First, lets understand the 3 models that are used for managing the HR Function.
1)Inhouse model: where all activities for HR & Payroll Operations, HR systems including attendance, LMS, Payroll etc are managed in-house
2)SaaS Model: This is the most prevalent model today where a cloud based HR / Payroll system is deployed and all operational activities for HR & Payroll are managed in-house by HR and Accounts teams. At times CA firm or 3rd Party consultants are involved for Income Tax and Compliance
3)HR-as-a-Service Model: This model is getting increasingly popular with all sizes of firms where a single provider ( vendor) is engaged to manage the HR Technology ( SaaS), HR Operations, Payroll Processing, Compliance and Employee Queries. In-house HR and Accounts team only review and control the process
Why is “HR-as-a-Service” becoming increasing popular among all sizes organizations?
In HR-as-a-service, one provider (vendor) takes over all the responsibilities of running the HR and Payroll function, namely
- HR Technology ( HCM system, Payroll Engine, Attendance integrations, Performance Management etc) – One vendor brings in the most suitable technology and ensures a successful implementation and is also responsible for the ongoing maintenance
- Managing HR processes, Payroll, Compliances and Employee Queries – These operational aspects consume over 80% of HR and Accounts teams time leaving very little bandwidth for performing Business Partnering responsibility like Recruitment analysis, performance management, policy restricting etc
- Service Levels for each activity: once outsourced to a vendor there are performance service levels for each activity which are monitored and reported. These SLA are generally not monitored rigorously when processes are managed internally. For example, any employee query is responded to within 1 Business Day and all Management dashboards are submitted on the decided date without exception
- Lower total spend on HR: since the vendor is able to leverage economies of scale and cross leverage resources for IT maintenance, compliance monitoring, reporting, Employee Helpdesk; the total cost offered is much lower if done internally
- Improved quality of HR function: It is very difficult for any organization to have all the skills recruited internally, for example – HR Managers, Payroll Processors, Income Tax Experts, Compliance Experts, IT managers etc. However, this being the core for a vendor, the quality of service for each activity is guaranteed to be much higher. (Read our post on HR Rockstar for a better view)