As a part of Human Resources Transformation efforts, many companies are considering human resources outsourcing opportunities. What HR services to insource and what HR services to outsource is not a black and white decision, but is based on a variety of macro and micro factors. Generally, the HR outsourcing opportunities are outlined as an integral part of the HR Transformation Roadmap. Before embarking on outsourcing any of the Human Resources functions, it is important to consider the following:

What is HRO or Human Resources Outsourcing?

HR outsourcing is the leverage of an external third-party service provider to either procure specific HR personnel to manage certain HR functions; or selectively farm out the management of specific areas of the HR value chain to a specialist HR services company, with a contractual agreement, which determines the size, scope, activities, outcomes and service level agreements.

What are some of the key considerations in HR Outsourcing?

  • Cost – Even in the most progressive companies, certain HR functions are deemed to be cost centers and hence reducing cost is an outsourcing driver.
  • Specialization – Companies today want to stick to the knitting and focus on the core and outsource the context and commodity functions.
  • Better Services – A specialist HR service provider, by way of serving other similar employers, time and again, has honed the skill and can render better services at lower cost and higher effectiveness
  • Flexibility Capacity – If an employer needs flexible staffing – perhaps to adjust to seasonal staffing fluctuations, for example – a model where additional staff can be added and removed with a short notice is better than having FTEs during leaner demand months.

What types of Human Resources Outsourcing Opportunities are available?

  • Traditional Business Process Outsourcing (BPO) – A complete range of HR outsourcing services, among which the company can choose from, are available. The BPO can be done onshore, near-shore, or offshore. It depends on a variety of factors.
  • Professional Employer Organizations (PEOs) – In this case, a specialist provider can provide HR personnel on contract, or take over entire set of HR functions and the company’s employees to their own payroll, and then administer the necessary services
  • Managed Service Providers (MSP) – Typically, this involves a cloud-based SAAS (Software-as-a-Service) provider with value added services.
  • Shared Services – In larger companies with size and scale, it is possible to have a shared services operation providing various HR services.
  • Best of Breed – In this model, the company can select the best providers for various HR functions and then get the best of the services available. But redundancy and replication, as well as reporting challenges may be something to consider.
  • Robotic Process Automation (RPA) – Robotic process automation, as the name suggests, is automation of certain tasks – most repetitive – and this can be an approach for certain HR services.

Which Human Resources functions can be Outsourced?

The answer to “What can be outsourced?” is everything and anything. But the question is “What should you outsource?”. As we mentioned earlier, it depends on a variety of factors, some of which are global trends, and others are company specific factors. In general, the following are some of the areas that have been historically favored areas for various types of outsourcing.

  • Payroll and Compensation
  • Application sourcing and tracking
  • Benefits administration
  • Call center support
  • Relocation services
  • Recruitment services
  • Learning and Development
  • Leadership Development
  • Legal and Regulatory Tracking and Reporting

What are the key aspects of a Human Resources Outsourcing process?

  • Conduct an internal assessment of why you want to outsource and define what you want to outsource
  • Evaluate alternative models of outsourcing and shortlist a couple of options that may be appropriate based on strategic and operational considerations
  • Develop a qualitative and quantitative business case, including the challenges and operational considerations
  • Assess the skills, competencies, services, and track record of HR outsourcing service providers
  • Select an appropriate model and a provider
  • Negotiate price, contractual terms, and SLAs (Service Level Agreements)
  • Conduct business process analysis
  • Transfer knowledge and the HR Services
  • Monitor and Measure

If you pursue the Human Resources Outsourcing Opportunities with a strategic vision, clarity of purpose, a prudent plan, and an operational blueprint, it is possible to successfully implement outsourcing strategies in your HR realm.

To learn more about HR outsourcing, you may consider reviewing reports on Everest Group and content/tools on SHRM.

There is more information available on HR transformation. Please check out CIOPages.com HR Transformation Resources and the Human Resources Transformation Toolkit for additional insights and resources to help you in HR transformation efforts.