Streamlining HR processes is the prerequisite to a company’s success because your employees are the ones who help your business grow. Any company needs to pay sufficient attention to its human resources or hire specialists to handle this task. If you bring focus to this area, it’ll be easier to retain and motivate employees, attract top-tier talent, follow the rules and regulations, and effectively manage performance.
But what if you don’t have enough time/resources to facilitate your HR processes?
That’s when HR outsourcing comes into play. It frees up time, allows you to focus on core business goals, and improves the overall working environment.
Want to know what is outsourcing in HR and how you can benefit from it? Wondering why it is such a hot topic nowadays and whether all the stereotypes about it are true?
HR Bit has your back! We address all the topical questions in this article, so let’s get the ball rolling.
What is Outsourcing in HR?
We should start from the basics, so what is HR outsourcing?
HR outsourcing implies hiring a third-party company (vendor) to manage some or all of your human resources tasks. This helps businesses facilitate their performance and unleash their employees’ potential.
Usually, the partner company takes care of time-consuming and not strategically vital tasks while the business focuses on its growth and core services.
What are HR outsourcing services the companies usually transfer to external organizations? Recruitment and staff training, payroll and compensations, employee benefits, and performance management are just some of the HR functions you can outsource.
Around 76% of the companies outsource their HR services, so it’s no wonder that human resources is the most commonly outsourced function. About 80% of the respondents also mentioned they’d opt for HR outsourcing again. This makes the growth of the HRO market incremental, which is expected to reach the value of $29,9 billion by 2025.
The statistic speaks for itself. HR outsourcing attracts more and more businesses that aim to decrease their expenditures while staying on top in a competitive market.
Besides, paying less doesn’t always mean getting services of poor quality. In reality, it’s about optimizing the costs and leveraging novel benefits that positively impact employee motivation.
If you hire HR outsourcing specialists to handle these tasks, you won’t have to deal with chunks of routine work that don’t bring direct receipts. It’s a win-win because you get more time, avoiding the repetitive tasks, while your employees are taken care of and enjoy working at your company.
Sounds compelling, right?
Now it’s time to find out “what are HR outsourcing services and which ones can I introduce into my company?”
What HR Services Can be Outsourced?
As mentioned in the HR outsourcing definition, your partner company will manage certain human resources functions, which usually depend on your needs and the vendor’s specialization.
Before outsourcing, you should consider some factors, such as business goals, culture, size, and location, to name a few. The organizations outsource 1% to 100% of their HR services depending on the mentioned aspects.
The most common areas of HR that are often outsourced include (but aren’t limited to) the following:
- HR Consulting
- Remote Recruitment
- Payroll Administration
- Benefits Administration
- Insurance Services
- Performance Management
- Time Tracking
- Bookkeeping
- Accounting
- Employee Termination
Now, let’s take a closer look at the most popular HR outsourced functions:
Recruitment
Selecting and hiring employees is a tedious task because you have to go through numerous CVs and interviews. These processes take considerable time slots and hinder addressing core business tasks.
If you have an outsourced HR manager, they will take care of all the resumes and pre-screening to exclude unfitting candidates. In this way, you’ll interview only those who match the requirements.
Also, the outsourced HR specialists could leave feedback about each selected candidate and point out critical points (e.g., experience, skills) to streamline the interviewing process.
So, you’ll be the one to choose who makes it to the job offer and be confident in your team while not worrying about onboarding, legal stuff, and other routine tasks.
Payroll Administration
Payrolls are tricky. Taking care of the invoice checklist is a full-time job itself, and when you have other jobs to do — it turns into a wild ride. As we’ve already addressed “what is outsourcing in HR,” you can understand that your partner company will handle all the payroll aspects, including time-tracking, benefits, taxes, and distributing payments.
This will free up a considerable chunk of your time, allowing you to focus on your business growth strategy.
Employee Benefits Administration
As mentioned in the “what is outsourcing in human resource management” block, an HR outsourcing company will introduce high-quality and competitive benefits for your company. In this way, you’ll be able to attract top talent, match employees’ needs by providing them suitable health and financial benefits, and keep the retention rates high.
