Will outsourcing your HR activities benefit your business? Or are you better off keeping it in-house?
We’ll try and help you answer that in this article.
We’ll cover everything you need to know about Human Resource Outsourcing (HRO) to help you make the best decision for your business.
Here’s what this article contains:
- HR BPO FAQs
- What HR services can you outsource?
- The benefits of outsourcing your HR process
- The risks associated with outsourcing HR activities
- The best HR BPO Vendors
Let’s get started.
Frequently Asked Questions About HR BPO
Before getting into HR business process outsourcing, let’s go over the concept of BPO first:
A. What Is BPO?
Business Process Outsourcing (BPO) is a process where a company outsources its non-core activities to a third-party. By delegating these non-core activities, the company has more resources to focus on their core competencies.
B. Who Do You Outsource To?
Usually, companies outsource to third-party companies in foreign countries with lower wage rates to save costs. However, you can also outsource to third-parties in your own country itself.
Recently, companies have even started to outsource activities like data entry and billing to independent freelancers as opposed to companies.
C. What Is HR Business Process Outsourcing?
HR BPO is the process of outsourcing your HR activities to specialized HR BPO vendors. These vendors will handle the HR activities you choose to outsource – giving you more space to focus on your core business activities. Some of these tasks include:
- High-volume recruiting.
- Payroll and benefits administration.
- Developing and implementing training programs.
D. What are HR BPO Vendors?
A human resources business process outsourcing vendor is a business that provides HR solutions to their clients. They can handle just a few of your HRM tasks or even manage all of your human resources functions – depending on what you want.
There are largely two types of HR BPO vendors:
- Human Resource Outsourcing (HRO) firms
- Professional Employer Organizations (PEO)
Here’s how these two vendors differ:
1. Service Set-Up and Decision Making
HRO providers help with tasks such as payroll, taxes, and talent recruitment. The workload they handle is largely fixed and you’ll still retain control of all major HR admin decisions.
PEOs take over your business’ entire HR process. They do everything from hiring to training and performance management. If you outsource to a PEO, they’ll be in charge of major HR decision making processes.
2. Taxes and Legal Compliance
HROs are service providers to your business – they’re not fully-fledged employees of your company. They simply perform the tasks assigned to them and charge you a fee. You’ll have to handle all the tax and legal implications resulting from your HR activities by yourself.
As PEOs take complete control of your HR processes, they can also file the taxes related your HR activities. They can also manage any legal issues surrounding your HR functions.
3. Employer Status
HRO vendors engage in a client-provider relationship with your business. They’re not employees or co-owners of your business. They deliver a service for a fee but do not interfere with your business decisions.
A PEO’s integrated role with your business makes them an extension of your firm – taking over all your HR data and responsibilities. They usually play a major role in your HR-related business decisions.
What HR Services Can You Outsource?
There are tons of HR activities that you can outsource. Here’s a closer look at some of the most commonly outsourced HR activities:
1. Payroll and Tax Administration
What’s the most painstaking part of HR administration?
Dealing with countless tax and legal obligations.
Whether it’s managing income taxes or handling employee issues – there’s a lot of tax and legal work involved in HR. As these are such vital activities, you’ll need someone with prior experience and formal training to handle this.
Instead of trying to manage these activities in-house and risk overworking your team, why not outsource it?
HRO vendors help companies manage their taxes and payroll by:
- Paying employee salaries, benefits and relevant taxes.
- Filing taxes and other documentation with authorities.
- Resolving issues that arise regarding employee salaries, benefits and taxes.
This saves you the time and effort of managing all of this by yourself!
2. Recruiting Talent
Your staff will make or break your company.
So it makes sense that you hire the best, right?
You need expert recruiters to thoroughly find and screen candidates that apply. The problem is, most companies let their senior managers handle recruitment activities.
While there’s nothing wrong with letting managers in on the hiring process – they’re not experts in the field and may already be overworked.
Instead of this, why not outsource your recruitment activities to a dedicated HR BPO firm?
They have all the expertise needed to carefully sort through candidates and find the best ones. They can manage tasks like:
- Advertising vacancies.
- Filtering applications.
- Conducting interviews.
- Negotiating offers.
In addition to recruiting, HRO vendors can also train new hires to help them integrate quicker.
3. Complete HR Outsourcing Solutions
Many companies hire HR BPO vendors to help them with specific HR activities to reduce their workload.
But what if you’re a small business who needs a global HR overhaul?
HR BPO vendors can also overtake your entire HR process to lessen your workload. They’ll plan your HR business strategy, detailing how you should approach the entire HR process. These plans cover your entire HR delivery model, from employee benefits administration to maintain legal compliance.
This saves you the trouble of conceptualizing and implementing everything on your own!
Benefits of Outsourcing Your HR Process
There are tons of reasons why you should outsource your HR activities. Here’s a closer look at them:
1. Cost Savings
What’s the #1 reason why businesses outsource?
To save a ton of money.
By outsourcing services, you no longer have to manage things in-house. This will reduce your payroll expenses and the money spent on training your staff. Often, companies also outsource to countries with lower wage rates to save costs.
For example, if you’re a company based in the United States, you can outsource your HR work to service centers in the Philippines. This allows you to access top-quality talent at a fraction of the cost!
Additionally, most HR BPO firms adopt a shared service model where they handle tons of clients. This allows them to acquire more cost-effective plans for their clients- such as lower insurance premiums.
2. Reduces the Legal Hassle
It’s no secret that HR involves tons of legal paperwork.
As this can be complicated, you need a dedicated team to handle it.
Remember, any hiccups here can lead to penalties – and even lawsuits.
Instead of keeping a dedicated team on your payroll, why not simply outsource the activity?
