5 benefits of human resource outsourcing (HRO)

Natalie Toniotti
AUTHOR
Natalie Toniotti
    4 minute read

Whether it be the effect of COVID-19 on employee mental wellbeing or the influence of new generations entering the workforce, there is this growing focus on improving company culture across businesses. Human resources are starting to focus their efforts on employee-focused activities like creating employee engagement programs more than the administrative tasks associated with the department like payroll or performance management.

Achievers’ ‘Workforce Institute’s 2021 Engagement and Retention Report’ found some key insights that further justify the need for HR to re-focus and re-strategise activities surrounding employee engagement. They found that employers who did just that experienced 41% lower absentee rates and a 25 to 59% decrease in staff turnover levels. But, only 21% of employees considered themselves to feel “engaged with” at their place of work. This disengagement percentage may seem relatively low but is costing businesses up to $550 billion per year. 

So how does human resource outsourcing (HRO) play a role in all this? Well, consider how much time your HR function or business managers would need to implement change management strategies surrounding just employee engagement alone, not to mention the other HR activities to improve business efficiencies. With any shift in business goals comes the need to find the time to strategise and implement new procedures. HRO can help by sending administrative tasks such as talent acquisition, payroll, incident reporting and policy queries to experienced HR specialists overseas. In fact, these outsourced HR specialists are not limited to just administrative capabilities. You can find specialists who can help your onshore team develop strategies and implement staff retention activities as well.

Here are five reasons your HR function will benefit from engaging in human resource outsourcing:

Reason 1: Free up your onshore team’s time

Take a moment to reflect on how much time your HR team spends developing strategies or establishing rapport with potential and existing employees versus how much time it spends on payroll administration and ensuring compliance with relevant guidelines and governing bodies. To put this in perspective, a survey conducted by Implementation Hub found that 49% of organisational leaders spend only one day a month reviewing and designing their strategic implementation. Keeping up with new and updates to existing employment legislation is a full-time job in itself. Nevermind updating staff databases with performance reviews, managing payroll queries and so on. If this rings true for your business, then outsourcing these types of tasks that take away from strategy-focused activities could be a solution.

Reason 2: Access the necessary support

With any business comes national, state and local labour laws and regulations that must be abided by. Regardless of the size of your business, ensuring compliance with employee overtime, superannuation, WorkCover and union requirements is crucial and keeping up or tracking changes to such legislation can’t be done incorrectly; otherwise, face significant repercussions.

Human resource outsourcing can provide the additional hands you need to help support your onshore team with monitoring these changes and re-writing policies and procedures. This extra support can work under the direction of your HR leaders to keep your business compliant with federal, state and local laws as necessary.

Reason 3: Improve policies and procedures

What about your internal policies and procedures? How much time does it take for your HR team to create an employee handbook or write up job descriptions? Different internal departments are likely to have different standard operating procedures or ways of working that require training modules to be created and involve speaking to varying managers across the business.

A HRO provider can help you develop these policies and procedures tailored to your organisation’s requirements. They are experts at liaising and drawing on information from managers to create these documents and can even monitor when policies need updating or changes.

Reason 4: Monitor employee relations

Maintaining good employee relations can be very time-consuming for business owners and managers. HRO providers can take care of tasks such as updating employee files, sharing updated company policies and procedures and collating new hire onboarding and induction packs.

Reason 5: Reduce costs

HR outsourcing can, if done right, save businesses a lot of money, up to 70% on employment costs, to be more precise. Depending on the location of your HR outsourcing provider, you can take advantage of the lower living costs of countries like the Philippines, where the cost to employ, say, a HR specialist, is significantly smaller than hiring one onshore. In addition to this, quality will not be sacrificed. You will save money that can then be re-invested into other areas of your business to increase efficiency and even support business growth.

What HR functions can you outsource to HRO providers?

Depending on your organisational needs, you may find that you’d like to outsource one or two roles or even build a team offshore. Here are some examples of HR functions that can be outsourced:

  • Talent acquisition, including pooling talent, background screening and setting up job advertisements.
  • Payroll processing (may or may not sit within your finance department; depends on the organisation)
  • Employee benefits and rewards
  • Employment law and regulations compliance
  • Employee relations and performance management
  • Risk, anti-discrimination and bullying management.

Now that you understand the benefits of HRO, you may want in on the action. It’s important to continue your research and take time to review additional guides to human resource outsourcing that take you through whether HRO is right for your business and ideal locations to outsource your HR functions.

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