Reasons to Outsource HR Functions
As a business strategy, organizations utilize outsourcing to procure certain goods or services from outside vendors rather than creating them themselves.
According to Statista, the value of the global market for outsourced services was 92.5 billion dollars in 2019, an increase of almost seven billion dollars from the previous year. Business process outsourcing (BPO), a subcategory of outsourcing, is contracting out of particular business processes.
These processes are typically either internal business functions (back office), like human resources, or customer-related functions (front office), like call center customer care operations. Outsourcing of business processes is frequently connected to IT operations. In 2019, the worldwide BPO market generated 26 billion dollars in sales.
What is HR Outsourcing?
In general, HR Outsourcing is using a skilled third-party source to help a corporation with particular HR functions. These features could include products made to support your company, such as:
- Entice and nurture talent.
- Adherence to laws and regulations.
- Payroll and benefits administration.
In many instances, a partnership with the third-party supplier might involve direction and assistance from an experienced HR professional as well as access to a scalable HR technology platform.
A Large Corporation as an Example of Outsourcing: Basecamp
A project management application called Basecamp assists in overseeing both local and remote employees. However, Basecamp began as a modest 4-man company and quickly gained momentum. As the business grew, it started to run into issues with client work, organization and projecting the appropriate image to its clients in order to maintain ground and expand profitably.
The company was providing a quality product for the money, but its internal operations were chaotic.
Basecamp started outsourcing HR functions and hiring remote engineers to advance app development. The team was able to become more structured, concentrate on business goals, and make the required changes as a result, which helped them better their product.
In order to maintain a positive corporate image, keep business operations structured, and ensure that their product stands out from the competition, Basecamp now employs a number of remote employees throughout the globe.
Types of Outsource HR Services
There are five main types of outsource hr companies: Human Resources Outsourcing (HRO), Professional Employer Organization (PEO), Administrative Service Offering (ASO), Staffing Companies, and Independent Contractors.
- HRO
Most human resources organizations (HROs) let big companies pick and choose which HR services they want to outsource.
A co-management connection or shared HR relationship is created between the HRO and the business when just a portion of the functions are handled by the HRO (this is typically the conservative approach to that first outsourcing HR). When all HR core functions are contracted out, the HRO is in charge entirely. The strategic HR management functions are still internally held in large firms, while the majority of administrative and tactical roles are outsourced.
- ASO
Choosing to work with an ASO or Administrative Services Organization is the second HR outsourcing scenario. An ASO works for your business to offer administrative services, as the name rightly suggests. These include paying employees, making direct payments, and submitting payroll taxes.
The ASO will offer support with queries regarding compliance and legal issues, access to insurance, and worker’s compensation, in contrast to outsourced payroll. These services and prices are based on the number of employees you have and the employment risks involved in keeping them.
- Staffing companies
Employers can identify and hire workers with the assistance of staffing organizations, often known as staffing firms or staffing agencies. In other words, they act as talent recruitment agencies and assist in locating potential employees for businesses to interview. Staffing firms collaborate with businesses until a position is filled but are not involved in the employee benefits side of things. Their only goal is to aid staff groups; they don’t deal with payroll. Businesses that use staffing agencies may also use PEOs; both HR outsource companies are advantageous to employers at various stages.
- Independent contractors
Without appointing them as an employee or providing them full-time employment, hiring an independent contractor enables your company to have someone on hand to assist in developing your functions of HR, ensure that the proper procedures are in place, and more.
It can be expensive, and you have no control over an independent contractor’s availability to have them on retainer. Employing a contractor for a single task has been helpful in certain cases, but it can be difficult in others due to the contractor’s limits in terms of skill or capacity.
- PEOs
PEOs, or professional employer organizations, take care of all the functions of human resource management and are often more advantageous for small and mid-sized firms. When a firm outsources its human resources department to a professional outsource HR company, they establish a co-employment arrangement in which the PEO serves as the employee’s employer of record and the business serves as the employee’s on-site employer.
The PEO will be accountable for taxes and workers’ compensation as the employer of record. Due to the shared responsibility, the small business’s financial obligation is reduced. PEO outsourcing may also save money on retirement benefits and health insurance by pooling the workers from all of its clients. They frequently provide outsourced payroll, performance management, hiring, background checks, and other employment administrative responsibilities, depending on the requirements of the company using them.
Who is HR Outsourcing for?
Outsourcing of HR functions can be done by companies of different sizes and with various needs. You are entitled to outsource if you have the issues mentioned below and many more:
- The process of fulfilling functions of HR management is time-consuming and prevents the company from functioning properly
- If the company can’t afford to hire a new full-time employee and cover its needs. Hiring IT headhunter might be one of the solutions.
- HR manager functions is a responsibility of several departments or employees
- Absence of internal HR employees to balance hiring and employee management responsibilities effectively
What Services do Outsource HR Solutions offer?
The administration of human resources is a multifaceted process that requires many distinct duties. And while outsourcing recruitment process all of your main HR functions will significantly lessen your workload, you shouldn’t choose that all-encompassing strategy.
Some administrative responsibilities in HR are better handled internally. The results of these tasks often define the direction of your company and your interactions with your staff. Here are a few services you can outsource:
Still considering your choices for outsourcing HR services? Consult with Mobilunity!>>>
Talent Acquisition
Finding and hiring new talent is one of the main duties of every HR department and outsource hr small business . It takes the longest amount of time, though.
There are typically four phases in the hiring process:
- Posting jobs on job search sites.
