Why HR Outsourcing?

Hiring freelancers is considered a kind of outsourcing. And it’s a widely-used and accepted practice that comes with a variety of benefits.

Human Resources Outsourcing (HRO) is the process of having an external company perform HR tasks and functions on behalf of your organization.

This external service provider aims to help you delegate and get the most  (if not all)  of the HR functions that you may not otherwise be able to do inside your company.

Top HR functions 

Before we get into the different kinds of outsourcing and the benefits of human resources outsourcing, let’s first clarify what we mean by HR functions.

While there are many functions, they mostly fall under one of these 9 functions: 

hr functions for businesses

1.   Hiring and recruitment (includingtalent acquisition)

2.   Employee relations

3.   Payroll and compensation planning

4.   Ensuring that the company complies with the country’s labor laws

5.   Workplace safety

6.   Establishing company policies and work ethics

7.   Employee development and training

8.   Performance management (including quarterly and annual performance reviews)

9.   Risk management

3 main HR outsourcing models:

• Professional Employer Organization :

Under the professional employer organization agreement, your HR service provider becomes responsible for several employee-related activities in your company.

These include payroll, compensation and benefits, taxes, and all government-related needs.

Professional employer organization agreements are also considered co-employment relationships or partnerships.

Under the PEO deal, your employees become part of the PEO provider including all their taxes, benefits and compensation, and others. Your salaries are paid to the PEO who pays them to your employees.

• Administrative Services Organization :

Under this model, you get your HR services from an external company but your employees, their records, and all their documentation remain part of your organization. Meanwhile, the ASO becomes like a trusted partner or advisor not a co-employer.

Under the ASO model, you can pick the HR services you want and exclude others.

Using an administrative service outsourcing model means you get more contact and authority over your employees, while getting organizational and administrative benefits of an HR service provider.

• Human Resources Organization :

Last but not least is Human Resources Organization (HRO), which is the most commonly-employed type of outsourcing in the HR world. The reason HRO is the preferred HR outsourcing model for larger companies and corporates is because of the variety of services it includes.

Unlike the PEO and ASO models, a Human Resources Organization provides a large number of HR services and functions for companies to choose from. Think of HRO as a menu of HR services.

1- Manpower outsourcing

Manpower outsourcing is the process of asking another company, usually an HR consulting firm or recruitment agency to carry out employee-related tasks.

With manpower outsourcing, these tasks usually include hiring and talent acquisition (including part-time staff), and payroll services.

That said, it’s worth mentioning that manpower outsourcing differs from payroll outsourcing.

2- Payroll outsourcing

One of the mostly widely outsourced HR functions is payroll. Many smaller businesses cannot afford to hire an HR professional but need to manage the process of paying their employees. That’s why they outsource the entire payroll function to a service provider like Longcorp.

3- BPO

Business process outsourcing (BPO) or business process HR outsourcing is when a company outsources its business processes.

Using this type, your company enjoys a personalized support experience from its service provider. You also get any HR software your organization might need.

4- HR strategy outsourcing

Many companies don’t know this but they need an HR strategy to support their business, its functions, and development. Having an HR strategy  helps companies identify and understand their internal hierarchy, including salary grades, and employee development.

And with many companies today not having – or needing – an entire HR department, they often struggle without a strategy in place.

But the thing about an HR strategy is that can be outsourced to an HR-focused recruitment company  like Longcorp, which understands the business and creates an HR strategy to suit and manage its needs.

5- Single source HR outsourcing

With this type, your company outsources all its HR needs to one services provider and enjoys support across the entire employee life cycle. It includes talent acquisition, performance management, payroll and compensation, among other services.

The outsourcing type is considered to be a flexible one because it automates much of the process, giving companies more time to focus on hiring needs and business operations.

6- Software-as-a-Service (SaaS) outsourcing

In the case of software-as-a-service, your company is able to manage some basic HR functions using software. Usually subscription-based, the HR software helps businesses get flexible solutions and enjoy organization support.

While SaaS is considerably low cost, you may need to use various software or applications to cover your needs.

Advantages of HR outsourcing

By outsourcing your HR functions, your organization can:

• Get more time to focus on your core products and services without having to worry about internal requirements.

• Cut the cost of hiring a full-time HR team.

•  Hire an HR service provider, like Tawzef, when needed, or for certain projects or requirements.

• Have experienced HR companies, like Tawzef, provide aspects that your company might not be familiar with like anHR strategy, manage employee relations and exit schemes.

Disadvantages of HR outsourcing

Despite the benefits, there are a few downsides:

• Your team may not feel that HR is part of the broader team and interaction becomes less personal.

• Some recruitment challenges. The recruitment process is generally full of problems. Outsourcing talent acquisition may result to arecruitment agency  may see some challenges if the agency isn’t thorough or well-versed in your talent needs.

Moreover, some candidates hired by an agency may (or may not) be in line with your company’s culture.