A human resources (HR) department handles essential business functions that keep your company running smoothly. Employee recruitment, payroll processing, and maintenance of company processes are just a few of the responsibilities that your human resources department manages on a daily basis. Having a stable human resources team will allow your business to expand while maintaining current employee satisfaction.
However, not every business has the resources for an in-house HR department. Fortunately, there are options available that will allow you to accomplish the tasks needed, such as outsourcing your HR responsibilities. Read on to learn more about human resource BPO outsourcing and why this may be the ideal solution for your business.
What Human Resource BPO Outsourcing Means
Human resource outsourcing — or simply HRO or HR outsourcing — entails sub-contracting functions in the HR department to an external provider either onshore or overseas. HR outsourcing has become popular as it streamlines business processes and makes them efficient and less costly.
As companies continue to outsource their non-core activities, HR as a nonprofit center is a perfect candidate to be passed on to third parties.
Benefits of Outsourcing HR
HR business process outsourcing is a major decision that can also expose a business to new risks. For the companies trying out HR outsourcing for the first time, the process can be a potential cause of jitters. Nonetheless, it is vital to note that outsourcing your HR tasks provides companies of all sizes with an opportunity to:
- Reduce costs
- Increase efficiency
- Access high-level HR expertise
- Access better HR IT systems
Partnering with an HR outsourcing provider such as C9 Staff’s HR outsourcing services can take your human resource functions to a new level. Some of the things that you can pass on to an HR outsourcing firm include tax administration and payroll services, recruitment, health insurance options, retirement plans, and other strategic tasks.
Firms that outsource experience a wide range of benefits. Their growth rates can be 7% to 9% faster compared to other firms, employee turnover can be reduced by 10% to 14%, and administrative costs can be reduced by as much as 40% to 70%, depending on the location to where you outsource. The right human resource BPO partner will deliver top-notch skills, timelines, and significant cost savings to your company.
Potential Risks of HR Business Process Outsourcing
While outsourcing HR has many benefits, it is not without its share of risks. You might want to consider these scenarios before making a decision:
1. Employees are resisting the change.
One of the greatest benefits of having an in-house HR department is accessibility and privacy. When an HR issue erupts, most companies prefer to keep issues quiet and discreet. When the HR unit is outsourced, staff might not feel comfortable with reaching out to somebody from outside of the company, especially since the majority of HR concerns are sensitive and personal.
2. You can’t monitor HR activities all the time.
If you outsource HR to a third-party provider in another country, or even just to another city within the U.S., you can’t immediately check what people are doing compared to having an HR team in-house. When your HR department is located miles or time zones away, it can be challenging to monitor work hours, productivity, and billing accuracy — just to name a few. One way to solve this when you have remote teams is to use time tracking and performance management software.
3. Confidentiality might be compromised.
HR departments handle sensitive information about the company and its employees, including personal details, financial records, employee complaints, and other potentially incriminating data. If this falls into the wrong hands, the entire office could get in trouble. While HR BPO providers ensure confidentiality and data privacy in their contracts, sharing information with a third party always comes with some level of risk.
4. There might be issues with compliance and service levels.
Determine the compliance services to be provided by the HR outsourcing vendor. They must be familiar with and completely meet your company’s legal obligations where you operate. In addition, you might have different interpretations of service levels, so it’s best to layout everything in black and white on the contract. Both parties must be 100% aware of the scope and limitations of the HR outsourcing services delivered.
5. Process conflicts may arise.
The human resource BPO provider may carry out tasks in a way that differs from the processes that your company is using. During the discovery process, you must be upfront and clear about how your company wants things done. However, you should also listen to recommendations from the HR BPO company to determine what will work best given your new agreement. HR BPO providers are experienced in their field and will know what works and what doesn’t.
Human Resource BPO Outsourcing: Step-by-Step Guide
Considering HR business process outsourcing? Here’s a step-by-step guide to help you start off on the right foot.
1. Identify your HR outsourcing goals.
Evaluation involves first analyzing how the entity is currently handling HR functions and to identify the gaps that may exist in the organization’s HR department. The second step is defining your HR outsourcing goals and how this will benefit the organization. As a business owner, it is recommended to first familiarize oneself with outsourcing trends and how they could affect your company and your industry. Don’t just get carried away by the HR outsourcing hype and get into the transition blindly.
Timing is crucial, and third-party advisors can help you identify whether or not it is the right time for the firm to embrace human resource BPO services. This can be done by analyzing data and financial projections. Some of the questions that can help identify if it is the right time to outsource HR include:
- Does the current organization’s situation merit HR outsourcing?
- What type of outsourcing solution will best fit the organization?
- Can the HR provider meet all of your company’s needs?
- Can the transition to outsourcing be carried out without disrupting current operations?
2. Identify the functions to outsource.
Companies may choose all or a limited mix of functions for outsourcing, such as payroll, benefits administration, and recruiting.
Selective outsourcing is the most popular practice, enabling an organization to delegate only transaction-oriented activities. Some of the HR functions that are popularly outsourced include:
Outsourcing compensation functions such as payroll, salary surveys, job evaluation systems, and executive compensation plans may be in the form of:
- Single-process outsourcing: The company picks one vendor to conduct all its compensation administration.