As this outsourced team is made up of experts, you won’t have to worry about any mixups taking place. They can easily handle all your HR paperwork and file it for you!
3. Prevents Overworking Your Employees
Most in-house HR teams handle more work than they’re hired for. Whether it’s additional administrative work or working with another department, the scope of their workload isn’t well-defined.
The problem with this approach is that it can overwork your employees. As they’re forced to handle so many different things, they won’t be able to focus on their core HR work.
That’s why it makes sense to outsource your HR activities to dedicated HR professionals in a BPO firm. As this is all they’ll be focused on, you won’t have to worry about overworking them.
Risks Associated with Outsourcing HR
While outsourcing your HR activities can help you, there are a few risks involved:
1. Employee Resistance
One of the key benefits of having a built-in HR department is that all your HR issues are kept in-house.
Whenever an employee has an issue, they can go to your company’s in-house HR department and get it resolved.
But what happens if you outsource your HR?
As you don’t have an in-house HR team, your employees are forced to go to an external party to deal with their issues. This issue is magnified by the fact that most HR issues are personal – such as problems with coworkers, bosses, workloads, etc.
Most employees are uncomfortable talking about these issues with an external party for privacy reasons. Some may even be apprehensive because they don’t believe an external party will understand their perspective as well as an in-house team.
2. Potential Confidentiality Issues
Your HR department handles tons of sensitive information such as:
- Employee complaints.
- Their personal information.
- Their financial records.
Naturally, keeping all this information confidential is essential. You can’t afford to let this information reach the wrong hands, right?
The problem is, when you outsource your HR activities, a third-party gets access to these sensitive records. While most HR BPO firms are incredibly trustworthy, sharing anything outside your organization always carries risk.
This can increase your chances of a data breach that could compromise your company’s and employee’s security.
3. Inability to Monitor Your HR Activities
The problem with outsourcing any activity is that it’s incredibly difficult to monitor what’s going on.
Think about it.
When you run an in-house team, you’re able to monitor their work constantly because they’re in the same office. But when you outsource, you’re handing your work over to an independent HR BPO agent that could be thousands of miles away.
This can make it difficult to know:
- How productive your outsourced team is.
- If they’re focused during work hours.
- If they’re billing you accurately.
Luckily, there’s a solution to this BPO monitoring problem.
All you have to do is use performance monitoring tools like Time Doctor!
Time Doctor is a powerful performance monitoring tool used by companies like Verizon, PwC and Apple that can help you monitor your outsourced HR staff.
The software can help you keep track of what tasks your outsourced team is working on and the hours they have dedicated to each task.
This is especially useful if you are outsourcing your HR operations to a small company or independent freelancers.
Here’s a closer look at how Time Doctor can help you:
1. It Helps Your Outsourced Staff Easily Track Their Activities
You won’t be able to monitor your outsourced staff if they don’t use your monitoring tool in the first place, right?
That’s why TimeDoctor is super easy to use.
All a user has to do is:
- Open the application.
- Type in the task they’re working on.
- Start the timer – where the app will track time quietly in the background.
- Pause the timer when they’re done.
It’s that simple!
2. Powerful Reporting To Keep Track Of Your BPO Activities
Time Doctor has tons of detailed reports to give you a real-time look at your outsourced staff’s productivity. Here’s a brief look at them:
- Timesheet Report – Shows you the time worked by all your outsourced staff within a given time frame.
- Time Use Report – Breakdown of the time spent on all tasks by a single staff member.
- Timeline Daily Report – Chronological breakdown of time spent by a staff member on a given day.
- Projects Report – Shows you who worked on your projects and for how long.
- Web and App Usage Report – A breakdown of each app and site accessed by someone during work hours.
- Poor Time Use Report – Highlights any unproductive apps & sites accessed by someone during work hours.
3. Can Manage Distractions Efficiently
As HR work is incredibly important to your company, you need your outsourced staff completely focused on it.
You can’t have them browsing Facebook while dealing with employee complaints, right?
That’s why Time Doctor has built-in distraction management features.
Whenever a user opens an unproductive site or app while working, a popup asks them if they’re still working. This is usually enough to get distracted workers back on track.
The Best HR BPO Vendors
Here are the best HR BPO vendors on the market today:
1. Aon Hewitt
Aon Hewitt is a human capital and management consulting firm founded in 1940. It’s headquartered in Illinois and has a presence of 500 offices spanning 120 countries.
Key HR BPO Services:
- Talent Management
- Payroll services
- Retirement plans
- Health and Benefits
International Business Machines (IBM) is a multinational information technology company operating in 170 countries and employing over 350,000 people.
Key HR BPO Services:
- Cloud HR services
- Artificial Intelligence-based recruiting
- Talent development
3. NorthgateArinso (NGA) HR
NGA HR operated as Arinso from its founding in 1969 until its acquisition by Northgate in 2007. NorthgateArinso operates in 35 countries across five continents and employs over 4,500 workers.
Key HR BPO Services:
- Payroll outsourcing
- HR as a service software
- HR analytics
4. Automatic Data Processing (ADP)
ADP is a provider of human resource management software and HR technology solutions. They employ around 57,000 people and operate globally.
Key HR BPO Services:
- Global payroll
- Tax services
Outsourcing your HR activities is a great way to save costs and increase efficiency. It allows you to focus on your core competencies while simultaneously giving your HR activities the attention it deserves.
With tons of capable outsourcing options available today, you’ll have no trouble finding one that perfectly fits your needs!
Lauren Soucy is the VP of Marketing for Time Doctor, the world’s leading time tracking and productivity software. She has 15+ years of experience in marketing at fast-paced companies. Her first passion is SEO, she can’t start her day without coffee, and she enjoys spending time at the beach with her two boys and her husband.