Strategic role of human resources; interdependence with other key business functions; outsourcing - HR functions, using contractors

What this dot point is asking

NESA wants you to articulate HRM's strategic role beyond payroll-and-policy, explain how HRM interdepends with the other three key business functions, and analyse the strategic use of outsourcing and contractors. Section II questions on this dot point often probe interdependence or outsourcing; Section IV extended responses can call for an evaluation of HRM strategy at a large business.

The answer

Strategic role of HRM

Human resource management is the management of people to achieve the business's objectives. Its strategic role is to ensure the business has the right people, with the right skills, in the right roles, at the right cost, motivated to deliver on the business strategy.

In a traditional view, HRM was a transactional function - payroll, hiring paperwork, compliance. In a strategic view, HRM is a partner to the executive, helping design the workforce required to deliver the strategic plan and shaping the culture that makes the workforce effective.

The contemporary view is that people are the source of sustained competitive advantage. Technology can be bought; processes can be copied; capital is widely available. The capability to attract, develop and motivate talented people is the differentiator that competitors cannot easily replicate.

Interdependence with other key functions

HRM does not run in isolation.

HRM and operations

Operations needs people with the right skills - trained baristas, certified pilots, skilled welders, qualified nurses. HRM supplies them through recruitment, training and rostering. When operations changes (a new automated DC at Coles, a fleet renewal at Qantas), HRM must respond with retraining, role redesign and sometimes redundancy.

HRM and marketing

Marketing's "people" element of the service marketing mix (the 7Ps) is HRM-delivered. The Apple store experience depends on the staff Apple HR recruited and trained. A great marketing campaign fails if the customer-facing staff do not deliver on the brand promise.

HRM and finance

Wages are typically the second-largest cost (after COGS) on the income statement. Enterprise-agreement renegotiations have direct financial consequences. HRM budgets must align with finance's overall plan, and HRM is increasingly responsible for cost-per-hire, time-to-fill, and other workforce KPIs that affect the financial result.

Outsourcing HR

Outsourcing means contracting an external provider to deliver an HR function that was previously done in-house. Common targets:

• Payroll. Specialist providers (ADP, Ascender) process pay runs at lower cost than in-house systems for most small-to-mid businesses.
• Recruitment. Recruitment agencies (Hays, Robert Half, Michael Page) source candidates for hard-to-fill roles; specialist tech recruiters (Talent International) serve technology functions.
• Training and development. External RTOs (registered training organisations) and specialist providers deliver technical training (forklift, asbestos awareness) and leadership development.
• Employee assistance programs (EAPs). Counselling and wellbeing services delivered by specialist providers (Converge, Telus Health).
• Legal and IR support. Workplace law firms (Maddocks, Herbert Smith Freehills) advise on enterprise bargaining, complex dismissals and Fair Work matters.

Advantages. Lower cost, specialist expertise, scalability, freeing internal HR for strategic work.

Disadvantages. Loss of control over the employee experience, confidentiality risk, atrophy of in-house HR capability, integration friction with internal systems.

Most large Australian businesses use a hybrid model - in-house strategic HR (workforce planning, culture, executive recruitment, employee relations) plus outsourced transactional HR (payroll, EAP, recruitment screening).

Using contractors

Contractors are workers engaged on commercial terms rather than as employees. They invoice the business and take their own taxation and superannuation arrangements (subject to ATO and Fair Work tests of genuine independence).

Advantages

Flexibility (ramp up or down without long-term employment commitments), specialist skill access (a senior data architect for a 6-month project), conversion of fixed labour cost to variable.

Disadvantages

Higher hourly rate (contractor day rates typically exceed employee equivalents), less control over working pattern, weaker integration into culture, legal risk if the engagement is in fact employment (sham contracting attracts Fair Work penalties).

Australian regulatory context

The Fair Work Legislation Amendment (Closing Loopholes) Acts of 2023 and 2024 narrowed the legal scope for treating workers as contractors, introduced regulated minimum standards for "employee-like" gig workers, and expanded penalties for sham contracting. HRM needs to be confident in the legal characterisation of every contractor engagement.

Worked Australian examples

Telstra

Telstra runs in-house strategic HR for its 30,000-plus Australian workforce but outsources significant payroll and routine transactional HR to global providers. Major operational HR projects (the long-running enterprise-agreement renegotiations, the 2024-2025 organisational restructure) are run by in-house HR with external legal and IR advice.

Qantas

Qantas uses HR outsourcing through its labour-hire model for ground operations and catering - a practice that became politically contested in 2023-2024 when the Federal Court ruled the 2020 outsourcing of 1,700 baggage handlers had breached the Fair Work Act, with damages awarded to affected workers. The case is the high-profile example of the legal risk in HR-outsourcing strategy.

Atlassian

Atlassian runs in-house HR for its core engineering and product workforce, outsourcing some recruitment-screening services and specialist training. Its strategic HR investment is the differentiator that supports its product velocity.