- Integrated HR outsourcing: Both compensation and workforce administration are outsourced.
- Point solutions: The vendor provides compensation administration as well as call center support.
Functions such as maintenance, development, and operations of HR IT systems are outsourced.
This involves outsourcing recruitment to obtain top-quality talent vital for the success of the firm. With recruitment-process outsourcing (RPO), the vendors turn firm-fixed expenses into variable expenses to help the company generate cost savings.
3. Identify the organization to outsource HR functions.
There are four main types of HR outsourcing organizations. To whom can you outsource?
Business process outsourcing (BPO) is a broad term for all outsourcing categories, including HR. The biggest benefit to BPO is that it applies new technologies to improve processes. In HR, a BPO provider will ensure that an organization’s HR system is complemented by the latest technologies; for instance, HR data warehousing or self-access.
C9 Staff is a perfect example of BPO in Manila, Philippines. Due to the high demand for Call Center Talent Outsourcing Services, Digital Marketing Talent Services, and Executive Head Hunting Services, C9 Staff continues to serve a diversified range of companies abroad and at home. The company is well-positioned to move with the latest business trends and respond to changing needs, especially in HR outsourcing. As a BPO, you can get all your HR functions outsourced to a single provider.
Professional employer organizations (PEOs) take the entire responsibility of your small to mid-sized company’s HR administration. PEOs take legal responsibility, including being in charge of the hiring process, contract termination, and employee compensation. A PEO is, therefore, a partner because they handle all the HR aspects. The only unique feature that differentiates PEOs from the other three vendors is that they take care of legal concerns.
A human resource organization (HRO) helps large businesses with 1000+ employees to pick the services they would like to outsource. The HRO has a co-management relationship with the business, regardless of the services delivered, and, therefore, takes full responsibility for all HR functions.
An administrative services organization (ASO) is a vendor that provides administrative services. These include filing payroll taxes, payroll processing, and performing direct deposits. ASO serves businesses with 50 or more employees. Other functions include safety management, compliance, payroll, worker’s compensation, and pension administration.
4. Screen the service provider.
What are the factors to consider in a service provider? Here are a few considerations:
In outsourcing HR, there is the risk of delicate information leaking out. Ask for references from past clients when considering your hiring decision.
It is vital to outsource your HR activities to a vendor that has experience in your industry. This is because they are in a better position to understand your requirements and provide relevant solutions. However, do not go for a firm that hosts your immediate competitor. This will help you to avoid more business rivalry and other conflicts.
Select a service provider that is almost your size. Human resource BPO providers maximize their revenues based on the number of staff assigned to your company. If they have the capability to work with bigger companies, where they earn more, there is a possibility that they will give your firm limited attention. With that said, if you’re a small firm, hire a small vendor that can give you lots of love.
5. Read your HR outsourcing agreement carefully.
At this stage, HR professionals must be fully aware of relevant issues and business goals to negotiate an optimal outsourcing agreement.
One of the contracts in this deal is the master services agreement (MSA). This is an outsourcing agreement that ensures compliance with a nation’s legal requirements and business operating guidelines. A business process outsourcing (BPO) service agreement specifies the fundamental contract terms and conditions.
When human resource outsourcing, an organization can choose whether to use a BPO or MSA agreement. The agreement must, however, cover service level fundamentals, pricing, exit plans, and other additional contract terms.
6. Begin the transition.
At this point, the outsourcing provider and the company must acknowledge that the probability of failure is very high. The third party must select a transition management team to control the deliverables and the scope of outsourcing, enabling it to take point during the entire transition process.
The benefits of the outsourcing relationship between the company and the provider are realized through the complete implementation of the terms of the agreement.
The company that is outsourcing HR tasks must ensure that:
- The transfer of activities to the outsourcing service provider is transparent.
- There is minimal to no disruption of current project activities.
- Work procedures and practices are established.
7. Manage and maintain business relationships.
Outsourcing HR can involve significant spending, but working with an experienced and trusted service provider can save the company money in the long run.
With that said, the company engaging in HR outsourcing must establish a collaborative way of working with the vendor to ensure trust and open communication. Lay down all the expected benefits, targets, and KPIs, and embrace practices proven to offer successful outcomes.
The HR outsourcing provider’s role goes beyond resolving problems, delivering payroll services, and approving payments. An organization must understand how the third-party works to offer consistent direction when it comes to meeting the obligations specified in the contract.
Make HR Outsourcing Easy With C9 Staff
HR business process outsourcing need not be a complicated endeavor. While it’s perfectly fine to get this done on your own, it will be much safer, more efficient, and faster if you have experienced HR outsourcing specialists to do it for you.
C9 Staff has a wide network of skilled HR professionals and teams from all over the world to fulfill the duties you need. Our end-to-end offshoring solutions give you access to expert insight and ensure that every crucial step to outsourcing HR successfully is covered. In this way, you worry a lot less about HR and focus your energies on growing your business.
Is your organization looking to get into HR outsourcing? Get in touch with C9 Staff today to learn more about how our HR BPO services can help you.