Human Resource Outsourcing

How HR outsourcing increases employee engagement

Human resources (HR) outsourcing has emerged as a strategic solution for many organisations seeking innovative ways to enhance efficiency, reduce costs and improve overall performance. Although there is an assumption that outsourcing HR operations affects employee engagement negatively, time and experience have proved otherwise. When planned and executed efficiently, HR outsourcing can actually boost employee engagement. 

Employee engagement

Employee engagement refers to how committed and connected an employee feels to his/her organisation. In today’s competitive business landscape, employee engagement has been tagged as a critical driver of success. Executives from around the globe agree that boosting employee engagement is on their list of top five business strategies.

Gallup's last employee engagement meta-analysis confirmed a well-established relationship between employee engagement and 11 performance outcomes. They are:

  1. absenteeism
  2. customer loyalty/engagement
  3. participation
  4. productivity
  5. profitability
  6. quality/defects
  7. safety incidents
  8. shrinkage/theft
  9. turnover
  10. wellbeing

Benefits of employee engagement

High levels of employee engagement translate to higher talent retention rates, lower absenteeism, better organisational performance and overall stakeholder value. It also boosts customer loyalty and customer satisfaction. Most executives also agree that employee engagement is closely connected with an organisation’s financial health. Further, engaged employees frequently become willing brand ambassadors and that attracts other employable talent.

How do employees feel engaged?

Sufficient communication and trust, social cohesion, feeling supported and encouraged, sharing information, common vision and goals are all factors that help boost employee engagement. Employees want to be valued and respected and get opportunities to do meaningful work.

HR outsourcing and employee engagement

HR outsourcing can serve as a catalyst for increased employee engagement. Here are more details about the how and the why.

  • Increased focus on core competencies
  • HR outsourcing allows organisations to delegate routine administrative tasks such as payroll processing, benefits administration, and compliance management to specialised service providers. Internal HR teams can then focus on more strategic initiatives and employee-centric activities such as talent development, performance management, and employee well-being.

  • Efficient and timely processes
  • Outsourcing HR functions ensures that processes are streamlined and executed with precision. Timely and accurate payroll, efficient onboarding, and effective performance management contribute to a positive employee experience. When employees see that their basic needs are met promptly and accurately, it builds trust and fosters a sense of commitment.

  • Access to specialised expertise
  • HR outsourcing brings a wealth of specialised knowledge and expertise to the table. Service providers are often well-versed in the latest HR trends, technologies and compliance requirements. This ensures that employees receive guidance and support from professionals who are adept at navigating the complexities of HR management. Access to expert advice can enhance the overall employee experience and boost confidence in the organisation.

  • Streamlined recruitment and onboarding
  • An outsourced HR partner can help the organisation implement improved recruitment processes, streamline onboarding and create advanced training opportunities for the employees. Experienced outsourcing partners leverage technology to make all these processes relevant.

  • Scalability and flexibility
  • As organisations evolve and grow, the demands on HR functions change. Outsourcing provides scalability, allowing organisations to adapt their HR processes to match the current needs of the workforce. This flexibility is crucial for employee engagement, as it ensures that HR services can adapt to the evolving expectations and preferences of employees.

  • Enhanced employee communication
  • Effective communication is a cornerstone of employee engagement. HR outsourcing can leverage advanced communication tools and platforms to keep employees informed about company policies, benefits, and important updates. Clear and transparent communication fosters a sense of belonging and ensures that employees are well-informed and engaged in the organisational culture.

  • Cost savings for strategic investments
  • By outsourcing routine HR tasks, organisations can increase cost savings, which can then be reinvested strategically in employee engagement initiatives. This might include training programs, wellness initiatives or employee recognition programs. Allocating resources to activities that directly impact the employee experience demonstrates a commitment to their well-being and engagement.

HR outsourcing service providers

There are three key types of HR outsourcing service providers:

  • Professional employer organisation (PEO): A PEO offers its clients comprehensive HR outsourcing services. A partnership with a PEO implies that while the organisation controls and manages operations, the PEO handles most of the HR-related functions and assumes certain operational liabilities.
  • Administrative services organisation (ASO): While an ASO operates like a PEO in many of its functions, it does not assume any liabilities. ASOs assist with tasks like benefits administration, HR compliance, payroll and risk management.
  • Business process outsourcing (BPO): BPOs take care of specific business tasks or operations. They handle a broader range of tasks beyond HR, including accounting and finance, customer service, data entry, IT support, supply chain management and more.

The downside of HR outsourcing

The benefits of outsourcing are undeniable but there are a few disadvantages that some organisations face.

  • A loss of control: Organisations may feel that they have less control when they bring in an external HR partner to take over some tasks. However, when a PEO is retained, the organisation retains complete control over its resources while having fewer administrative tasks to manage.   
  • Unable to find the perfect provider: Organisations may sometimes face difficulties in finding the perfect PEO who can understand their unique needs. 

However, neither of these two challenges are unsurmountable. As businesses continue to evolve, HR outsourcing stands out as a dynamic solution that aligns HR practices with the goal of fostering a highly engaged and productive workforce.

* For organizations on the digital transformation journey, agility is key in responding to a rapidly changing technology and business landscape. Now more than ever, it is crucial to deliver and exceed on organizational expectations with a robust digital mindset backed by innovation. Enabling businesses to sense, learn, respond, and evolve like a living organism, will be imperative for business excellence going forward. A comprehensive, yet modular suite of services is doing exactly that. Equipping organizations with intuitive decision-making automatically at scale, actionable insights based on real-time solutions, anytime/anywhere experience, and in-depth data visibility across functions leading to hyper-productivity, Live Enterprise is building connected organizations that are innovating collaboratively for the future.

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