR situation. What’s working well, and what isn’t? Get opinions from your employees and HR managers to hear what they think of the idea of an HR shared service. By having multiple points of view, finding where it could be useful will be much easier. If certain aspects of your HR system are working extremely well, then it makes less sense to change them.

2. Allocate a trial period

If you’re unsure about whether you want to commit to an HR shared service, it might be a good idea to try it for a while to see whether it’s a suitable choice. Allocate a finite trial period and then analyze the results of that period. Make sure you establish key performance indicators (KPIs) to measure the success or failure of the new system.

3. Create pathways for reporting issues

The worst-case scenario is implementing a new system that has more problems than the original one. However, that doesn’t mean there won’t be some issues; it’s about how you deal with them. If you simply ignore the problem and allow people’s frustration to fester, it won’t lead to positive outcomes. But if you create accessible pathways for people to report the issues and then actually deal with them, you could have great success with this HR alternative.

4. Decide whether it works for your company

When the agreed-upon trial period expires, and you and your team have identified the key advantages and disadvantages of working with an HR service provider, weigh whether it’s worth it. Calculate how much you’ll save by using the service and if the potential challenges are worth the switch. Get opinions from everyone who used the system; they might be able to offer valuable insight that you didn’t think of.

Why consider an HR shared service

HR shared services are a trending topic in the business world. Many companies are realizing the advantages that come with centralizing their HR functions into a single department, allowing them to pool their resources and expertise in HR.

This centralized approach enables businesses to capitalize on economies of scale and achieve efficiencies that would not be possible with a decentralized HR structure. In addition, by outsourcing HR functions to a shared service provider, businesses can free up internal resources to focus on other core competencies. By taking advantage of shared services, companies can enjoy increased efficiency, lower costs and improved regulatory compliance.

Shared services also offer the benefit of consistent quality, as providers typically have robust systems and processes in place to ensure compliance with employment regulations. For companies considering moving to an HR shared service model, the benefits are clear. Increased efficiency, lower costs, and improved compliance are all strong reasons to make the switch.