Today, organizations’ investment in business process outsourcing 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. Utilizing business process outsourcing services is an effective way to capably handle each and every core HR function.
The outsourcing of HR has accelerated over the last decade and will continue as such, as it allows companies to reduce the burden of doing tasks that are not part of the core activities. 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. HR functions do not end with finding, recruiting, training and retaining selected people, but also include managing benefits, compensation, employee and labor relations, data capture, and legal issues.
The common functions in HR assigned to a BPO company include:
- Payroll Processing
- Benefits Administration
- Hiring and Recruitment
- Education and Training
- Personnel Administration
- Health and Welfare Administration
Rise in HR Outsourcing
According to a Market Research Future study, the global HR outsourcing market is expected to increase at a rate of 11% each year between 2020 and 2027. It is projected that this growth trajectory will result in a $45 billion market value. According to Deloitte’s Global Outsourcing Survey, 85% of businesses have outsourced at least one HR function. This suggests that HR outsourcing services are widely accepted and trusted.
These figures demonstrate how important HR outsourcing services are to today’s corporate environment. They also highlight the industry’s growth potential and opportunities, which makes it a field worth looking into for companies that want to improve their HR administration.
Here are some of the reasons why HR BPO is growing:
- 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
The Importance of HR Outsourcing Services for Businesses
The primary driving force behind outsourcing is the prospect of cost savings. Instead of maintaining internal HR staff, businesses can save money by outsourcing HR activities. Having access to resources and professional knowledge is another important advantage of HR outsourcing services. This might be very beneficial for small and medium-sized businesses who don’t have the resources to recruit HR specialists with advanced qualifications. Additionally, HR outsourcing services can assist companies in maintaining regulatory compliance. This is essential for preventing legal problems and preserving the good name of the business.
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 using a shared service structure. Performing HR functions in-house is mainly done to reduce costs 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.
HR outsourcing is beneficial and that accounts for its popularity. Here is a look at the types of businesses that can benefit considerably 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.
- HR Outsourcing 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 labor laws like Affordable Care Act (ACA) and Fair Labor Standards Act (FLSA).
Access to new technology, ensuring risk management and compliance, and reducing operating costs 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.
Choosing the Right HR Outsourcing Services
Businesses should be careful while selecting a service provider. Problems may arise, if the vendor is interested in maximizing their income and lowering their cost, without being concerned about the clients. Reliable outsourcing partners can provide assistance for the entire lifespan of the employees, i.e. from the recruiting and selection process to any terminations and exit interviews. Check for the following capabilities while selecting an HR outsourcing firm:
- Whether they can provide reliable and dedicated payroll and tax administration services.
- Whether they can provide performance management features such as measures of goal setting, departmental tracking, annual/semiannual performance interviews, and so on.
- Whether the professional team is up to date with the latest trends and regulations.
- Check for their customer service by consulting with their existing clients or through adequate research.
Unlock cost savings and specialized expertise by outsourcing your HR activities to us.
HR Functions Outsourcing for Small and Medium-sized Businesses
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. HR outsourcing to a reliable provider of business process outsourcing services is now regarded as a necessity rather than a luxury in the modern workplace. Among the many outsourcing benefits are cost savings, the availability of specialized knowledge, and guarantee of compliance. Businesses must carefully select their HR outsourcing provider and manage risks in order to reap these benefits.