Your HR partner will offer you a list of benefits to choose from and help you in administering your custom employee benefits program.
The benefits vary greatly, including such components as access to various types of insurance (e.g., health care, dental, life), onsite assistance, unemployment claims administration, COBRA administration, 401(k) plan and administration, and others.
Staff Training
What is outsourcing HR training and development? It’s about helping the employees focus on advancing the skills they lack and increasing their qualifications. The remote HR managers help point out employees’ strengths and weaknesses, as well as hard and soft skills. After receiving the results, they develop certain training and development plans to bridge the skill/knowledge gaps.
Companies that pay attention to employee training and development programs see higher profitability because their workers are more satisfied with their jobs. Also, your specialists will hone their skills and become suitable for new roles and possibilities.
Your HR outsourcing vendor will make sure these development programs are beneficial for your business by designing plans that match the organization’s overall goal. In this way, your employees will become more competent and goal-oriented, turning into reliable assets for your company.
Employment and Labor Law Compliance
The regulations in most countries are constantly changing. New laws are passed or amended almost every week, making it hard for the companies to follow all the updates and comply with them. An outsourced HR provider will take on this responsibility by tracking all the changes and making sure your business is compliant with the federal, state, and local workplace requirements.
The outsourced HR firm could provide guidance on laws and leave policy, wage requirements, and anti-harassment training, to name a few.
Performance Management
Helping the employees unleash their skills and use their knowledge to the fullest helps companies grow. For example, various activities, such as performance reviews, ongoing feedback, identifying employee skills gaps and talents, and goal management, significantly increase job satisfaction and engagement.
You won’t have to guess what activities fit your employees because your HR outsourcing partner will seamlessly introduce several strategies that will be a perfect fit and boost the results.
Besides, this will make your employees feel valued, hence empowered. Such workers will inspire their colleagues to unlock their full potential.
This also includes fair compensation based on the average numbers in the area and regular salary reviews.
What is HRO’s Set of Advantages?
What’s great about HR outsourcing is that there are no strings attached. You just pay for the service and get it. You can start or end the cooperation whenever you need. At the same time, having a remote HR provides multiple benefits because your employees are in the good hands of skilled HR managers.
Also, having such a specialist in your company allows you to get some valuable insights because an HR manager will have a fresh perspective on the business environment.
So, you get a hassle-free employee experience with HR outsourcing. What is better — spending long hours and considerable sums on trying to boost your human resources and ending up with no growth or hiring outsourced HR specialists that will address these issues without a hitch? We bet it’s the second option.
The major benefits of HR outsourcing include:
1. Cost-Effectiveness
If you were to ask some business owners who have already opted for this solution, “what is HR outsourcing’s main advantage?” they would have said it’s spending less and saving more. For example, if you’re a startup, it’s too risky to have just one person to handle the recruitment, benefits, and payroll. But establishing a whole department is too pricey.
When hiring HR outsourcing specialists, you save costs on their salaries, benefits, and office rent. The average HR manager salary in the US is $80,000–$107,000, while an outsourced specialist charges about $30,000–$60,000.
So, instead of having individual departments that handle different tasks, you just outsource them to HR professionals. Among other things, they’ll take care of payroll management, which is tricky enough if you aren’t familiar enough with all the procedures.
Also, outsourcing recruitment and hiring are cost-effective too. Your HR managers will have access to professional applicant tracking systems, provide job description support, write job postings, and take care of testing and background checks. This will save a lot of your time, and time is money.
2. Time Savings
Lengthy HR processes take hours that one could have spent on critical business tasks. In addition, all the paperwork requires a lot of attention and time, turning the administrative work into a ground-hog day. Besides, if you lack expertise in certain aspects, be it compensation or training and development, handling all these processes takes even more time and resources.
So, what is a human resource outsourcing perk for the business? It’s significant time savings that result in increased efficiency and improved performance. You free up your working days once you outsource your HR tasks. It will help you optimize work schedules and focus on long-term goals.
