Some companies are doing away with their human resources departments as a way to cut costs and demand more accountability from other employees. In some cases, executives believe having an HR department stifles innovation and forces workers to use inefficient work processes. Unfortunately, there are financial and strategic risks associated with eliminating human resources positions. If your company is thinking about doing away with its HR department, you must be aware of the potential consequences.
If your company decides to do away with its human resources department, you may have to outsource functions such as payroll processing, compensation management and benefits administration. If you work for a small company, it may cost less to outsource these services than it does to pay a payroll clerk and a compensation and benefits administrator. This may not be the case with large companies that have thousands of employees. Your company may benefit from retaining its human resources department instead of eliminating the department in a misguided attempted to cut costs. Outsourcing HR functions also leaves your company more vulnerable to the theft of confidential information, especially if you use a cloud-based service provider.
Eliminating your human resources department may also leave your company more vulnerable to lawsuits and penalties from state and federal agencies. HR experts have specialized knowledge of laws such as the Family Medical Leave Act and Title VII of the Civil Rights Act. Experienced HR professionals also have experience managing compliance issues. If your company must conform to DOT regulations, for example, it is helpful to have at least one HR staff member who understands the need to conduct regular driver history checks and make sure company drivers have their DOT-required physicals on time. Managers without this specialized knowledge may unknowingly break the law or let compliance issues slide through the cracks.
Without a human resources department, your employees may feel that they have nowhere to turn if they need to discuss HR issues. This is a serious problem, especially if your company already struggles with employee engagement and rapid turnover. HR professionals typically handle employee complaints, resolve conflicts between workers and ensure employees have the training they need to succeed in their jobs. If you do not have a human resources department, company managers will have to spend more of their time on these tasks and less time making strategic decisions.
If your company needs to cut costs, eliminating the human resources department may seem like the answer. Unfortunately, doing so could create more problems than it solves. If you do not have any HR professionals, you might have a hard time finding talented employees and keeping them happy. Instead of cutting the department entirely, you might want to eliminate redundant positions and appoint a human resources coordinator to oversee payroll administration, recruitment and other activities.
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