Human resource outsourcing (HRO) is a burgeoning industry that’s not just for the big players anymore as more mid-size buyers have gotten into the act. The number of providers is growing, with many powerhouses offering consolidated, comprehensive services for numerous functions, making this a good time to be a buyer.

What can Human Resource Outsourcing do for your business?

Companies outsource HR for various reasons: costly transactions, too much time spent on daily operations, high cost of upgrading applications, lack of integrated processes, difficulty hiring or retaining process staff, and lack of timely or accurate reports.

Consultants say saving money shouldn’t be the only reason for human resource outsourcing. “The belief that outsourcing can cut costs attracts enterprises to HR Business Process Outsourcing (BPO) like moths to a flame,” a Gartner study says. “Like the moths, these enterprises can become enlightened, but they can also get burned”.

There is still internal resistance to outsourcing among HR employees. Many organizations cited loss of control as a barrier. But greater job satisfaction is an outsourcing benefit that hasn’t been effectively communicated. Internal HR managers will be able to focus on more strategic HR management, while employees who shift to an outsourcing provider will now be part of a profit center vs. a cost center for their organizations.

Growth in the Business Process Outsourcing (BPO) is being fueled by a number of factors: HR departments have been forced to do more with less and many companies believe HR is a comparatively low-risk function “with which to begin experimenting with outsourcing”.

Some companies are outsourcing end-to-end HR solutions, while other companies are outsourcing components of their HR functions. More and more vendors are offering total BPO solutions, making it easier for companies to move toward a single provider and outsource several if not all HR functions.

Human Resource Outsourcing – Many Forms

HRO is an umbrella term that encompasses three components: HR transaction processing, HR BPO and HR business transformation outsourcing.

With HR transaction processing, vendors provide single-point services for large volumes of transactions, such as payroll, but management of the function stays with the company that outsourced the work. On the other hand, in HR BPO, vendors provide a range from single-point to integrated end-to-end services that represent the entire employee life cycle, but management is outsourced to the vendor. HR business transformation outsourcing is similar to HR BPO, but both the retained and outsourced functions efficiency and effectiveness are dramatically improved. HR management of the retained functions is improved because HR is freed up from the administrative functions. The quality of the outsourced functions also improves because it’s the provider’s specialty.

Human resource outsourcing is more popular than outsourcing finance and accounting functions, although interest has grown there, too.

Selecting a provider for Human Resource Outsourcing

Organizations are moving toward single HRO provider, for several reasons: They’re full-service, proven, brand-name vendors; economies of scale may lead to significant cost savings and efficiency improvements for the outsourcing organization. The availability of rich data, integrated across all functions, enables the outsourcing organization to better manage its costs and workforce.

Outsourcing will continue to grow because companies have realized the value and true return on investment from their HRO contracts. 91% of organizations that outsource report they have achieved or partially achieved their HR outsourcing objectives. Not one company would bring the function back in-house, according to The Conference Board/Accenture study. Most companies plan to continue with the same provider; 71 percent said they will extend or renegotiate contracts, while 29 percent will put existing outsourced services out for a new bid, the study found.

The more value they experience, the more integral Human Resource Outsourcing will become in their organizations. Also, as they see other organizations experiencing success in their HRO implementations, they will have to move toward Human Resource Outsourcing in order to remain competitive.

If you would like a consultation on how you can outsource HR, call us at 920-436-9887 or email us at info@hrstaff.net. You can also click here to ask us any questions regarding HR.