How to minimize HR-related expenses under crisis conditions

How to minimize HR-related expenses under crisis conditions

"Payroll expenses is a normal and the most considerable liability of any business", says Maxim Stepanov, the President of the AVENIR GROUP of companies. These expenses, being virtually permanent, can make up to 10% (for high-tech manufacturing) and up to 90% (for consulting and service companies) of overall business expenditure. For this reason, not only under crisis but in favorable economic conditions as well it is of utmost importance for top managers to optimize staff expenses.

Today every top manager is equipped with a variety of instruments to establish the most optimal system of the company's staffing in terms of quality, cost, control and existing risks. The most popular are recruitment, staff leasing and transfer of certain business functions to outsourcing. The key differences between the above methods are characterized by the list of functions to be performed by the employer.

During the recruitment process, candidates are searched for, evaluated and selected by the employer or by a specialized recruiting agency. The employer recruits the selected specialists, does all the related administrative paperwork, ensures personnel management and controls the quality of the resulting work.

If the employee is leased (the process can also be referred to as outstaffing) – the service rendered by specialized agencies – the specialist is searched for and selected by the leasing agency. The leasing agency hires the employee and provides the employee to the client company to complete certain tasks. In this case, the company retains management function and controls the resulting work while the leasing agency undertakes to do all the administrative work related to the specialist leasing process. Later, the company can hire the successful employee for a certain agreed compensation to the staff leasing agency. The amount of this compensation is normally equal to cost of the specialist search and selection with the recruiting agency.

The service of providing temporary personnel is very similar to the personnel leasing services and is mainly of short-term character. The service is most frequently used to temporarily replace a secretary, an accountant, IT specialist on sick leave or on vacation.

And, at last, the outsourcing when the outsourcing services provider not only provides its employees to complete certain tasks but is also responsible for search, headhunting, selection, evaluation and professional growth of a specialist and controls the quality of the resulting work. The outsourcing company hires the employee and does all administrative paperwork (HR administration services).

Outsourcing means transferring of existing business functions to an external contractor. According to Karina Stepanyan, the Executive Partner of the ACCENTOR Consulting company, the classic formula of outsourcing is "I only do functions I can do better than others; I outsource the functions which are better done by an external contractor".

The most popular outsourced business administration services are: financial and tax accounting outsourcing services, preparation of management and financial reports in accordance with International Financial Reporting Standards (IFRS), payroll outsourcing services (calculation and payment), outsourcing of HR administration and documentation management, outsourcing of legal advice and support and a number of different tasks which required establishing internal agencies, hiring employees and investing considerable funds in their professional development and management.

Being a relatively new technology imported from the West, the outsourcing of business processes (Business Process Outsourcing or shortly BPO) gained ground mostly in big cities – Moscow and St. Petersburg. At the present time, however, outsourcing is growing popular in other cities and regions of Russia and in capitals of some CIS countries, mainly in Ukraine (Kiev) and in Kazakhstan (Astana and Alma-Ata/Almaty).

The major evident advantages of the business administration outsourcing are as follows:

1. Contracting a specialist, you obtain the knowledge and experience of the certain specialist, while by contracting an outsourcing company you obtain the whole company's knowledge and experience.
2. No specialist hiring, replacement and professional development expenses.
3. Elimination of operating management, control and administration functions.
4. Permanent personnel expenses become variable.
5. Flexibility in staff number management.
6. Elimination of work interruption, flexibility of working schedule.

Business Process Outsourcing Services is the optimal solution for small businesses and for newly created companies. Administrative load is a major setback and a considerable financial liability at the start-up stage. Outsourcing is also effective in the following areas:

1. Company registration (incorporation), organization of business (Start-Up)
2. Representative office or branch opening
3. Limited acceptable staff number
4. Temporary projects
5. Seasonable phases of the production cycle
6. Optimization of expenses
7. Quality optimization