Top 5 Benefits of Outsourcing HR Duties to HR Service Providers

From IT departments to legal departments to human resources (HR) departments, the trend of outsourcing specialised talent is gaining traction across the global business environment. Along with other benefits, outsourcing specific tasks to specialised experts can free up your employee’s time to focus on streamlining activities that affect the business’s bottom line.   While we know HR to be the backbone of any successful business, it also happens to be one of the most time-consuming and cost-draining functions. From employee screening and background checks, to recruitment and onboarding, to managing employee benefits, to overseeing payroll, an HR department is responsible for maximising business productivity while protecting the company and its employees from any legal concerns that may surface during day-to-day operations.   In this article, we’re going to take a look at some of the many benefits of outsourcing HR duties:

What are HR service providers?

An HR service provider is an entity separate from a company that offers outsourced HR support. Different types of organisations provide a range of HR-related services. Depending on the nature of your business and your budget, you could choose from the following:   Human Resources Organisations (HROs): Typically used for businesses with over 1000 employees, HROs may take full responsibility for the HR management of a company or share this role with the core company.   Professional Employer Organisations (PEOs): Suitable for small and medium-sized companies (SMEs), a company and a PEO will enter into a co-employment relationship whereby the PEO will remain responsible for only HR related functions.   Employer of Records (EORs): EORs are used for smaller companies looking to expand their presence across borders in a short time.   Administrative Services Organisations (ASOs): In addition to all employee-related functions, ASOs assist with legal administrative matters such as compliance, insurance, compensation, and benefits.   Recruitment Agencies: These agencies oversee recruitment and staffing functions, filling long and short-term positions with qualified workers.  

There are five main benefits of outsourcing HR service providers:

1. Business Compliance and Risk Management

As experts in the field, HR service providers delegate their team of professionals to focus on each HR function that requires attention. Outsourcing a service provider ensures that each HR function is managed by qualified professionals who specialise in that particular function.   Each country and state has its own federal and local labour laws that businesses must comply with. Understanding these laws is a full-time job in itself, since labour regulations are routinely being reviewed and new rules are constantly being implemented.   A lack of business compliance can result in considerable financial penalties for any business. Outsourcing HR duties can help ensure your company complies with up-to-date labour laws and regulations by ensuring there is always an expert eye on your business activities.   Securing business compliance is even more pertinent for companies with a global presence. Hiring across state and country borders is a sure way to expand a business, yet it can be legally complex. However, a PEO or an EOR, for example, can ensure you remain on top of hiring regulations across all locations.

2. Cost-Saving

Running a successful business is all about affecting the bottom line. Especially for small businesses, hiring a full-time HR manager or team while factoring in additional office space, equipment, and information systems can be a huge expense.   In the same vein, it isn’t realistic to expect one HR professional to handle a company’s recruitment, payroll, and compliance functions. As a business expands its workforce, it will inevitably need to expand its in-house HR team. Hiring an external HR service provider can be a substantial cost-saving alternative in the long run.   With a repertoire of employees under their belt, professional HR service providers can negotiate better employee benefit rates with insurance companies, offering further cost savings for their client companies.

3. Time Saving

From processing payroll to ensuring compliance, HR functions are both costly and time-consuming. Instead of directing resources towards hiring an in-house HR team, companies outsource service providers to handle all tedious HR administration and tasks.   Certain HR firms even offer services to monitor employee performance and assist with training and development. Both of these functions are heavily time-consuming for management staff, and HR outsourcing companies can help reduce time spent on administrative duties for these essential in-house employees.   Outsourcing all HR functions ensures your employees will have more time to maximise profits by engaging in the core activities they know best.

4. Employee Performance and Output

When it comes to recruitment, hiring, training, and development, a specialised HR provider will do a quality job of inducting new employees, reducing your company’s turnover rate and future employee acquisition costs.   A high-quality workforce that has gone through the necessary background checks and training and development programmes will inevitably produce better results for the business. Outsourcing an HR professional to oversee employee performance can help develop a workforce’s expertise and talent base while ensuring satisfied employees.   HR service providers can use performance goal management systems, review processes, ongoing feedback, and ongoing training and skills development to ensure your employees contribute exactly what they need towards your business.

5. Employee Experience

Not only does streamlined recruitment, training, and development improve the output of a workforce, it also increases employee job satisfaction and experience. Quality hires, combined with sufficient training and development, is key to boosting employee morale in the workplace. Outsourcing HR duties can ensure you attract and retain qualified and motivated employees suitable for the role at stake.   Providing employees with a safe work environment is essential. Partnering with an HR service provider with in-house health and safety specialists ensures there will be tools, regulations, and insurance policies in place to minimise or prevent injuries or illnesses in the workplace.

Final Words

Keeping up with changing laws and regulations is a tedious and complex job that often requires hiring specialised staff. By outsourcing capable HR experts, you limit the risk of non-compliance while streamlining the quality of your HR functions.   Contracting HR outsourcing companies with specialised information systems and internal expertise is a cost-effective option to help carry some of the administrative weight of a business. Along with other benefits of outsourcing HR, the most significant advantage is the cost and time savings your company will receive, allowing your core employees to focus on what they do best while the HR specialists deal with the rest.