Human resources (HR) departments are fighting in a war-torn landscape mired by labor shortage, burnout, poor retention, and low employee engagement. With AI and automation in the mix, adapting to new technologies can feel like traversing an uncharted territory. Not to mention that changes in compliance and regulations add a layer of complexity to data collection and storage.
So, what’s the solution? Most probably, you’re thinking of recruitment process outsourcing (RPO). But here’s an alternative: HR shared services. Let’s find out HR shared services’ meaning and explore what this strategy brings to the table.
HR Shared Services Meaning
HR shared services is defined as the centralization of an organization’s HR administrative and operational functions, from recruitment to payroll processing. By consolidating all tasks in a single hub, HR departments can work efficiently, standardize processes, and ensure consistent service delivery.
Think of it as a huge HR department — but without all the separate teams for each function, or a dedicated HR team for each branch. This model is also powered by cutting-edge human capital management (HCM) and AI technologies, enabling the smooth delivery and optimization of workflow across a company and its branches while increasing cost savings.
Oftentimes, the HR shared services model is divided into tiers, just like the customer service trend of tiered customer support. Let’s find out what each tier does:
- Tier 0: The self-service tier. Using an HR platform augmented by chatbots and other technologies, employees can perform basic and routine HR tasks at any time of the day.
- Tier 1: Handled by HR generalists, this tier provides personalized support to basic inquiries. Company emails or workplace applications like Microsoft Teams are used for Tier 1 inquiries.
- Tier 2: HR specialists take care of complex inquiries. Escalated issues are resolved here, too.
- Tier 3: Reserved for HR specialists and leaders, this tier involves expert consulting and completion of complex and strategic HR tasks to help executives achieve their goals. In some cases, though, tier 3 is not necessary.
HR Shared Services and Outsourcing: Is There A Difference?
Don’t make the mistake of mixing up shared services’ meaning with outsourcing. While both models involve non-core functions and improve operational efficiency, there is a clear difference between HR shared services vs. outsourcing.
HR shared services (and shared services in general) centralize functions into a cohesive hub to standardize processes and enhance the quality of service. Apart from HR, there are also shared services in finance, IT, marketing, procurement, and many more. However, these departments can be outsourced, as well.
Outsourcing, on the other hand, involves hiring a service provider to perform non-core tasks, cut costs, and work with outsourced experts. Onshoring, nearshoring, offshoring, and hybrid outsourcing are the common types of outsourcing.
Understanding the differences between HR shared services and outsourcing can help you decide which model is most suitable for your business.
7 Most Common Functions In HR Shared Services
Shared services in HR unify day-to-day HR operations into a centralized system. Below are functions commonly performed in HR shared services centers.
1. Talent Acquisition
Talent acquisition is an HR function in which talent acquisition specialists identify and attract qualified candidates for an open position. These professionals select applicants based on their credentials, experience, and cultural fit. They are also responsible for maintaining employee retention.
Furthermore, talent acquisition focuses more on the long-term aspects of hiring, such as:
- Employer branding
- Candidate life cycle management
- Workforce planning and strategy
- Workplace inclusivity
- Succession planning and management
While talent acquisition is often part of HR, some companies create a dedicated talent acquisition department.
2. Onboarding
Onboarding refers to acquainting new employees with a company’s culture, expectations, processes, and policies. During this process, accounts, tools, and equipment are set up, and all the necessary paperwork — such as contracts — is also prepared and signed.
A successful onboarding process helps new hires prepare for their role, establish a routine, and form professional relationships with peers.
3. Professional Development
Professional development is a process in which employees undertake further education to acquire new or hone existing skills. It is also used to keep the workforce abreast of new tools and emerging industry trends. Professional development furthers employees’ careers, unlocking their potential for promotion and other growth opportunities.
Common examples of professional development include workshops, training programs, certifications, conferences, and the like. Standardizing career development ensures consistent delivery of learning opportunities for all employees.
4. Employee Data Management
Employee data management is defined as the collection and storage of employee data for various HR purposes. Data includes not just an employee’s basic and personal information, but also relevant employment information, such as benefits, attendance logs, and tenure.
With this data, HR departments can make informed, data-driven decisions to improve performance and retention. Proper employee data management ensures optimized data collection and analysis as well as compliance with data privacy and security regulations.
5. Benefits Administration
Benefits administration is a process of offering and managing employees’ benefits, from PTOs to life insurance. Benefits administrators orient employees on the company’s benefits, so they know how to maximize their benefits during their tenure. Administrators also conduct surveys to understand employees’ needs, enabling effective, people-centric benefits administration.
A great benefits administration process involves using benefits administration tools to maintain efficiency and ensure effective benefits enrollment and tracking.
6. Payroll
Payroll focuses on the processing and distribution of employees’ salaries for a given payroll cycle. This function involves calculating taxes, incentives, benefits, and other relevant costs. Handled by the finance or HR department, payroll employees ensure accurate calculation and regulatory compliance to avoid errors and penalties.
7. Compliance
Compliance is the most important function of an HR department. HR compliance staff maintain order in the workplace through policy enforcement, safeguard employees from abuse or discrimination, and protect the organization from lawsuits. They also perform compliance audits to assess existing policies and identify and address compliance issues.
