What is HR Shared Services Model: Best Practices, Pros and Cons

In many years, HR strategies have been a continuous innovation of establishing better processes, more effective talent management, cost reduction, and other alternatives. One of these HR solutions is centralizing HR activities for efficiency and better company experience.

When it comes to streamlining HR administrative tasks, the shared service model offers enhanced efficiency in human resource processes, better employee relations and experience, and allows other dedicated teams in HR department to center on strategic initiatives.

Learn more about HR shared services model, its benefits and challenges, how to build one, best practices, and some frequently asked questions here.

What is HR shared services?

HR shared services is a centralized unit where operational and administrative HR functions are managed using automation, technology, and employee self-service. This is typically done by third-party HR management companies or internal service providers.

The common services in this centralized hub are payroll, recruitment operations, employee data management, reporting and analytics, learning services, HR service center, and compensation benefits.

To streamline operation like the compensation process, tools like Compensation Software help HR professionals and business leaders accurately price jobs with HR-reported dataset, analyze pay practices, simplify survey management, and model salary structures fit for the company.

HR shared services model

In a shared services model, there are usually 4 tiers:

• Tier 0: These are self-service and handled by employees in a centralized portal.

• Tier 1: These are services managed by the internal customer service center.

• Tier 2: These services are more complicated, handled by HR specialists, and might be managed by HR center of excellence or a team specializing in specific areas of HR expertise.

• Tier 3: These services are usually policy-level or strategic HR processes.

Here is a list of the key functions of the shared services model:

• Payroll: A centralized payroll system ensures that payments are accurate, consistent, and compliant with employment laws and regulations and taxes.

• Recruitment: The hiring process is streamlined, such as job ads, interview, screenings, and onboarding. Talent acquisition is standardized and reduces personal biases.

• Employee data management: Employee information is collected, maintained, and updated in a centralized system, so that it is accurate, accessible, and secure.

• Employee benefits administration: Retirement plans, insurance programs, professional development and other company benefits are properly managed, making sure that they are consistently applied to all employees.

• Learning and development: Continuous improvement for employees is focused through training programs and keeping tabs on employee progress.

• Onboarding: Having an integrated system allows an established onboarding process, easily accessible orientation programs and training materials, satisfaction of new employees, and increased productivity in the workplace.

• Performance management: Performance evaluations and employee development can be tracked easily, making sure that company goals, employee development plans, appraisals, and feedback are prioritized.

With the many functions of the shared services model, it is better to have HR integration into your systems. With Salary.com’s HR Technology Integration feature, you can have an all-in-one compensation tool integrated into your HCM/HRIS systems.

This gives way for streamlined implementation with updated employee data, one-click survey participation, and comprehensive documentation all available to make your processes more efficient.

Benefits and challenges of HR shared services

The shared services offer both advantages and disadvantages depending on the practices of the entire organization. Here are some of them:

Benefits

• More consistent process: Since repetitive tasks are automated, there is consistency in every output. This leads to minimization of error, compliance with regulations, and employee satisfaction.

• Reduction of costs: There is significant cost savings since there is no need for additional employees or tasks since transactional and administrative tasks are centralized and uses technology infrastructure to make the processes automated and more efficient.

• More employee engagement: The self-service portals enable employees to administer their own HR queries, such as personal information, total compensation statements, and availing leave benefits, giving them a sense of engagement.

Challenges

• Lack of knowledge: Expertise is needed with the shared services model for an effective implementation. Without adequate knowledge of the new technology, there will be problems in managing and streamlining processes.

• Complex implementation: New strategy and technology that come with shared services can be complicated and will require proper strategy, trial and errors, and fine-tuning for them to be fully functional and better than previous processes.

• Cost justification: The HR transformation to a shared service model can require a big sum of money, so the return on investment must be convincing and attainable, especially if the company budget is limited.

How to build HR shared services

To build an effective shared services model, here are steps you can follow:

1. Assess current HR processes and issues, tasks that need standardization, and potential benefits in establishing shared services.

2. Identify objectives for the shared services. These goals serve as guides in the steps and strategic decisions to make in building the HR model.

3. Craft a digital roadmap outlining the steps, timeline, milestones, resources, and metrics to ensure successful transition.

4. Train HR staff on new technologies, develop a team specializing in the shared services model, and create a change management strategy.

5. Integrate technologies that facilitate the shared services model like self-service portals, automation, and analytics.

6. Do test runs before the official implementation. Assess performance using key metrics and make important adjustments based on the assessments.

Best practices of HR shared services

The way to experience a better system through the shared services is through careful planning and maintaining best practices. Here is a list of them:

• Build clear service level agreements.

  A clear service level agreement (SLA) specifies the responsibilities and expectations between the business units and the HR shared services center. This ensures the quality and accountability of the service provided by the extent of the services, standards, and timeframes.

• Focus on continuous improvement.

  Continuous improvement means that the shared services are consistently refined through employee feedback, trends on service performance, and analyzing areas of development.

• Prioritize clear communication.

  Productive collaboration starts with effective communication. This can be achieved through clear communication methods, regular check-ins, and shared workspace to effectively resolve any issues and ensure every step is aligned with the business strategy.

• Broaden the use of data and analytics.

  Implementing HR shared services is smarter with the help of data and analytics. Tracking the KPIs of the shared services model through employee satisfaction, service quality, response time, and cost efficiency indicates if the model is effective or needs improvement.

Data and insights help companies make sound decisions and strategic objectives in their shared services model, such as Compensation Software’s Reporting and Analytics, where you can combine employee data with external market data and share report across the company to provide a comprehensive analysis of the latest compensation trends.

FAQs

Here are some frequently asked questions about the shared services model:

What is the role of a shared service?

The role of a shared service is to centralize certain company functions, maximize efficiency and consistency of processes, minimize costs, and improve employee experience.

For example, administrative and operational HR tasks like payroll and recruitment are consolidated into a centralized hub for a more efficient system.

What is an example of a shared service?

Some of the examples of a shared service are payroll processing, recruitment process, job postings, compensation and benefits, employee data management, reporting and analytics, learning services, and HR service center.

What is the difference between HR shared services and HR service delivery?

HR service delivery is a wider framework than shared services. HR service delivery covers the overall approach of HR services for employees, while HR shared services is specific to operational and administrative tasks in the HR team.