Outsourcing HR Business Processes

by | Last updated Jan 12, 2024 | Published on Nov 6, 2015 | Business Process Outsourcing

Outsourcing HR Business ProcessesToday, organizations’ investment in business process services has increased drastically. This is mainly because of the need to improve efficiency and customer service, enhance employee productivity, reduce cost and optimize business processes. Outsourcing is an effective way to capably handle each and every core HR function. HR BPO is growing because of certain specific reasons such as:

  • Rising demand for easily deployable global payroll solutions
  • Increased customer involvement from the small and medium business market
  • Increased regulatory concerns and requirements, especially with regard to benefits administration
  • Changes in the present economy

HR business process outsourcing occurs when a business instructs an external supplier to take responsibility for its HR functions and perform these tasks. The external agency assigns manpower and specialized entities to perform specific tasks within the organization. They ensure quality service, improved administrative functions and productivity at low cost. Typically, human resource processes include the following multiple functions.

  • Payroll Processing
  • Benefits Administration
  • Hiring and Recruitment
  • Education and Training
  • Personnel Administration
  • Health and Welfare Administration

Anything that can be put into a service center can technically be outsourced. Insurance companies and banks for instance, find it advantageous to outsource payroll, and accounts payable and receivable processes. A 2012 FSOkx survey found that 37% of the BPO by banks and insurers focused on the middle office including trade support, risk management and reporting solutions, and a further 30% came from banking/product administration processes.

BPO in an insurance company facilitates standardized and streamlined back office processes, managing customer interaction, front office operations and so on. Carriers can speed up their time to market and deploy services and products across new geographical regions and new channels. Moreover, companies get to lower costs while providing better customer service to existing as well as new policyholders. The practice of outsourcing is gaining momentum in the insurance sector with carriers looking to improve operational efficiencies and enhance growth opportunities.

Outsourcing HR functions will have the following benefits:

  • Minimize exposure to risk and compliance regulations
  • Reduce the cost of administration
  • Improve efficiency
  • Focus on more strategic tasks
  • Benefit from state-of-the-art technology platforms
  • Streamline processes and improve overall business operations
  • Manages employee performance and development

In spite of these many advantages, some companies still hesitate to outsource their HR functions. They use some strategies when processing HR activities in-house like centralizing operations or shared service structure. Performing HR functions in-house is mainly done to reduce cost but this may lead to poor performance, is more time consuming, involves more costs, and employees will have multiple tasks to take care of, which will lead to inefficiency in employee output. Therefore, to ensure better performance companies can consider outsourcing their HR functions to a reliable HR BPO service.

Access to new technology, ensuring risk management and compliance, and reducing operating cost should be the principal market drivers for a company that chooses to outsource. When selecting an outsourcing partner, it is important to ensure that they have a proven track record, guaranteed service level required, flexible contracting, previous experience and grade of specialization. Such a partnership will prove to be beneficial for your company.

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