Human Resources Outsourcing
Outsourcing is becoming the force behind the virtual organisation movement, and human resources (HR) is no different. Human resource outsourcing (HRO) is a process where companies outsource their HR functions to a third party because of their expertise and cost-effective offerings.
Challenges in in-house HR processes
- High manpower and turnover rates place tremendous pressure on the HR team to remain competitive with HR processes at other companies.
- Lack of standardisation in HR processes across locations increases costs and fails to attract the right talent.
- Obsolete IT systems are managing the HR services in-house. The systems are not updated on time and are prone to cyber threats.
The benefits of outsourcing HR services
Each of the following benefits intends to simplify, socialise, and transform an organisation’s HR operations:
- Free time and resources to focus on core operations.
- Achieve direct and indirect cost savings.
- Create a stable platform for all HR services.
- Transfer the focus from internal processes to achieve business goals.
- Ensure compliance with any legal and regulatory requirements.
- Reduce the risk of non-compliance with employment legislation and transfer it to the experts.
- Get flexible solutions and costs that are quickly scalable.
- Access the broader market for skilled talent and business opportunities.
- Understand the employees’ motivation drivers and career aspirations better.
Types of HR outsourcing services
How and what an organisation outsources depends on the nature of the business and the confidential data. The three types of HRO services are:
Application service provider (ASP):A host of companies provide software applications for large organisations to support their HR activities. Such applications are either on the cloud or on-premise. Two of the biggest disadvantages are operational costs and rate of successful implementation in a large organisation.
Business process outsourcing (BPO):In this option, the client can stay in touch directly with the BPO employees. MNCs that operate in multiple countries and employ a large number of people use BPO services.
Total HR outsourcing:Here, the complete HR function of the client is outsourced to a service provider where all the non-strategic functions and communication happen. The client-side HR team only has the senior management that oversees the progress and designs the HR strategy.
Choice of HR Services to outsource
Companies can choose to outsource selected HR services to an external service provider. Examples of these services include:
- Hiring services
- Employee orientation services
- Training and development services
- Performance management
- Compensation and benefits management
- Reward and incentive management