What Is HR Outsourcing?

Outsourcing any activity to an external provider, including HR, can benefit companies because they can save time and have access to expertise. What is HR outsourcing, and how can companies benefit from it? What areas can be outsourced? 

Stay tuned as we have prepared an extensive guide on these topics. We will introduce HR outsourcing and explain how it works.

How Does HR Outsourcing Function?

So, what is outsourcing in HR? HR outsourcing refers to the practice when an organization hires a third-party organization to handle its human resources activities and administrative tasks. HR outsourcing is the process of receiving work completed by staff of another company. 

At CLICKVISION BPO, we view the essence of HR outsourcing as a strategic endeavor to elevate the efficiency of HR processes. This involves harnessing the expertise and resources of external partners to achieve substantial improvements. This allows organizations to focus on their core business processes while leaving the non-core HR functions in the hands of experts.

HR outsourcing functions through a collaboration between the organization and the external partner. First, the organization identifies the specific HR tasks it wants to outsource. These tasks include recruitment, onboarding, payroll, and benefits administration. Once the assignments are established, the organization negotiates the agreement with the HR service provider.

The next step involves merging the external partner with internal HR processes. This is done through technology, like cloud-based HR management systems. The organization and the service provider exchange information and collaborate on HR activities using the shared platform. For instance, if the organization seeks to hire new employees, it can post job openings on the shared platform. The service provider can work on the recruitment process. 

Benefits of HR Outsourcing

Outsourcing is not a novel concept, but the digital era has streamlined the process. Technological advancements have enhanced communication, data analysis, and IT services, fostering more seamless collaboration between service providers and organizations.

Now, let’s have a look at how you can benefit from HR outsourcing.

Saves time

HR outsourcing is time-saving. Outsourcing allows you to delegate the hiring process to an external service provider with the knowledge and experience to complete the task. An example of how HR handles this is by searching keywords through the resumes and then choosing the candidates to interview. You can approve the candidates before hiring them officially, or you can let the whole process go to the outsourced professionals.

Find the right people

One of the hardest parts of hiring is finding the best talents. Many resumes and motivational letters are perfectly written, but the candidates are not the best at work. Regardless of the job position, you want to make sure to hire the best candidates. Outsourcing HR specialists will help you get the best talents through thorough searches and interviews. This is a complex process; delegating to someone else will save you time and effort.

Reduces costs

As with anything outsourcing-related, outsourcing HR will also save you money. Since all service providers already have talented employees, you will save on hiring and training HR specialists. So you can use the saved money to invest in something else.

Quality control

Another advantage of HR outsourcing is that you no longer need to think about quality control. This will now be a task for the HR specialists. Besides hiring employees, your outsourced HR professionals will take care of the quality of your new team. So you can be sure that your operations and projects will run smoothly.

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Payroll administration

Payroll processing and administration is a common HR function that every company needs. For large enterprises, the payroll checklist is a full-time job. So, when you outsource HR, the external provider will manage this process, including benefit deductions, time-tracking, payroll tax filing, reporting, and more.

Training

Outsourcing HR can sometimes be more than hiring staff. These HR specialists can take charge of the orientation and training. So, once you start working with your new staff, they will be on board.

Flexibility

Remember that when delegating HR processes to an external HR team, they can handle all the demands and requirements of your staff. Besides time, you will save costs on handling these demands, and you can invest the saved money elsewhere.

Legal compliance

When you hire a new employee, you must deal with paperwork, which is time-consuming. 

On the other hand, the external HR specialists will handle these processes and reduce your responsibilities. They also follow and update you about the employment law.

Types of HR Outsourcing

Recruitment process outsourcing (RPO)

Recruitment process outsourcing (RPO) is a form of business process outsourcing (BPO). RPO involves outsourcing the recruitment and hiring process of an organization to a specialized external provider. This can include sourcing candidates, screening resumes, conducting interviews, and facilitating onboarding.

RPO providers often have candidate sourcing, talent acquisition, and recruitment technology expertise. They are important as they help organizations to find the best fit efficiently. Organizations benefit greatly from RPO, like improved hiring metrics, reduced hiring costs, improved hiring consistency, etc.

Payroll outsourcing

Payroll outsourcing is when an organization delegates a part of its payroll operations to a third party. This includes tasks like calculating and paying employee salaries, managing their taxes, and handling employee benefits. Besides payroll, service providers usually help with tax reporting, data security, unemployment claims, and regulatory compliance.

Outsourcing payroll services adheres to legal requirements, ensuring accurate and punctual payroll processing. This approach not only saves time and money but also allows organizations to concentrate on advancing their business. However, outsourcing payroll can have its drawbacks, such as potential data security risks and less direct control over the payroll process.

Total HR outsourcing

In this outsourcing model, the service provider takes charge of the entire HR function. Your organization won’t maintain a separate HR department; instead, you’ll have HR professionals who also serve as strategic advisors. Total outsourcing stands out as the prevalent form in the outsourcing landscape.

Total HR outsourcing may involve multiple HR functions, like HR administration, talent management, training and development, and payroll processing. So, if you choose to do total outsourcing, you will pass over the control and administration of your activities to a third provider for a set period of time.

This allows organizations to spend more time on core business activities while outsourcing the management and administration of HR-related tasks to an external provider.

Areas of HR That Can Be Outsourced

Organizations can dedicate time to more important in-house operations when delegating the following HR areas to a third-party service provider.

HR administration

Administrative functions usually include transactional duties, like employee development, hiring support, and offering opinions on policies and procedures. Most HR outsourcing services provide tools, like self-service portals, that help manage HR functions.

Payroll

Payroll functions include tax filing, payroll setup, processing payroll cycles, time and attendance, payroll and paid time off (PTO), and sick and vacation leave reporting. Yet, it is important to make sure that you outsource these functions to a reputable service provider.

Recruitment

HR outsourcing services have a big database of experienced professionals. They write job descriptions, post positions on job boards, review resumes, interview candidates, and prepare paperwork.

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Compliance and risk management

Compliance means ensuring that all policies and codes of conduct are met. Outsourced HR teams or professionals handle these duties. HR outsourced experts create employee handbooks and handle employee documentation and training programs.

Benefits

Benefits are any extra payments besides salaries and wages. This encompasses healthcare, retirement and pensions, and childcare. Outsourced HR specialists offer personalized benefits packages according to the client’s needs.

Recognition and rewards

Employees do not work only for salary. They also need rewards and recognition for their efforts and results. These programs are great for keeping employees motivated and usually include annual performance bonuses or work anniversaries. Yet, creating these types of programs is time-consuming, so HR outsourcing can greatly help you. 

While recognition doesn’t require a budget, a small note or a social media shout-out suffices. HR teams must be mindful of when and whom to recognize. In contrast, rewards are concrete gifts, varying with factors like job performance, position, and experience. These tangible rewards can range from sports tickets to bonuses.

Conclusion

To conclude, what is HR outsourcing? Human resource outsourcing is the practice of outsourcing HR activities to an external provider. Some businesses decide to outsource almost all activities, while others outsource only some of them, like payroll or recruitment.

Nonetheless, you can outsource areas like HR administration, payroll, recruitment, compliance and risk management, benefits, and recognition and rewards.

Finally, you can benefit from HR outsourcing by saving time, reducing costs, finding the right employees, and delegating training, quality control, and payroll to your external service provider. While we focus on your less essential operations, you can focus on something core in-house. This collaborative approach ensures mutual benefits for both parties.