What Is HR Outsourcing? Definition, Types, Challenges

Companies are most likely to outsource their HR functions. This is because they may lack the technical knowhow to handle people effectively, and the management of people is a core function for any business. So, HR outsourcing is a common business tactic these days. Top HR solution providers have extensive experience and access to a much wider talent pool that they can tap into for recruitment and other functions such as training. HR functions generally outsourced are employee administration, workforce management, training, payroll management etc.

Definition

HR outsourcing is a practice in which an organization hires a third-party solutions provider to handle its HR activities and administrative tasks. HR consulting companies (companies to whom you outsource HR functions) can help with not just day-to-day HR but also to meet your targets with a team that fits into the culture you have created within your company. We stay on top of current trends, ensuring that the services we provide are of the best value to the companies we have guided in the past.

What Services Are Typically Provided by HRO Companies?

1. HR and people management

HRM services involve recruitment, training and management and other core services of HR, for which you would typically need an HR team. Our full stack HR solution comprises of-

• Onboarding technology
• Compliance tools and resources
• Talent management
• Work-life employee assistance program
• Employee and manager HR support

2. Payroll and Compliance

Alp takes care of payroll administration and compliance management end-to-end. The payroll specialist will help answer any queries you may have and help lead the payroll management solution for your company. The comprehensive payroll solution provides-

• Payroll processing and auditing
• Time and attendance tracking
• Filing and registration of taxes
• Quarter and year-end co-ordination and administration
• Compliance checking

3. Recruitment

Alp’s recruitment management capabilities help in speeding up the hiring process, and our holistic recruitment approach enables us to attract, engage and deliver the right talent for your organization, while also ensuring a cultural fit. Our recruitment solution encompasses –

• Screening of candidate profiles through digital platforms
• Preliminary interviews to understand the suitability of positions
• Scrutinizing the credentials of candidates and conducting background checks to detect any falsification
• Eliminating bias through repeated checks of each recruitment cycle
• Final selection process
• Onboarding of the candidate with all the formalities in place
• On-going support post placement to ensure the smooth settlement of the employee in his/her position

4. Performance and Compensation

Our customized performance and compensation technology streamlines your business’ performance reviews and compensation management. This helps

• Increase visibility into team priorities and progress
• Reduce the complexity of compensation calculation
• A structured program for developing and rewarding new employees

5. Real-time monitoring

Our tailor-made HRMS helps

• Track workforce analytics in your organization, allowing you to make informed decisions.
• A dedicated account manager is provided to review data and recommend required action to further your business.

6. HRMS technology

Robust, customized technology to transform your business. A full-rounded technology solution integrating routine HR procedures to manage your workforce.

What Are the Types of HR Outsourcing?

1. Professional Employer Organization

In this type of contract, there are two entities, the leading company and the outsourced company, that manage the employees. The outsourced company takes care of only employee wages and manages taxes, while the leading company (the one outsourcing HR functions) takes care of the employee contracts and day-to-day activities. The outsourced company is paid for its services by the main employer, the leading company.

2. Administrative Services Organization Outsourcing (ASO)

Under this approach, the day-to-day administrative and HR activities are outsourced to the other company, while the leading company takes care of the employee contracts, wages and taxes etc. Also, for the hiring, termination etc. of employees, though overseen by the second party, any decision that is made must get the approval of the leading company. This approach is convenient for organizations that want more of a say than in PEO.

3. Human Resources Organization (HRO)

This type of outsourcing is ideal for those organizations that want specific functions outsourced to a third party, such as training of HR or employees, specific stages in recruitment such as onboarding of employees etc. In such a case, the organization may be perfectly positioned to handle these activities but might still request the support of the outsourced company.

4. Software-As-A-Service HR Outsourcing (SAAS)

In this outsourcing type, the software alone (or the HRMS or even more capable software) is provided to the leading company. The software is provided in the form of Software-as-a-Service, and any troubleshooting, guidance or maintenance will be provided by the other company. This way, the in-house HR team shoulders a lot of the responsibilities, with some HR functions being automated.

5. Business Process HR Outsourcing (BPO)

This type of outsourcing is very similar to HRO, but the outsourced company handles a much more critical function for the company. In other words, a very important process is outsourced to the second company, hence making it a form of business process HR outsourcing.

6. Single Source HR Outsourcing

In this type of HR outsourcing, the outsourced company manages most of the functions of the leading company, ensuring that the HR functions smoothly. The outsourced company is responsible for all aspects of HR, and this is clearly mentioned in the contract that is signed between both companies.

What Challenges Do Companies Face when Outsourcing HR?

These are the challenges faced by companies when they outsource HR.

• Cost

HR outsourcing, if not well managed or if done by an expensive HR partner, will lead to higher costs for the employer.

• Lack of control

There is a lack of control over the hiring process, which could lead to lower quality of hires, unpredictable hiring times etc., especially if the contract does not specify who controls what clearly enough.

• Affects organizational culture

The HR is responsible for several things like supporting employees when they need mental or moral support and monitoring their progress and encouraging them. Outsourcing to a third party might not seem like a great idea.

• Data insecurity

Outsourcing could lead to disclosure of company information, and if this information includes employee data, it could be very bad for privacy.

What Companies Benefit Most from HRO?

HRO can benefit companies of any size. Companies that are smaller can avoid any obstacles in getting things done and gain the expertise and knowledge of the outsourcing provider. Companies that are larger in size could discover potential gains by outsourcing HR, especially by lowering operational costs, hiring better candidates and reducing the time to hire. Whether you need HRO can be decided only after a consultation with a knowledgeable HRO partner.

Why Choose Alp Consulting for HRO Services?

With Alp Consulting, you have a great talent pool to pick from and scale up or down depending on your specific business needs. We also provide complete HR consulting beginning with simple administrative activities and ending with executive search and other pivotal HR endeavors. Our HR consultants are also up to date with the latest in compliance and can advise you accordingly. Looking to make use of technology to streamline any functions of HR? We will help you cover that too! Talk to us today and let us guide you to better people and better growth.

Frequently Asked Questions

1. What is the purpose of HR outsourcing?

The purpose of HR outsourcing is to ease the burden of HR, especially staffing, payroll and compliance. By moving these functions to a third-party with great expertise at managing them, a company can focus on more strategic initiatives that would lower its operational costs and ensure it does not invite any penalties from the government etc. because of lawsuits.

2. What are the advantages of HR outsourcing?

Advantages of HR outsourcing is access to a larger talent pool for recruitment, experts in their respective HR discipline, better management of a company’s HR needs (no matter the size), and in some cases, more cost savings and accuracy than if it were done in-house.

3. What is the future of HR outsourcing?

The future of HR outsourcing is bright and bold. HR outsourcing companies have boosted the bottom line of top companies several times, and when one looks at the benefits they have provided, the cost is not that much. With the influx of technology, HR outsourcing should become even more affordable for several companies.