What is Human Resource Outsourcing?
Human Resource Outsourcing is a practice in which an organization hires a third-party organisation to handle its human resources activities and administrative tasks. In other words, HR outsourcing is the process of receiving work previously completed by corporate personnel from sources outside the company.
Why HR outsourcing is important?
When an organisation outsources HR tasks, it eliminates the need to hire skilled workers. In addition, it rules out the need to organise training programmes for the new employees.
This improves work efficiency and quality along with cost savings.
2. Risk Minimisation
Payroll processing, administration of incentives and other arduous HR processes may be time-consuming. Due to a lack of experience, processing errors may occur in these areas of HR activities.
Since HR outsourcing services generally entail the work to be delegated to those who are already specialists in the field, you minimize the chances of risk and errors.
3. Support & Compliance
Expansion of a business into a new market or region demands conformity to local tax and labour rules that differ from region to region. Hiring a competent outsourcing firm help assure law and regulatory compliance in the HR processes.
4. Security of Data
When working with sensitive information, data security is critical. In order to keep the data secure, respectable HR outsourcing companies use advanced security systems and software encryption.
What services of HR are typically outsourced?
Hiring & Recruitment
With a wide range of people entering the job market at various stages of their careers, businesses find it highly costly and arduous to reach out to the correct market in order to hire skilled employees.
Payroll & Compensation Management
HR outsourcing companies offer online outsourcing solutions to assist businesses with the intricacies of payroll benefit, such as automating direct deposits, rolling out compensation and incentives, managing paid time off, and maintaining records of the same.
Specialised Consultancy Services
Offering tools and insights to gain industry-specific market access and commercial prospects are among the other services of HR outsourcing companies. These consulting firms gather, analyse and interpret market information on the processes of different organisations.
Businesses generally hire such specialised HR outsourcing services to learn and emerge in their industry-specific domain by analysing the case studies which help them lessen the risk and cost of adoption.
Apart from these comprehensive HR functions, HR outsourcing may also handle employee handbooks and policy documents, background checks and drug tests, etc.
Difference between a Professional Employer Organization (PEO) and HR outsourcing:
A Professional Employer Organization (PEO) is a co-employment arrangement in which the PEO serves as the employer of record for your employees and takes on some of your responsibilities. You can contract for a number of PEO services, ranging from basic human resources to more comprehensive and strategic offerings. The co-employment relationship is a significant difference between the PEO and HR outsourcing.
A contractual agreement should govern the operation of any HR outsourcing partnership. This will specify the expected performance requirements for both, as well as any penalties for non-compliance. A service level agreement is a critical contract that must be carefully negotiated to delegate accountability of the HR functions to the outsourcing firm and mitigate any risks and dangers in the procedure.