An in depth guide to Human Resources Outsourcing (HRO)

Natalie Toniotti
Natalie Toniotti
    7 minute read

From talent acquisition to creating employee policies and procedures, an organisation’s human resources (HR) team is a business function that values staff well-being above all else. Organisations rely on a successful HR team to keep staff satisfaction levels high and to instill company cultures and values. Organisations are nothing without dedicated employees, that’s why it’s so important to invest time and money into your HR team. Outsourcing can be a cost-effective and value-add option to improving staff satisfaction without significant investment in your HR team.

What is outsourcing and how does it apply to your HR functions?

Outsourcing is a fee for service contracting arrangement. It occurs when an organisation engages a third-party provider to get them to perform certain tasks or services outside of their organisation. Essentially, this third-party provider sets up an employee or team of people to perform tasks that would otherwise be done in house. 

Let’s take HR as an example. Say a business wishes to outsource their talent acquisition team. The first step is to engage an external provider, and through the negotiation of a contract, this provider sets up a team of talent acquisition specialists offshore. The third-party provider can source a qualified and experienced team that matches the businesses values and needs for these roles. 

Put simply, an offshore HR team works no differently to your onshore team. They meet KPIs, administer employee benefits, recruit and onboard new employees and add value to your business just as your onshore team would. The main difference would be the costs of employment and the location of your team. 

Outsourcing applies to your HR function in the sense that you can outsource one, a few, or even all of your HR tasks and services to a third-party organisation. What makes HR functions so well-suited to being outsourced is the repetitive and transactional nature of the tasks performed.

What types of HR functions can be outsourced?

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 is a general overview of the types of HR functions that can be outsourced:

  1. Talent acquisition and background screening
  2. Payroll processing (may or may not sit within your accounting department; depends on the organisation)
  3. Employee benefits and rewards
  4. Employment law and regulations compliance
  5. Employee relations and performance management
  6. Risk, anti-discrimination and bullying management.

The vast majority of HR tasks are rules-based and require a significant amount of time performing administrative functions. Outsourcing is a solution that can take the “weight off your onshore team’s shoulders.’’

Where can you outsource your HR services to?

The answer is simple; anywhere. You might even have an outsourcing provider down the road from your business. The great thing about outsourcing is how easily accessible it is to businesses. Whether it be overseas, in another country or the same city, outsourcing is a cost-saving alternative that can be located anywhere in the world. 

“Where” isn’t as important as “who”. Who do you outsource your HR services to and how do you know you are going to get a quality service from those providers? When choosing an offshore provider for your HR tasks, it’s crucial to cover off all the key questions to ensure that the company and the employees they hire match your own cultures, values and business goals.

Offshoring isn’t a business decision to take lightly. It’s an investment that requires efficient planning and confidence that you have chosen the right provider to meet your business needs. From internal change management like offering support to your onshore staff regarding the structural changes associated with offshoring, to engaging an outsourcing supplier and establishing key result areas for the offshore team, these are all key steps to any successful outsourcing venture.

Why outsource your HR services to the Philippines?

Within the Business Process Outsourcing (BPO) industry, the Philippines is one of the leading suppliers for outsourcing in the world. Outsourcing HR tasks and functions will not only save on employment costs, but an expected 29.2% increase in cloud-based technology in companies around Australia only makes offshoring a more viable and practical option.

To better understand how the Philippines can provide desired returns for your organisation, here are a few reasons why you should be outsourcing to the Philippines:

  • English language proficiency

    With a Business English Index (BEI) of 7.95, Filipinos can communicate effectively with your employees and interpret awards, legislation and understand HR documents.

  • Cost-effective and quality

    Due to lower living costs in the Philippines vs Australia, businesses pay LESS for MORE. By spending less to employ staff in the Philippines, organisations gain business efficiencies as Filipinos strive to produce quality work. Depending on your HR requirements, outsourcing providers can source experienced and qualified employees in the Philippines.

  • Strong work ethic

    As HR can be mentally taxing when dealing with employee complaints, high-volume recruitment and background checks, having a dedicated team who can keep themselves motivated and inspired to work is important. Filipinos value respect and honest effort, so are better able to manage these highly stressful tasks.

  • Cultural compatibility

    With a history of colonisation by foreign forces, the Philippines has experienced a multitude of different ethics, values and customs. As a result of this, it’s created compatibility between Filipinos and other cultures which gives them an edge in understanding the sensitive nature that can come with HR tasks such as employee relations and performance management.

What are the benefits of outsourcing HR services to the Philippines?

Here are four benefits an organisation can get from successfully outsourcing HR services to the Philippines:

  1. Lowering employment costs by up to 70%
  2. Improving staff satisfaction and retention: moving certain tasks to an offshore team member so that your onshore staff can focus on what they were hired to do
  3. Creating the ability to scale your business: by choosing a low-cost alternative to employing HR team members locally, you are able to re-invest these savings into revenue generating projects and grow your business
  4. Increasing business efficiency: your offshore HR provider isn’t just a supplier; they are an expert on all things outsourcing. By having them be an “extra pair of hands”, you don’t need to worry about managing a whole team over in the Philippines and can consult with your new provider on how you can continue to save costs or scale your business as your relationship develops.

How to know if outsourcing your HR services is right for your business?

Outsourcing can provide your HR department with access to the best global talent, all while saving on employment costs. Outsourcing helps organisations reassess their respective HR departments and enable a more productive method of operating.

To determine whether your business and it’s HR functions are ready for outsourcing, here are four components that you must check off before your able to engage with a third-party provider:

  1. Have clear systems and processes already in place
  2. Understand how to use and are already connected to the Cloud
  3. Existing staff react positively to implementing change and are ready for cross-cultural teams
  4. Clear functional areas within your business to clearly define outsourced roles and tasks associated.

Once you have ticked these four boxes, you are then able to confidently start approaching suppliers and begin the conversation of outsourcing your HR services. However, with any business venture, research is the key. It is important to continue with your outsourcing research as the more knowledgeable your business becomes, the more benefits you will receive.

Time to get started on your outsourcing journey?

We’ve compiled two free outsourcing toolkits, Part 1 and Part 2, that cover everything from communication, preparation, recruitment and onboarding to what to expect from outsourcing and how to choose the right offshore provider in the Philippines.

Airplane 3

Business growth tips delivered to your inbox weekly

Airplace 6
Boost your knowledge about offshoring, register for our education series here.