What is Human Resources Outsourcing? Definition, Functions, Importance

HRO is one of the most popular terms in the HR (Human Resources) industry. HRO stands for Human Resources Outsourcing.

Outsourcing is a predominant force behind the flowing movement of an organization. Human Resources Outsourcing is typically the process of outsourcing your organization’s HR activities to an expert third-party service provider. 

What is HRO (Human Resources Outsourcing)?

HRO Human Resources Outsourcing is a strategic initiative that helps an organization gain cost and time efficiencies, by handling its human resource activities and administrative tasks. Engaging with an HRO company helps improve services to your employees and helps you focus on their internal business operations. 

What is the Concept of Human Resources Outsourcing?

The concept of Human Resources Outsourcing refers to hiring external firms to undertake recruitment-related tasks for your company including but not limited to recruitment, payroll, benefits and administration, and IT services.

What are the Human Resources Outsourcing Functions?

There are 6 key functions of human resources outsourcing. 

1. Talent acquisition

It is one of the most important functions of any HR department. It is necessary to be strategic when hiring new employees or restructuring the current team. 

The main three aspects of talent acquisition are recruiting, hiring, and retaining talent. 

Recruiting– It involves finding/identifying the right candidate for a specific job role. It is HR’s responsibility to analyse the market and set a competitive salary range before making the role available and putting it out on different platforms. HR professionals are responsible for screening applications before deciding on the ones that qualify for the hiring process. They set up one or multiple interviews depending on the requirements.

Hiring– The hiring process involves performing background checks, onboarding employees, and briefly describing the payroll process, benefits, and policies. There is a lot of paperwork involved in the hiring process. 

Retaining talent– Employee retention is as important as hiring the right candidate but is often overlooked by the organization. A human resource outsourcing partner will ensure focus on employee satisfaction thereby retaining the best employees for your organization. 

2. Employee engagement

Engaged, motivated and happy employees are the secret to the success of any organization. A two-way dialogue between the HR and the employees is crucial if you are looking to achieve your goals of employee engagement as it is the only way to build and maintain a company culture. Your in-house HR may fall behind on improving employee engagement at a certain point as they are burdened with several other tasks. Your HRO (Human resources outsourcing) partner can play a saviour in your company as they can take up the responsibility of ensuring Employee engagement by including activities like sharing successes and failures, organizing group activities and company-wide gatherings, mediating conflicts between employees etc. 

3. Performance management

It involves maintaining and improving job performance, typically by using certain assessment tools, coaching, counselling, and providing valuable feedback. How a company decides to go about evaluating, recognizing, coaching, and rewarding employees decides the effectiveness of their performance management. 

4. Compensation and benefits

Having the right compensation and benefits policies in place is a big part of HR’s job. At the end of the day, all employees look forward to how well they are being compensated/ the kind of benefits they are offered. Creating a package that aligns with both the organization’s budget and the employee’s expectations is crucial if you don’t want to lose out on the better candidates. An HRO partner will help you create the perfect package that attracts the candidates.

5. Development and training

Training and development are an important part of employee satisfaction and engagement. Every employee wants to have a successful career and an ongoing growth graph that adds value to their professional development. Robust professional development programs enhance employee productivity, and performance, increase opportunities for internal promotions and reduce turnover rates. Informational sessions and training on topics like Diversity, inclusion and equity in the workplace, mandated reporting, industry, and marketing trends etc are appreciated by employees.

6. Audits and legal compliance

Labour laws are complex and ever-changing. Laws on matters like benefits, fair compensation, hiring and firing need to be adhered to by every organization. To maintain 100 % compliance, it’s necessary to keep yourself updated about the changing laws. Partnering with a third-party service provider is a good idea to help you avoid compliance risks. 

What are the Roles & Responsibilities of a HRO Partner?

A HRO partner understands how to execute HR activities tactfully. Their roles and responsibilities include-

• Complete payroll execution
• Compliance with best practices and regulations
• Implementation of benefits
• Quick and effective responses to sensitive HR situations

They are also required to excel on the strategic side and can:

• Create a positive company culture.
• Foster employee engagement.
• Help upskill your team through training and development.
• Share strategies for building comprehensive and competitive benefit packages.