However, one must remember that HR compliance involves the collective efforts of the whole organization, not just executives and HR leaders.
4 Benefits of HR Shared Services
An HR shared service model is a game-changer for HR departments and organizations. The benefits below give a sneak peek into the potential impacts of integrating an HR shared services center into your organization.
1. Heightened Efficiency
Efficiency is the main appeal of an HR shared services model, with technology and digitization as its backbone. By deploying a dedicated platform for performing HR tasks or automating routine processes, employees across all departments can enjoy higher productivity levels and service quality.
2. Improved Standardization
Standardization and efficiency work hand in hand. Deloitte, cited in Applaud, found that shared services in HR improved process efficiency and standardization in almost 80% of companies.
Standardizing processes across all organizations and locations creates a more uniform approach that eliminates bottlenecks, avoids errors and duplications, and minimizes compliance issues. Enhanced Reliability of HR Services
An HR shared service center does wonders for the quality of HR services, which ties up to the first two benefits. HR platforms and AI agents, for example, empower employees for self-service by giving them the autonomy to perform HR tasks and ask basic questions without relying on HR staff.
As a result, HR employees can pool their expertise on high-value tasks that support business goals. Because all HR processes are less fragmented, employees — including new hires — have a clearer picture of how their HR department works, ultimately making it more reliable and accessible.
3. Significant Cost Savings
Let’s say your company has offices in multiple locations. Each office has its own dedicated HR department with its own practices. From a cost perspective, this entails additional expenses on overhead and manpower. It’s inefficient and fragmented, too.
Like RPO, an HR shared service model can reduce expenses. In the same Deloitte study, most companies (88%) reported a reduction in expenses. After all, the cost of hiring employees alone averages $4,683 USD, with executives costing as high as $28,329 USD!
By centralizing HR functions and leveraging HR software solutions, establishing independent HR departments and hiring additional staff is no longer necessary, as all HR practices and processes are already standardized across your company and its offices. This translates to reduced expenses, increased efficiency, and better HR experience for all.
4. Better Global Compliance
There may be overlaps and differences in compliance laws, regulations, and HR practices between countries. Frankly, this is tricky to navigate. However, a shared services model can be of great help. With this strategy, companies can centralize functions in all their locations while tailoring to specific country needs and complying with local and international regulations.
4 Best Practices for Implementing Shared Services In HR
If you made it this far, HR shared services have probably piqued your interest. We rounded up a list of best practices for shared services in HR.
1. Know Your HR and Organizational Needs
Transitioning to a shared services model brings change. Do your research on its potential disadvantages and challenges, which include:
- Changes in HR roles.
- Resistance to the shared service center model.
- Increased investment in technology and infrastructure.
- Lack of knowledge of shared services in HR shared services.
We also recommend observing your HR department. Here are a couple of guide questions:
- Is the HR department fragmented?
- Have there been inefficiencies in HR processes?
- Has the company put itself at risk of compliance issues?
- How satisfied are my employees with the company’s HR services?
Additionally, interviewing HR staff and other employees is a good way to get grounded feedback on your current HR business functions. Below are sample interview questions:
- What improvements would you like to see in the HR department?
- What are the inefficiencies and challenges your team has encountered?
- Which tasks and processes should be standardized and automated?
While educating your employees about the HR shared service center model, it’s also important to listen and respect the concerns of HR professionals regarding this strategy. Aligning everyone in the organization can help ensure a smoother implementation of HR shared services.
2. Train and Work With Your Employees
Employees are the “customers” of HR shared services. Including employees in the design process ensures that all solutions meet their expectations and needs, creating a healthy feedback loop between staff.
Training employees on AI and automations equips them with the knowledge of how these technologies work, helping them become tech-savvy individuals with a knack for innovation.
3. Leverage Technology
The right technology can elevate your HR department. Common examples include:
- AI-powered agents
- Self-service portals
- HR information systems (HRIS)
- Payroll processing software
- Benefits administration software
Make sure all technologies address your HR needs and enhance employee experience. Software solutions should be user-friendly and come packed with all the needed features to perform the job.
AI tools should be trained on bias-free data and trained thoroughly, so they’re sophisticated enough to handle inquiries of varying complexities, which equates to higher HR service quality.
4. Establish Performance Metrics
You can’t measure the success of your HR shared services center model without performance metrics, which include employee satisfaction, employee retention, resolution times, and many more. By measuring these metrics, your organization can gauge whether the HR shared services are performing as expected.
Even if it’s performing well, don’t just stop there and settle. Shared services in HR promote operational excellence, hence there’s always room for continuous improvement. Use data analytics in conjunction with employee feedback to make informed decisions and implement changes as needed.
Upgrade Your HR Department With KDCI Outsourcing
While HR shared services are a great alternative to outsourcing, there’s no right or wrong approach. Depending on your goals and needs, you can even combine shared services and outsourcing to reap the benefits of both models.
If you have already rolled out HR shared services in your organization, but still want to utilize outsourcing, consider working with KDCI Outsourcing.
We are the best BPO company offering tailored offshore staffing solutions for human resources and other industries. With our thorough vetting process, we only hire the best employees with the qualifications, character, and work ethic you’re looking for.
Send a proposal or inquiry, and let’s help you combine the strengths of outsourcing and HR shared services.
