Dedicated HR Services as an IT Cost Optimization Tool

Administrative tasks often take up a lot of time and resources for IT organizations, particularly those with both in-house and remote teams. For this reason, it’s becoming more common for companies to outsource their HR functions. This strategy allows them to access top-notch HR services affordably, without the need for an in-house HR manager or department, leading to significant cost savings. Today, about 80% of companies outsource at least one HR task, which can reduce their HR expenses by up to 22%.

This article explores dedicated HR services in the context of IT cost optimization, highlighting key areas where outsourcing can drive significant value and provide a cost advantage in the technology-driven business environment.

Read on.

What are Dedicated HR Services?

Dedicated HR services, or HR outsourcing involves hiring a third-party provider for HR tasks like recruiting, managing employee relations, payroll, administering benefits, and overseeing training and development.

This approach is particularly impactful in the IT sector, which faces unique challenges like skill shortages, talent retention, managing remote teams, ensuring workforce diversity, addressing cybersecurity issues, and meeting industry compliance standards. The market for dedicated HR services is expected to grow significantly, reaching $431.14 billion by 2030, highlighting its increasing importance and rapid expansion.

Benefits of Dedicated HR Services

There are several compelling reasons why IT firms should consider leveraging dedicated HR. Let’s explore a few below.

Cost Savings

HR outsourcing services offer a prime advantage: potential cost savings. According to Gartner, HR functions typically spend $2,441 per employee annually, with two-thirds (67%) of total HR function costs attributed to HR personnel-related expenses. Naturally, organizations seek ways to trim this expenditure, and that’s where HR outsourcing can help.

Specialized Expertise

Dedicated HR services provide specialized knowledge that’s perfectly suited to the specific requirements of IT companies. These experts have a deep understanding of the challenges IT teams face, including the significant issue of talent acquisition, which 86% of tech firms identify as their primary HR hurdle.

Enhanced Efficiency

Improving operational efficiency is another big reason why IT firms should consider HR outsourcing. Dedicated HR providers leverage advanced software and analytics to generate data-driven reports on crucial HR metrics like employee turnover, recruitment expenses, and job satisfaction. But it’s not just about collecting data. HR analytics enhance hiring quality, reduce costs, and slash hiring times by 48%. Studies even show that hiring algorithms outperform humans by 25%. The insights derived from data can help  IT companies pinpoint areas for improvement, streamline HR processes, and make informed decisions about talent acquisition and retention.

Elevated Employee Experience

In the competitive tech industry, finding and keeping the best talent is tough. But with HR outsourcing, IT firms can level up their hiring and onboarding. Research proves that great recruitment and onboarding can boost commitment levels by 18 times and increase job satisfaction by 30 times.

Focus on Core Business Operations

In today’s IT industry, innovation and keeping ahead of the curve is critical to success. That is why IT organizations should focus their management attention on strategic objectives. By delegating HR chores to professionals, these businesses can free up resources and concentrate on growth, product development, and exceptional customer service. This strategic decision enables them to keep a competitive advantage in today’s dynamic market.

How Does Dedicated HR Services Reduce Costs?

Let’s delve into how dedicated human resource services help IT companies save money while enhancing operational efficiency.

Lower Overhead Expenses

Did you know HR budgets usually amount to 2 to 4% of total revenue? Outsourcing HR can significantly cut this expense. By teaming up with specialized HR service providers, IT companies can say goodbye to the high costs of managing an in-house HR team. No more worries about hiring, training, or retaining HR staff, plus savings on HR systems and infrastructure. With dedicated HR, you get expert support without the heavy investment needed for an internal HR department.

Streamlined Recruiting Process

Recruiting can be a drain on time and finances if not managed efficiently. According to the Society for Human Resource Management (SHRM), businesses spend nearly $4,700 per new hire, covering expenses like job board fees, background checks, and training.

However, dedicated HR can streamline this process and save you money. These services have vast candidate networks and use advanced technology to automate and simplify hiring, from conducting technical interviews to designing effective training programs. Additionally, they are adept at managing remote teams, making sure that every legal, financial, and regulatory framework is covered.

This means quicker hires and lower costs on advertising, background checks, interviews, and onboarding. With this approach, IT companies can attract top talent from anywhere in the world without overspending.

Enhanced Training and Onboarding

Ensuring new hires hit the ground running is crucial for their success. Yet, creating and delivering thorough training programs can drain resources. According to Training Magazine’s 2023 Training Industry Report, the average U.S. company shelled out $954 per employee in 2023 for training. However, outsourced HR services offer a cost-effective solution. They grant access to a wealth of training materials and e-learning platforms tailored to boost employee skills and knowledge. By tapping into these services, IT companies can slash expenses on in-person training sessions and materials. This not only saves money but also equips employees to excel in their roles.

