Outsourcing staff has grown to be an effective business practice in recent years, and it doesn’t look like businesses are letting that go in the future. This is the practice of offering functions or job positions to a third party on a contractual basis. Companies generally outsource within their own country, in a neighboring one, or in a country abroad.
Some common departments businesses will look to outsource are software development, finance, and customer service. While it’s common to hear about people working in call centers or customer service being frequently offshored, did you know human resource outsourcing (HRO) exists too?
What is Human Resource Outsourcing?
Human resource outsourcing is an arrangement between an employer of record (EOR) and a third-party individual or team that calls for the outsourced party to administer human resource-related tasks on behalf of the outsourcing business.
Like any other outsourced relationship, this arrangement provides both parties several benefits. Third-party staff members are given competitive wages to provide for themselves and their families. Usually, these wages are much higher than the local position equivalent, which makes it all the more appealing to those seeking work.
On the other hand, outsourcing businesses generally benefit from lower costs due to lower labor rates and increased efficiency since in-house employees have more time to do other tasks.
What Does an Outsourced Human Resource Team Do?
Simply put, outsourced human resource teams function the same way an in-house department would. The only difference is that they aren’t in-house employees, and they’re based in a different area or country.
Their primary job functions revolve around providing day-to-day business support, recruiting and onboarding talents for the company, creating and implementing competitive employee benefits packages, and managing payroll and tax administration.
How Can Outsourcing Help the Staffing Industry?
The staffing industry saw strong growth in recent years, at 3.4%, and experts expect it to continue within the next few years. With the industry being stable and expected to last longer than other sectors, it’s safe to plan and focus on business development.
Effective business development plans can include a greater focus on recruitment to cater to the industry’s robust demand. Apart from needing more people, employers and business owners also need more time-effective processes to ensure they can keep up in their respective industries.
Because many of the tasks in most corporations include menial functions and manual automation, staffing firms and HR outsourcing can be an optimal solution.
What are the Pros of HR Outsourcing for Staffing Firms?
When it comes to its benefits, outsourcing human resources teams can be an asset to any business. As a primary benefit, offloading tasks and functions to outsourced parties can help your in-house team focus on core business activities.
If your firm isn’t looking to offload work to offshore teams fully, you can opt for business process outsourcing (BPO) arrangements instead. This is when outsourced human resources teams are given tasks like monthly payrolls and drafting competitive benefits packages. This leaves the in-house staff to focus more on the front-end operations, such as recruitment and employee well-being checks.
Another benefit of outsourcing is its competitive edge in the global market. You eliminate geographic boundaries with teams working abroad or in a neighboring country. Both parties can exchange techniques, ideas, and processes which you can implement and build on your company.
What are the Cons of HR Outsourcing for Staffing Firms?
While HR outsourcing greatly benefits companies regarding cost-efficiency, workforce, and expertise, it also comes with a few disadvantages you should consider before fully committing to an agreement.
Even if you find an outsourced HR team that works well with your business, one disadvantage is losing control. Because they’re located outside where your business works, you lose control of how tasks are being done and monitored. This also creates trust issues if you don’t recruit the right agency to take on your back-end operations.
Data security is also a significant risk to outsourcing, especially if your outsourced team handles customer or personal information. Moreover, if the outsourced party is one you aren’t comfortable with, you risk jeopardizing confidential information, which can lead to the loss of clients’ trust or a negative public image of your company.
What are Some of the Practices to Keep in Mind When Outsourcing?
Before outsourcing employees, you’ll need to understand why you’re outsourcing. What do you want to achieve through outsourcing? What problem do you want outsourcing to fix in your firm? Defining your goals and identifying the type of outsourcing model you want can help make the process much easier.
Once you’re clear about the type of engagement model, you can look for the service provider that’s best suited for you. It’s important that you do background checks on any outsourcing prospects, and this includes looking into their industry reputation, support, and processes.
Additionally, avoid collaborating with a large team immediately. Instead, it would help if you started with a small group. This way, you can learn more about your chosen service provider’s offerings and assess if they fit you. You can eventually add more to your team if you’re confident in what you see.
Globalize Your Business with Outsourcing
Ultimately, outsourcing isn’t a mandatory thing to do, but it does open the door to many opportunities. It has benefits ranging from work opportunities with competitive salary ranges to being globally competitive in your industry. As your business innovates, you can get more work done by outsourcing some of your processes to offshore workers.
Explore HR staffing for outsourcing and seriously consider adding it to your business strategies. It could be what you need to elevate your operations.