3. Reduced Workforce Turnover
Bringing in the new talent and retaining the existing one is challenging, especially in today’s competitive labor market. So, employee relations are as critical as the benefits you offer. However, to manage the performance of each employee and give regular feedback, you need to spend your working hours on these tasks only.
It’s better to reduce this load because you won’t have the opportunity to address pressing issues, which might turn into big problems. And that’s when HR outsourcing steps into the game.
Your outsourced HR manager for hire will build trusting relationships with employees, gathering and providing feedback, and asking their opinions about workload or the updates you introduced. After having all the necessary information, your remote HR specialist will ensure you stay on the same page with your workers and are aware of their successes.
Employees that feel valued and included are more likely to stay at the company for longer. So, if you analyze all the received information and have one-on-ones with employees, this will boost their motivation, help them understand their strong and weak sides, and inspire them to achieve excellent results.
4. Access to Improved Benefit Packages
As mentioned in the “what is outsourcing in HR‘“ block, working with remote HR ultimately provides you with access to top-rated health benefits for your workers. Even if you have a startup or an SMB, you can leverage benefits similar to those offered by larger companies. You’ll get access to comprehensive coverage for a reasonable price, which will make your employees happier.
5. Increased Focus on HR Policies
You can significantly minimize risks when outsourcing HR functions. The federal and state regulations are constantly changing, and keeping up with them is complicated. But if the business is unable to adhere to the guidelines and changes, it might lead to non-compliance.
So, you can rely on your outsourced HR to keep up with the updates and check on your compliances in various critical aspects.
7. Improved Training and Development Opportunities
A one-size-fits-all development program won’t work for your employees because they all have specific preferences and approaches to studying. For example, some prefer taking a slower path, while others treat it as a marathon. And you have to consider these aspects if you don’t want to waste money on useless training plans.
Having outsourced HR by your side will make you more confident in your employees’ training and development activities because they’ll match their taste. Also, these programs will be customized to help each person fill in specific gaps and emphasize certain skills.
An individual approach will bring more benefit than spending money on a random, hyped-up program.
8. Access to Global Talent
You’re a professional in your business area, so you’d want your HR outsourcing company to match your level. Choosing a reliable partner company, like HR Bit, provides access to an experienced team of dedicated HR managers who know the HR industry from “A” to “Z” and help you handle complex tasks and make your business grow.
How Can HR Outsourcing Facilitate Your Company’s Development?
If you are a startup or SMB owner, you know all the challenges of such businesses. But, what is HR outsource’s role in helping companies do what they need to do instead of being scattered over thousands of tasks?
These are the examples:
You’ll Focus On Growth, Not On Administrative Tasks
If you and your employees aren’t HR experts, you’ll spend a lot of time beating around the bush and trying to understand endless regulations and requirements. But why do a blemish job if you can entrust HR functions to professionals? Outsourcing HR will add some free time slots to your schedule that you can use for strategic planning.
You’ll Take Care of Your Employees
The business fails if its employees don’t get enough attention. Therefore, the “human” element of human resources is critical. So, a professional HR outsourcing manager will surround employees with support and a bunch of morale boosters to make them feel appreciated.
You Won’t Have to Bog Down In Rules and Regulations
Did you know that local, state, and federal employment regulations change around 75 times a year? This makes keeping up with them a real struggle. Meanwhile, it’s a piece of cake for remote HR specialists, so why not outsource this function?
You’ll Optimize Spendings
In most cases, HR outsourcing vendors match business owners’ financial expectations, so this solution will optimize your spendings by using various approaches. Also, they’ll bring top-rated benefits and services and help you avoid penalty fines.
Debunking Popular HR Outsourcing Myths
If you’re pondering over outsourcing your HR services and can’t understand how it might affect your company, the following list of the most common concerns of having a remote HR vendor is for you.
“HR Outsourcing Services are Too Expensive”
Actually, most businesses outsource HR to reduce overhead costs and prevent penalties for compliance violations. Hiring in-house HR managers and setting up an individual department is several times more expensive than outsourcing human resources. Besides, outsourcing helps you achieve core business goals, which is a more money-making approach.
