In Human resources the focus is on developing
strategies and policies, standards in wide range
of areas such as:
Recruitment, selection, this includes developing
job descriptions, preparing advertisements,
checking application forms, shortlisting, interviewing
and selecting candidates;
Organizational design and development
Business transformation and change management
Performance, conduct and behavior management
Industrial and employee relations
Human resources (workforce) analysis and
workforce personnel data management
Compensation, rewards, and benefits management,
Payroll, employee benefits (Health, Medical,
Life insurance, cafeteria, etc), maintaining
records relating to staff
Interpreting and advising on employment legislation;
Training and development (learning management),
analysing training needs in conjunction with
Administration (producing checks, handling
taxes, dealing with sick time and vacations)
working conditions, performance management,
equal opportunities, disciplinary procedures
and absence management;
hiring and firing, risk management (workers’ compensation,
dispute resolution, safety inspection, office
policies and handbooks) and others.
What is HR Outsourcing?
For most business, personnel is its largest
cost. People are talented, dedicated and
valuable, but they're also expensive and
sometimes complicated to manage. A familiar
concept to numerous entrepreneurs is the
practice of utilizing outside firms that
handle the work that is performed in a company,
small businesses have done so by outsourcing
their accounting, payroll processing and
distribution along with other important responsibilities
and functions of a HR department. Large companies
do the same simply because it is cost efficient.
HR Outsourcing Is the process where a Company
takes certain parts (or the whole) of its
existing Human Resources responsibilities
and it is outsourced to be managed on an
ongoing basis by another company.
It does not however, remove your control
over your own HR, and in fact provides you
with a far greater degree of control. This
is achieved by providing the Line Managers
with high quality advice, methods, processes
and systems, which allow them to more efficiently
and effectively manage their staff and their
HR outsourcing services generally fall loosely
into four categories: PEOs, BPOs, ASPs, or
A Professional Employer Organization (PEO)
assumes full responsibility of your company's
human resources administration. It becomes
a co-employer of your company's workers by
taking full legal responsibility of your employees,
including having the final say in hiring, firing,
and the amount of money employees make. The
PEO and business owner become partners, essentially,
with the PEO handling all the HR aspects and
the business handling all other aspects of
By proper definition, a service is only a PEO
when it takes legal responsibility of employees.
But take note--some HR outsourcing services
like to use the recognized term "PEO" when
they handle the primary aspects of HR like
payroll and benefits, yet they do not take
this legal partnership.
Business Process Outsourcing is a broad term
referring to outsourcing in all fields, not
just HR. A BPO differentiates itself by either
putting in new technology or applying existing
technology in a new way to improve a process.
Specifically in HR, a BPO would make sure a
company's HR system is supported by the latest
technologies, such as self-access and HR
Application service providers host software
on the Web and rent it to users—some
ASPs host HR software. Some are well-known
packaged applications (People
Soft) while others are customized HR software
developed by the vendor. These software programs
can manage payroll, benefits, and more.
E-services are those HR services that are
Web-based. Both BPOs and ASPs are often referred
to as e-services.
Why Outsource HR?
More and more businesses are turning to Human
Resources Outsourcing as a way
of removing the burden of administration
and changing their focus back to people
focused strategies. They are looking for
operational efficiency, the ability to
provide excellent service to
their employees and looking to save costs
on Human resources, which often is not
even carried out at the same location. It
is one thing that can make the difference
between efficient and inefficient employment
of resources for businesses, especially
small and medium-sized concerns. Resources
not utilized fully could lead a business
towards higher operating costs and loss.
Setting apart a substantially large chunk
of the company’s resources and income
for an HR department prevents the resources
from benefiting the company’s productivity
and capacity for greater income generation.
Pros of Outsourcing HR
HR outsourcing enables businesses to concentrate
on their core competencies, ultimately resulting
in better productivity and results for the company.
With HR outsourcing, client companies can utilize
their resources more effectively, as the human
resources department is taken care of. It results
in streamlined business processes.
HR outsourcing enables employees of client
companies to enjoy benefits typically offered
in larger companies, these being outsourced from
the professional employer organizations (PEO’s)
employee leasing organization. The comprehensive
benefits package offered by PEOs increases the
buying power of companies in the job market and
facilitates greater retaining of employees.
The PEO consists of experts in the business
and legal fields, who can positively influence
the client company and help it make better decisions.
To aid organizational growth: Fast-growing
organizations can lack the HR capacity to deliver
business objectives, making HR outsourcing an
If you opt for an online service (ASP/e-service),
you don't have to purchase software, install
it, and worry about configuring it. An ASP business
model is hosting software, so you don't have
to bother with additional software or installation.
Potential Benefits and Reasons for HR Outsourcing
When organisations put forward a business case
for HR outsourcing there are a number of potential
benefits that many cite. In practice, these benefits
are not necessarily mutually exclusive and a number
of them could be achieved through some alternative
solution rather than via outsourcing. Commonly
mentioned benefits include:
- Increased efficiency.
- Access to improved HR IT systems without capital
- Improved people management information
(including human capital metrics).
- Access to HR expertise not available internally
- Increased flexibility and speed of response
to HR problems.
- Part of an overall strategy (for example the
organisation is outsourcing a number of its support
functions, of which HR is just one part).
- Reduced risk as it is possible to scale up
and down more efficiently.
- HR resources can operate more strategically.
- Freeing up manager’s time from implementing
Finically Driven Reasons
- Reduces Investment and frees up these resources
for other purposes
- Reduced cost for example a full time HR manager
may cost around £40, 000 per annum.