Just as back office outsourcing reduces back office workload and provides time and cost savings, HR outsourcing can reduce your administrative workload and free up your time so you can focus on your business objectives. Today many companies rely on human resource outsourcing to ensure quality of service, increased efficiency for administrative functions, and excellent productivity at low cost. Functions under the HR domain that can be outsourced include:
- Benefits Administration
- Hiring and Recruitment
- Education and Training
- Personnel Administration
These functions can be efficiently handled by a PEO (professional employer organization) that can take on tasks such as recruiting, employee on-boarding and training, developing an employee handbook, and regulatory compliance assistance, which are typical tasks that a full-service HR department handles. Outsourcing HR is much more cost-effective than hiring in-house HR employees, and you benefit from access to a team that works to ensure that your organization and employees are compliant and successful.
Before going on to 3 types of companies that can benefit from HR outsourcing, let us have a look at the global human resource outsourcing market. According to the Global Industry Analysts’ market research report, the global market for HR outsourcing is projected to reach US$ 53.9 billion by 2020, driven by the growing need among enterprises to reduce costs, increase operational efficiency, streamline operations, and improve compliance management. Service providers are increasingly focusing on technology innovation, and this is benefiting the commercial success of cloud/BPaaS as an HRO (human resource outsourcing) service delivery model. Since they are time-consuming and involve significant compliance challenges, payroll services and benefits administration are the most widely outsourced HR processes. Recruitment and learning are also other HR functions being outsourced popularly. The United States represents the largest market worldwide. Asia-Pacific is predicted to emerge as the fastest growing market with a CAGR of 8.1% over the forecast period.
HR outsourcing is beneficial and that accounts for its popularity. Here is a look at the types of businesses that can manage effectively by outsourcing their HR functions.
- Blue Collar Companies: Blue collar jobs often involve a higher rate of risk and companies in this category see higher premiums for worker’s compensation insurance coverage because the probability of an accident is very high. Outsourcing services can help blue collar companies in the administration of risk management and loss control. They can also gain access to experts and specialists that ensure that blue collar companies remain safe and compliant with federal organizations like OSHA (Occupational Safety and Health Administration). An outsourcing partnership could help companies save money that could be lost in penalties or lawsuits. Under a PEO’s master policy, blue collar organizations could also benefit from discounted rates for workers’ comp insurance coverage.
- Companies with 10 to 100 employees: A growing business will require more labor and time to manage processes such as payroll, benefits administration, and employee tax reporting among others. A company with ten to hundred employees can definitely benefit from outsourcing HR. If HR staffing resources are limited, an entire team of HR and payroll professionals are provided by the outsourcing partner. They will handle all the routine tasks and ensure all operations are running smoothly.
- White collar companies: White collar companies can outsource HR to minimize cost, gain access to better benefit plans, and ensure compliance with constantly changing labour laws like Affordable Care Act (ACA) and Fair Labour Standards Act (FLSA).
Access to new technology, ensuring risk management and compliances, and reducing operating costs are the principal drivers for a company that chooses to outsource. While selecting HR BPO service, it is important to ensure that they have a proven track record, guaranteed service level, flexible contracting, previous experience and grade of specialization. Services that satisfy these requirements will prove to be beneficial for your company.
Managing HR intelligently and efficiently is very important, and when outsourcing be careful to associate with a service provider that can offer the right mix of services. You may choose to outsource part of your HR requirements, or the entire HR functions.