Why HR Outsourcing is Important?

Advanced technology has revolutionized the hiring process in today’s date. Organizations have the luxury to outsource their human resources with the click of a button. 

The advantages of outsourcing human resources are many like-

1. Saves Cost

You can avoid investing in resources or capital to find the right talent as Human resource outsourcing service providers are already sitting on a huge pool of talented candidates and possess deep industry knowledge and the technological edge to drive the best results your business needs. 

2. Timesaving

A lot of time is saved in the recruitment and hiring process as the right HR service provider has the experience and expertise to handle the task efficiently, right from filtering resumes, and interviewing candidates to finding the right ones. You may take part in the final screening process before you select your candidates. 

3. Acquire the best of the talent pool

Finding the right people is a real struggle for every organization. An expert third-party human resource outsourcing services provider can help you overcome this challenge by creating a successful hiring strategy and finding the right talent who fits the needs of your organisation. They help simplify the recruitment process by leaps and bounds. 

4. Offers scalability, flexibility and room for growth

By outsourcing the tedious and time-consuming HR tasks you can allocate yourself plenty of time to expand your business. You can trust your HRO partner to be responsible for your end-to-end recruitment process and hire the best talent while you focus your efforts on your core business operations. 

5. Payroll administration

The payroll process and administration are one of the most important tasks to be carried out by HR in an organization with utmost confidence and care. And it’s no surprise that the payroll process is a full-time job given its nature and the accuracy with which it must be processed.  As your human resources partner, we manage everything that comes under payroll- tax filing, benefit deductions, reporting etc.

6. Legal Compliance

Staying compliant with adherence to the ever-changing labour laws is quite difficult. A third-party provider can help simplify this process. They can help minimize errors. Losses and unnecessary penalties by keeping you updated about the changing laws and regulations and maintaining compliance with labour laws. 

7. Employee relations

Outsourcing helps companies to manage/eliminate conflicts and create company policies without the requirement of a full-time HR team. A competent Human Resources Outsourcing partner can help elevate company culture and build positive relationships between the company and the employees. 

8. Reduced turnover rates

Onboarding employees through an HRO partner is a sustainable option for your company. There is a lesser liability when a third party provide communicates with the candidate about the salary, benefits, policies etc. It helps maintain a positive employee-employer relationship, resulting in reduced turnover rates.

What are the Disadvantages of Outsourcing Human Resources?

Outsourcing Human resources could be the right approach to help you manage and streamline your organization’s HR activities. But some aspects of outsourcing may not make it the right step for you to take. But again, it depends. 

A few of the disadvantages of outsourcing human resources could be-

• Lack of control
• Drastic Culture change 
• Higher overhead costs
• Frequent turnover
• Data insecurity

If outsourcing human resources should not pose a disadvantage to your organization, you should make sure that you are outsourcing it to the right firm such as Alp. 

Alp has an industry experience of over 26 years and holds a high reputation for serving clients of all ranges, be it small scale or large and delivering the best outcomes for their clients. 

Frequently Asked Questions

1. What are HRO services?

HRO, or human resource outsourcing, is a provision in which a third-party provider handles all or part of your organizations HR activities allowing you to focus more on core business operations. 

2. How much will it cost to outsource human resources to a third-party service provider?

The pricing depends on the company you choose whether you are going for a large corporate or a startup. It also depends on the range of services that you want to outsource. Outsourcing services cost 5000-10000 and up, again depending on both the above factors. 

3. Why should a business consider HRO?

Businesses should consider taking up HRO services to relieve themselves from HR-related responsibilities and allow themselves to concentrate on core business objectives. 

4. How to choose an HRO provider?

Consider these few important factors before choosing an HRO provider- 

• Industry Reputation and experience
• Cultural fit 
• Budget constraints 
• Offerings by the provider
• Level of service

5. What is the HRO payroll?

HRO payroll is when a third party payroll provider handle all aspects of payroll- paying employees’ salaries, filing taxes, administering benefits, compensation, and other payroll-related tasks on behalf of a client business.

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