- Application review and background investigation.
- Interviewing candidates on the shortlist.
- Greeting the new employees at the business.
It makes sense to outsource talent acquisition duties to an HR outsource company rather than carrying out all of these processes in-house because doing so might divert attention from your core responsibilities and will give you access to a worldwide recruitment solution.
Performance Management
Employee performance management entails monitoring the effectiveness of your staff members and making sure that their personal objectives are in line with those of the business.
Every team member’s skills, accomplishments, and duties are thoroughly examined. Additionally, it involves a variety of decision-making processes, including firings, reviews, job changes, and bonuses.
It is recommended to enlist the outsource HR functions for this as it calls for a time-consuming investigation. Any choice involving a worker, such as a performance-based promotion, must, nevertheless, be made by the company’s owner or management.
Payroll Management
Perhaps one of the most typical functions of human resource management to be outsourced is payroll processing. You don’t want to make any errors while figuring out all the deductions to withhold from your employees’ paychecks since it may get quite complex and difficult. For this reason, a lot of businesses decide to delegate the process to payroll specialists rather than manage it themselves.
Administration Of Benefits And Compensation
While incentives and rewards encourage an employee to perform more, compensation is what you pay your staff for their job. You must continually update both in accordance with the most recent industry standards if you want to improve staff retention.
But you have to do a ton of research to achieve that. For instance, you should research the most recent market norms for employees’ remuneration and compare them to the productivity of each individual in your company.
Employing someone full-time is unnecessary because you don’t require these services all year round, and manually assessing each employee and double-checking the information with those of other businesses takes time. And those are the main reasons why companies choose to outsource HR functions.
Pros and Cons of HR Outsourcing
A new idea has been introduced to the business sector today to make handling day-to-day functions of HR manager less difficult and more successful. One can either outsource all the tasks or some of them to an outsourcing provider, depending on the size of the business of the company and how much control one wishes to maintain over outsourced hr functions.
Consider an HRIS consultant if you need HR main functions to be managed with the aid of software, including maintaining employee profiles, maintaining legal papers, managing vacation requests, delivering annual evaluations, and organizing training or education.
| Pros | Cons |
| Reduces Costs | Control Loss |
| Enables Employees to be More Strategic | Cultural Shifts |
| Access to a Large Pool of Professional Profiles | Less Adaptability |
| Obeying Legal Requirements | Different Views |
Obstacles a Recruiter May Face When Hiring in Another Country
The necessity to outsource HR for small business outside of their home country is at the top of the list for businesses trying to take advantage of the opportunities offered by today’s increasingly globalized business environment.
Managing a recruitment program has its hurdles, but for businesses trying to grow internationally or strengthen their global presence, those challenges increase significantly.
The main concerns for any business in order to have a fruitful worldwide hiring campaign are:
- The distinction in cultures
- The struggle to find talent locally and internationally
- The difficulty in communicating because of distance
At Mobilunity, we use a system based on our 10+ years of expertise, the distinctive abilities of our team, in-depth knowledge of the global labor market, and a creative approach to every situation to provide our clients with optimal match specialists.
As an example, we had a client from Japan that was seeking a specialist who was prepared to work at the company’s office. It was crucial for the team to add a new member who would participate in every aspect of the on-site work operations.
In a two-month period, we identified 145 possible employees, received 13 CVs, conducted 6 interviews, and presented 4 applicants to the customer.
HR Outsourcing Services Pricing in Different Countries (Monthly)
*Ukrainian salaries are provided based on Mobilunity’s Recruitment Team research on the local job markets. All salaries are net and do not include the service fee (in case of hiring on a dedicated team model). The salaries are provided for comparison purposes and could be not entirely accurate. Contact us to know the exact cost of hiring a developer corresponding to the required parameters.
Ukrainian professionals appear to have the most experience of all the HR service outsource countries mentioned, but they are paid less than those from the other countries. The cost of living has an impact on outsourcing HR manager salaries. On a global scale, however, the standard of employment is still high and competitive. The Ukrainian IT market is expanding swiftly, maintaining Western standards while adhering to modern trends.
Mobilunity is Your Best Option!
Since 2010, when recruiting became one of our core services, we have employed thousands of IT specialists for our international clients.
Mobilunity is a team augmentation platform used by more than 40 businesses across more than 15 nations. Mobilunity promises specialized services based on its years of expertise, not just for unique businesses but also for every distinct market and location. Among our clients are OnTrack Retail (the UK), Pafin (Japan), i-doit (Germany), Zenchef (France), CamptoCamp (Switzerland), etc.
The hiring team works together with the internal media team at Mobilunity to creatively market hot positions. For instance:
- Our recruitment team works with the media team to produce interesting videos that highlight hot job openings and informally explain criteria and conditions to prospects.
- Our team uses inventive adverts placed on well-known social networks to promote the opening.
- We frequently send audiences emails with hot job openings.
With our HR outsourcing functions, you have the option of employing an HR manager and paying them flexibly based on the amount of hours they put in. This approach gives you the freedom of independent contractors while maintaining our promises.
You are welcome to get in touch with Mobilunity specialists if you’re looking for knowledgeable advice from HR managers. This is your chance to outsource HR functions!
All salaries and prices mentioned within the article are approximate NET numbers based on the research done by our in-house Recruitment Team. Please use these numbers as a guide for comparison purposes only and feel free to use the contact form to inquire on the specific cost of the talent according to your vacancy requirements and chosen model of engagement.
