Organizations constantly seek ways to optimize operations, reduce costs, and focus on core competencies. One of the strategic functions where businesses face challenges is managing their human resources (HR). HR encompasses critical tasks including:

  • Recruitment – Recruiting employees is a significant part of any HR function. Finding skill-specific, suitable candidates for positions they need for their business can be very challenging. Employee experience starts with the onboarding and goes on till the time they leave.
  • Payroll Management – Payroll processing and management is another HR function every business needs. Depending on the organization’s size, payroll administration can be a full-time job.
  • Performance appraisal – Goal setting, periodic performance appraisals to ensure employee alignment with organizational goals is necessary for the success of an organization.
  • Organization Development – helps organizations build their capacity to change and achieve greater effectiveness by developing, improving, and reinforcing strategies, structures, and processes.
  • HR analytics – As Organizational complexity increases, management needs a range of data to effectively manage the Human Resources function well.

Why Outsource HR?

  1. Many MSMEs struggle with recruitment and payroll management activities as the Organization cannot afford to hire experienced HR professionals, in some cases, the workload is inadequate to retain ambitious HR managers.
  2. The activities involved are quite amenable to automation and sophisticated tools. Smaller organizations cannot make the right choice of tools and apps and struggle to implement them.
  3. Companies realize that their attempts to manage HR processes in-house lead to error-prone or inefficient processes in HR and become a drag on company operations.

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What Are Managed HR Services?

Delegating HR functions to external providers specializing in such operations is termed Managed HR services. Such providers have the expertise, network, and technology to handle the HR function efficiently. Outsourcing HR functions allows you to streamline operations, reduce costs, and access specialized knowledge and technology.

It is more common to outsource recruitment, payroll services and performance appraisals to service providers. However, there are many examples where all parts of HR are outsourced to mid-sized HR service providers.

What are the Advantages of Managed HR Services?

Managed HR services offer numerous benefits that can contribute to the growth and success of an organization. Let’s explore some of the key advantages of managed HR services:

1. Cost Savings

The potential cost savings are among the foremost reasons companies choose managed HR services. By outsourcing HR functions, businesses can avoid the expense of hiring and maintaining an in-house HR team. Managed HR service providers can leverage economies of scale to provide cost-effective solutions, resulting in significant company savings. Our clients have saved 20% to 40% of their HR department costs by outsourcing HR functions.

2. Access to Expertise and Technology

With a team of professionals having in-depth knowledge and expertise across HR functions, managed service providers can take care of end-to-end services. Since they stay up-to-date with the industry’s latest rules, regulations, and best practices, availing their services can ensure business compliance. Such providers also have access to the latest HR technology and systems, enabling them to streamline processes and improve efficiency. In our experience, a judicious choice of HR software appropriate to the size of the organization and efficient implementation leads to significant benefits to the organization. Some companies use the same large ERP for their operations, finance, accounting, and HR, while many others find it easier to use stand-alone, flexible HR software. An experienced HR service provider can help make these decisions and implement and run the software without impacting the company’s operations.

3. Improved HR Processes and Systems

Managed HR service providers bring vast experience in managing and optimizing HR functions. They also bring standard operating procedures that are proven across the industry, eventually driving up employee engagement, morale and productivity. Some of our clients where the founders have had limited exposure to HR processes find it easier to take our assistance in defining HR processes appropriate to their ways of working and changing HR systems as the organization grows and /or embraces significant changes in its business processes.

4. Time-Saving

Outsourcing your HR services frees up the time of your internal resources who can then be deployed for growth-complimenting business critical initiatives.

How to Overcome Challenges in Managed HR Services?

While managed HR services offer significant advantages, organizations must know their potential challenges. Recognizing these challenges will help businesses successfully partner with service providers.

1. Cultural Differences

One initial and typical challenge organizations encounter while outsourcing HR services is understanding the cultural nuances of the client’s environment and suggesting appropriate changes in HR processes and systems. Open communication will help bridge such cultural gaps and result in a successful partnership.

2. Quality

Organizations must establish clear expectations, service level agreements (SLAs), and performance metrics, upfront. Having continuous feedback and reviews with the service provider will ensure high-quality services aligned with the organization’s expectations and requirements are delivered.

3. Data Privacy and Security

Any outsourcing engagement entails sharing sensitive information with an external organization. In the case of HR services outsourcing, it is even more critical as your business and employees’ critical information is shared. Extreme caution must be exercised in assessing the service provider’s data privacy and security policies. Organizations must follow strict guardrails, including signing comprehensive confidentiality agreements, implementing data protection protocols, and conducting periodic security audits, which will help protect your organization’s and your employees’ sensitive information.

4. Communication

“As per a recent research, 40% of businesses in India say that communication is the most common challenge they face when using managed HR services”

As with any two entities, communication is the most significant factor in ensuring the success of an engagement. Expect initial hiccups regarding the communication methods, frequency and tools of the service provider.

How to Choose the Right Managed HR Service Provider?

Selecting the right managed HR service provider is crucial for ensuring a successful HR organization. Consider the following factors when choosing an HR service partner:

1. Expertise and Specialization

Identify the exact HR functions where your organization needs support and then identify service providers with expertise. Evaluate their industry knowledge, experience, and track record to ensure they can meet your custom needs.

2. Technology Expertise

Ensure the service provider has a robust HR system and tools for efficient and effective HR operations. This may include payroll systems, employee management portals, and HR analytics capabilities.

3. Communication and Collaboration Approach

Assess the service provider’s communication approach and willingness to collaborate closely with your organization’s stakeholders. Regular meetings, clear communication channels, and shared project management tools will ensure effective collaboration.

4. Reputation and References

“60% of businesses in India say that reputation is the most important factor when choosing a managed HR services provider”

Research the reputation of the HR service provider in the industry. Seek references from their existing customers to get first-hand insights into their service quality, reliability, and satisfaction levels. A service provider with a strong reputation and positive references will likely deliver high-quality services.


Managed HR services offer organizations a strategic solution to streamline HR operations, optimize costs, and enable them to focus on core business activities. A study shows that 85% of businesses in India believe that managed HR services can help them improve their bottom line. Whilst they bring many benefits, Organizations must be aware of potential challenges and proactively address them.

Astravise, a trusted provider of managed HR services, offers comprehensive managed HR services to customers. With a focus on efficiency, cost optimization, and customer satisfaction, Astravise enables organizations to optimize their HR operations and achieve their business goals.

In conclusion, many MSMEs will significantly benefit from managed HR services from experienced and reliable providers. With the right approach, the client will benefit from the quality output and digitized processes and save cost and management time.

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