Outsourcing HR (human resource) functions means hiring a third-party individual to carry out the hiring process for specific roles. Businesses require a slew of talented professionals to deal with the daily workflow. However, it might be a big ask to have in-house HRs who can consistently hire professionals who are not only competent but share the same vision as the company.
Therefore, specialised HR services are becoming increasingly relevant, with their own set of advantages, including scalability, cost-effectiveness, and compliance. Professional Employer Organisations (PEO) are becoming increasingly relevant because they provide streamlined services like Administrative Services Only (ASO).
Are you ambitious enough to build an offshore company but are unsure about the tax and legal compliance issues? Human resources outsourcing might be the best option for you to navigate through these roadblocks and build a successful venture.
In this article, let us delve into how HR outsourcing works, the 8 benefits of outsourcing HR roles, and when you should think of outsourcing.
How does HR outsourcing work?
According to research data, 58% of companies claim that outsourcing human resource work significantly reduces operational costs and helps save money. This is how it works –
- PEOs offer highly customisable HR services so that businesses only pay for the service that they opt for, rather than keeping an entire HR department on its payroll.
- According to data, 500+ PEOs in the United States cater to more than 400,000 businesses, and they earn more than 414 billion dollars as total industry revenue.
- Therefore, the demand for PEOs cannot be stressed better. The PEOs help manage tax filings, employee payrolls, and the hiring of individual contractors, which means businesses can have more time to devote towards generating revenue.
- The co-employment model works well for outsourcing HR as the PEOs continue to thrive solely based on performance.
PEOs also take care of all associated offshore duties, and taxes are filed under the business’s Federal Identification Number for legal compliance.
What are the 8 benefits of outsourcing HR?
There are several benefits of outsourcing HR which employers leverage to run a successful business.
- Cost-effective model: Outsourcing HR is indeed a cost-effective model for the primary reason that it allows businesses to reduce the overhead costs of hiring a dedicated HR department. Moreover, the modern market requires the use of sophisticated technology for the HR department to function. If the HR roles are not outsourced, the cost of this software has to be borne by the business itself, thus shooting up costs. Furthermore, outsourcing also helps streamline HR processes, which leads to faster turnaround times, thus reducing costs further. If you are looking to make the most of these benefits through outsourcing, Atidiv might be the outsourcing agency you are looking for.
- Access to better expertise: Hiring professionals in the present times requires a combination of various skills, like talent management. Moreover, HR departments also have to deal with compliance protocols. Outsourced HR services are adept at handling these multiple tasks while staying up-to-date with the current hiring trends. Thus, these agencies always give your business that competitive edge that is needed to stay ahead of others in a competitive market.
- Increased efficiency: Having outsourced the HR services, companies can shift their focus on the tasks that are at the top of the priority list. Furthermore, the productivity of employees can go up a notch because of the specialised hiring strategies of the outsourced HR department. Outsourcing also gives businesses an upper hand concerning their long-term vision, which often suffers because the management is swamped with work that needs to be prioritised and deadlines that must be met.
- Legal compliance: Outsourcing can stave off legal compliance issues and the monetary loss that might arise out of it. The reason for this is that the outsourced HRs specialise in being on the same page as the current law enforcement, so businesses can count on them to stay on the right side of the labour code, and other law enforcement norms. Therefore, as a business, you would always stay compliant with local laws and regulations, thus minimising legal risks.
- Recruitment assistance: Outsourced HR roles to PEOs and ASOs can help companies recruit the crème de la crème of the candidates. Furthermore, with the latest evaluation methods, they can make sure they run the best strategies of talent management and carry out best practices during onboarding. Doing these would ensure that employees are not only made industry-ready but also checked for quality assurance.
- Special benefits: Businesses that contact PEOs often enjoy perks and benefits that are meant for Fortune-500 companies. Moreover, such privileges might extend to rebates on insurance rates, which can help companies save big and reallocate funds for hiring top employees.
- Advantages of an open market: Outsourcing HR opens up opportunities for collaborations with international agents for business. Thus, as a business owner, you have the advantage of dealing with local talent with the help of experienced HR professionals. Thus, you skirt around the risks of getting around cultural differences and also need not worry about legal aspects.
- Reduce communication gap: Outsourced HR professionals can more effectively convince talented candidates about salaries and other benefits, apart from discussing company policies. Furthermore, if you are looking to lower the employee turnover rate, outsourced HR professionals can build the appropriate relationships with your offshore employees to achieve the same.
When should you decide to outsource?
The decision to outsource your HR comes in the face of certain specifics, such as –
- You feel you are spending way too much time and attention in the hiring process and it is time to delegate responsibilities.
- You feel that your HR department needs a reshuffle because it has become outdated concerning technological advances.
- You feel that the HR department is not adding much value to your company, and outsourcing might make a difference with better skills and strategies.
- You are struggling to keep up with changing legal norms and are facing too many legal bottlenecks in your operations.
FAQs On Outsourcing HR Functions
1. Does outsourcing HR cut costs for businesses?
Outsourcing HR cuts costs for businesses because an entire in-house HR department can be done without as businesses will be paying for a service and not individuals. Moreover, better technology can be deployed in the selection process without any extra cost.
2. Why is outsourcing HR necessary to have more efficient employees?
Outsourced HR has a better technological infrastructure to suit its strategic planning for employee selection. Thus, employees can be evaluated for quality at any stage and the necessary skills are inculcated in them before they join a specific team. Thus, employees are made job ready by familiarising them with what is expected of them, thus leading to more efficiency at work.
3. What are PEOs and how do they help in the outsourcing process?
PEO is the acronym for Professional Employer Organisation, and they help outsource HR roles such as Administrative Services Only (ASO). Thus, by trusting them, employers have less to worry about filing taxes, managing payrolls or even compliance with the local legal system.