“HR Outsourcing Makes You Pay for the Things You don’t Need”
Many business owners believe they’ll get a bunch of useless features they don’t need but will have to spend a fortune on them. But that’s not true.
Top-rated HR outsourcing service provides, like HR Bit, consider the requirements of each business and create custom plans based on them. You pay only for the features you need. Also, if you want to outsource all HR functions — you can easily do this, and if you need help with one HR service — no problems as well.
“Outsourcing HR Services are Useless for a Small Company”
Both small and large companies have to deal with the same HR tasks — just in different volumes. You still need to engage your employees, provide competitive benefits, and manage payrolls even if you have one team. But with HR outsourcing, you get to work with experienced HR specialists that handle an array of tasks for the price of one full-time employee.
“A Large Company Won’t Benefit from Outsourcing HR Services”
Even flourishing, well-established businesses wouldn’t mind enhancing their HR processes and optimizing costs. Hiring an HR outsourcing company, such as HR Bit, will free up your time, prevent you from dealing with compliance issues, and minimize costs. Partnering with experienced remote HR managers is always a good idea, no matter how big or small your company is.
“HR Outsourcing Services Take the Control Away”
Our “what is outsourcing in HR” definition mentions that you can decide how many HR functions you want to outsource. Be it 1% or 100% — you’re the one to choose.
Since remote work is at its peak, having a remote HR is equal to having an in-house professional. Your partner company will be as interested in providing high-quality services as you are in receiving them. You’ll have the amount of control you want to have, discussing your preferences with the outsourcing HR company.
“I Don’t Need an Outsourced HR because I Can Handle HR Functions Myself”
Adhering to the usual way of things is fine, especially if it brings relatively desired results. But why shoulder the administrative burden if human resources aren’t your company’s primary area of interest?
Let’s put it this way.
If you need help with finances — you hire an accountant; if you need help with writing blog posts — you hire a copywriter; if you need to change your website’s appearance — you hire a designer. So, if you’re not an HR expert, it’d make more sense if you hire an HR outsourcing manager or a team of professionals, wouldn’t it?
Leverage HR Outsourcing Benefits with HR Bit
What is outsourcing in HR? Do I really need it? Is it worth the money? Will my employees benefit from it?
We hope we got these questions covered in this article and you won’t encounter them anymore.
HR outsourcing is a go-to approach for businesses of different sizes because, as they say, “modern problems require modern solutions.”
You won’t have to deal with a bunch of complex and time-consuming tasks if you have an outsourced professional. Also, your employees will get top-notch benefits and won’t lack motivation, while you’ll cooperate with well-performing and dedicated teams who won’t let you down.
Managing human resources isn’t that complicated if you have HR Bit as your partner. So, don’t hesitate to drop us a line and get a consultation call.
FAQ
1. What do HR outsourcing companies do?
HR outsourcing companies help businesses manage their human resources functions. They take care of payrolls, benefits, employee recruitment and selection, employee benefits management, payroll, taxes, retention, and training and development activities, to name a few.
2. Why is HR outsourcing important?
HR outsourcing helps companies manage their human resources functions more effectively and frees up their time. It also provides access to competitive employee benefits and allows them to cooperate with professionals who have sufficient experience in the field. In this way, your company increases its performance and delivers better results while keeping its employees happy and motivated.
3. Is HR outsourcing good or bad?
The advantages of outsourcing HR tasks include: making all the processes (from hiring to payroll management) more efficient, saving money, making your business more flexible, engaging experts to help your employees grow, improving employee experience, and providing better employee benefits.
4. When should you outsource HR?
You can outsource HR whenever you feel like your business needs expert help. For example, if having an in-house HR department isn’t cost-effective; your employees lack motivation and engagement; the turnover rates in your company are too high; you don’t have enough time to follow all the regulations and requirements; you lack competitive benefits packages; you spend too much time on HR needs compared to core business tasks.