Improved Employee Relations

Maintaining strong employee relationships is crucial for a thriving workplace and enhanced productivity. However, managing these connections, especially within skilled software developers and IT teams, can be challenging. That’s where dedicated HR outsourcing comes in. It improves relationships through clear communication channels, effective complaint resolution, and conflict management strategies. But it doesn’t stop there.

Expert HR partners also promote a supportive environment, prioritize human capital development, and offer career advancement opportunities. These services foster a culture of continuous learning and progression, vital for success in the fast-paced IT industry. HR providers also reduce the risk of costly legal issues by fostering a positive work atmosphere.

Efficient Benefits Administration

Outsourced HR can help cut costs by streamlining benefits administration. Handling employee benefits like health insurance and retirement plans can be a real headache, especially in fast-paced industries like IT where time is scarce. Without dedicated HR support, tech companies might miss out on comparing different providers for the best deals, leading to unnecessary expenses.

However, by having a dedicated HR team on board, businesses can delegate this complex task to experts who specialize in benefits administration. These professionals will search through various options to secure the most cost-effective benefits package for their clients. Outsourcing benefits administration not only saves valuable time and effort but also results in tangible cost reductions and happier employees.

Lower Turnover Rates

Dedicated HR offers a great cost advantage: lower turnover rates. High turnover is expensive and disruptive, especially in the IT industry with its ongoing talent shortage. By outsourcing HR tasks to experts in hiring and retention, businesses can improve their recruitment, select the right candidates, and introduce programs to improve retention.

This means less spending on finding and training new employees while ensuring a stable team and a positive workplace atmosphere. Given that turnover can cost up to 33% of an employee’s salary annually, this translates to substantial savings for IT companies.

Scalable Workforce

Dedicated HR services assist IT companies in cost reduction through flexible staffing solutions, enabling them to scale their workforce according to project needs, and avoiding the costs of maintaining a full-time staff during periods of lower activity.

According to research from Harvard Business School (HBS), nearly 90% of business leaders anticipate that leveraging on-demand talent will be pivotal in securing their organization’s future competitive edge, particularly in cost reduction, speeding up time to market, and flexibility.

On-demand talent refers to professionals available to work on a project-by-project basis, not full-time, typically through dedicated HR or staffing agencies.

Who Needs Dedicated HR Services?

So, how do you know whether you need to outsource HR services? Here are some signs that would tell.

1. Shortage of Internal HR Resources. When your IT company lacks skilled HR experts to deal with complex HR duties, outsourcing can provide the necessary expertise, ensuring smooth and compliant operations.
2. Outdated HR Infrastructure. If your HR department still relies on outdated HR infrastructure like old software or systems, then outsourcing may be a better option. Outsourcing HR can bring in modern technology and systems to streamline operations.
3. Focus on Core Expertise. If you prefer to focus on product development without employee-related distractions, then you should consider HR consulting services. Outsourcing provides specialized expertise, allowing you to allocate internal resources more effectively.
4. High Employee Turnover. Do you have a higher-than-average employee turnover? This could signal problems with employee engagement and work environment satisfaction. Outsourcing helps address underlying causes, implement retention strategies, and foster a positive workplace culture.
5. Growing Business Demands. If your IT company is experiencing rapid growth or expansion, HR staffing services offer scalable solutions tailored to evolving needs, without the overhead of hiring additional internal staff.

The Newxel Advantage

HR consultancy services are a cost-effective alternative to hiring a full-time, in-house HR manager. However, the effectiveness of this approach depends on partnering with a reliable provider. This is where Newxel comes into play.

At Newxel, we are well known for providing top-notch offshore development services and IT staff augmentation, and over the years, have gathered experience in IT staffing, making us well-qualified to offer comprehensive HR solutions including consulting, retention strategies, compensation reviews, and growth and development plans.

By leveraging Newxel’s HR consultant services, IT companies can save significantly on their budget. There’s no need for full-time specialists as all HR functions can be efficiently handled by Newxel experts, following global best practices, for a fixed monthly commission. This ensures cost predictability and allows companies to focus their resources on core business activities while we take care of the intricacies of HR management.

Conclusion

Outsourcing HR services is one of the keys to optimizing costs in the IT industry. This approach helps you streamline recruitment, attract top talent, and slash HR expenses. Remember though, for optimal results, team up with a trusted provider like Newxel.

By partnering with Newxel, you not only gain access to affordable outsourcing solutions that outperform in-house options but also leverage our expertise as a top IT staff augmentation partner, which allows you to tap into a pool of skilled professionals, allowing you to focus on core business goals. In today’s dynamic IT environment, adopting HR outsourcing isn’t just smart—it’s essential for long-term success.

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