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Effects of Outsourcing on Workplace Satisfaction

Change management is an important part of implementing any outsourcing solution. Change is disruptive and uncomfortable, and it can have a negative effect on workplace satisfaction. When handled correctly, however, outsourcing payroll and other HR functions can actually enhance employee satisfaction. Here are four key factors that deserve close attention:


Negative emotions

In many cases, outsourcing leads to job loss for some employees. Especially in small and medium-sized businesses where employees know each other well, that can be hard on the friends of the employees whose jobs were outsourced. In addition, it’s natural for remaining employees to worry about additional outsourcing and to wonder whether their own jobs are in jeopardy.

Transparency and communication are critical to alleviating employee concerns. Communicate as much as possible about the reasons behind your decision to outsource, what the benefits will be, how the change will be implemented, and, if possible, any additional outsourcing that is planned. All communications should be geared toward fostering a sense of loyalty between the company and the remaining employees, since a temporary drop in loyalty is a common effect of outsourcing.

Practical concerns

Most (if not all) of your employees wouldn’t work without compensation, so changing the way in which they get paid is bound to cause anxiety. You can alleviate this anxiety by explaining the steps you took to vet the vendor, mechanisms that you’ve put in place to make sure they get paid correctly and on time, actions they can take if there’s a problem, and the protocols that are in place to protect their personal data. Basically, your employees just want to know that you’ve put care and thought into the decision to outsource payroll and that you’ve taken the time to plan for the possible contingencies.


In many cases, outsourcing payroll functions can actually improve employee satisfaction – but you may have to call attention to the benefits. For example, some third-party providers provide self-service capabilities: Employees can log in to do things like change their address, check their benefits, request leave time, etc. In addition, an online portal can eliminate the need for time-consuming paperwork. And, if the payroll process has been problematic while being handled in-house, you can point out the ways in which it will run more smoothly when outsourced.


A rough transition period, filled with disruptions in employee pay and other services, can be hard to recover from, negatively affecting employee morale on a long-term basis. Best practices include careful trouble-shooting during the planning process as well as establishing alternative processes to make sure employees get paid despite any problems that might occur. Taking steps to minimize employee inconvenience during the transition process is critical to overall workplace satisfaction after outsourcing has been implemented.

In most cases, outsourcing payroll and other HR functions will have both a positive and a negative effect on workplace satisfaction, at least in the short term. However, the benefits are often great enough to make the transition period well worthwhile. And careful planning and thoughtful communication can do a lot to make the transition easier.

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