Outsourcing Human Resource Functions: Implications for the Performance of SMEs in Oyo State, Nigeria

Abstract

The study explores the impact of outsourcing human resource (HR) functions on the performance of small and medium-sized enterprises (SMEs) in Oyo State, Nigeria. It specifically examines the level of adoption of HR outsourcing by SMEs and investigates the influence of recruitment and selection, training, and payroll outsourcing on SME performance. A simple random sampling technique was used to select 720 respondents, while a structured questionnaire was employed to collect the data. Data analysis was performed with the aid of simple percentage, mean, standard deviation and Path Analysis. The result reveals that a larger portion of respondents exhibit an average level of adoption of HR outsourcing, while nearly half report a low level of adoption. The evidence further reveals that a strong, statistically significant positive relationship between HR outsourcing functions (recruitment and selection, training, payroll) and SME performance.  In conclusion, the data strongly support the idea that outsourcing recruitment and selection, training, and payroll functions can significantly improve SME performance. Therefore, SMEs should consider these outsourcing strategies to enhance their operational effectiveness, and stakeholders should support their adoption through targeted initiatives and policies such as workshops, training sessions, and awareness campaigns tailored to demonstrate how outsourcing can address common HR challenges faced by SMEs.