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HR Outsourcing: Everything You Need To Know

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Human Resource (HR) operations have a major role to play in the overall growth of your business. To ensure the significant growth of your startup, it is mandatory for you to focus on streamlining the HR activities of your organization. These include taking good care of your employees, hiring, and onboarding appropriate talents, helping the employees with payroll and benefits, and so on.

Startups already have a lot on their plate. It can become challenging for them to handle the core HR activities efficiently. This is exactly why outsourcing HR is gaining significant popularity. As of 2019, the global outsourcing industry is worth $92.5 billion.

If you’re running a startup or planning to start one, it’s time that you learn more about outsourcing HR functions, and its importance for SMBs. This article is all set to cover it all. So, without further ado, let’s get started.

What is HR Outsourcing?

HR outsourcing is an arrangement where an organization hires a third-party agency to handle its Human Resource (HR) operations.

Depending on the requirements of your organization, there are tons of services that you can get from an HR outsourcing company. These may include everyday HR functions, long-term HR initiatives, and so on.

5 Major HR Functions that can be Outsourced Easily

We can divide outsourcing HR functions into two segments:

  1. Administrative HR Outsourcing tasks
  2. Strategic HR outsourcing tasks.

Let’s find out the respective functions under each segment:

Segment 1: Administrative HR outsourcing tasks

The administrative HR outsourcing tasks are associated with various administration operations of your organization. We’re listing some of those here:

Payroll management

A critical task for any HR team is to handle the payroll of an organization’s employee base. When you’re opting for Human Resources management outsourcing, an external HR team will handle activities like payroll tracking, benefit deductions, tax filing, and more.

Here are some of the major tasks that fall under the payroll management category in the case of outsourcing HR:

  • Setting up payroll
  • Processing, weekly/monthly payroll cycles
  • Tracking Paid Time Off (PTO), leaves, etc.
  • Managing automated deductions
  • Accessing and maintaining the attendance system
  • Employment verification of new joiners
Benefits and administration

HR outsourcing companies can also help SMBs with essential employee benefits. These may include both health and financial factors.

If you’re looking for hiring and retaining skilled talents, you must offer them with necessary benefits. These benefits act as motivating factors for your workforce.

Most HR outsourcing firms have specialized knowledge to use the benefits that will work for your company and will keep the employees satisfied.

Some of the widespread benefits that you can access through an HR outsourcing company are as follows:

  • Health care, life insurance claims (self and family), short-term and long-term disability, and so on
  • Employee assistance programs for the wellbeing of your workforce
  • Administrating the unemployment claims
  • Reconciling necessary invoices to estimate benefits and contributions
  • Tracking PTO
  • Handling employees’ queries related to administration

Segment 2: Strategic HR outsourcing tasks

HR outsourcing companies can also handle strategic tasks. Here’re a few that you can refer to:

Screening and Hiring

Hiring skilled employees who can stay for a long time in your organization has always been a priority for SMBs. While this can be a tedious job for your internal HR team, your HR outsourcing partner can easily help you with this. In fact, some common HR outsourcing activities include sourcing, interviewing, and hiring skilled candidates.
Below are some of the essential tasks that fall under this category:

  • Sourcing the right candidates
  • Tracking the potential candidates on different web-based portals
  • Developing and posting job descriptions
  • Screening new candidates based on the provided criteria
  • Onboarding new employees
Employee performance management

Every organization should have a dedicated performance management program. Such programs aim to track the employees’ performance and motivate them to keep up their hard work. Startups can easily get assistance from HR outsourcing agencies regarding this.

Here’re a few performance management services that you can expect from an HR outsourcing agency:

  • Streamlining the performance goals of each employee
  • Collecting the ongoing feedback on each employee’s performance
  • Maintaining and accessing employee performance records
  • Focusing on various knowledge management and employee development tools
  • Identifying the skill gaps for each employee and reporting the same to the executives
  • Implementing diversity and inclusion initiatives
Workplace safety

Prioritizing employee safety is one of the greatest goals of any organization. By hiring an HR outsourcing firm, it gets easier for organizations to initiate several HR outsourcing activities. An HR outsourcing company can help with well-researched plans and strategies that can improve workplace safety quotients.

Here is some workplace safety support that you can receive from an HR outsourcing firm:

  • Developing and maintaining an employee safety handbook
  • Initiating accident prevention programs
  • Offering on-site training, safety training to all employees
  • Investing in the causes of workplace accidents and preparing proper reports
  • Offering consulting services for workplace safety management

Why is Outsourcing HR Functions Important For Small Businesses?

The importance of outsourcing HR functions for small businesses is relatively high. Largely because small businesses have limited resources and their objective is to make the most of it to achieve growth. By partnering with an HR outsourcing firm, small businesses can continue their focus toward growth.

Here’re a few reasons why SMBs should focus on HR outsourcing:

HR outsourcing can help in reducing  costs

Investing in an HR outsourcing company is always a smarter choice. Largely because it can optimize an SMB’s spendings in multiple ways. Approximately 80% of respondents in Deloitte’s survey have mentioned their satisfaction with HR outsourcing from a cost-centric point of view.

Any HR outsourcing company works with experts having notable experience in recruitment, onboarding, retention, administration, and other aspects of HR operations. HR outsourcing partners are as efficient as full-time HR. In fact, sometimes the overall spending is way lesser in the case of partnering with an HR outsourcing company.

SMBs can shift their focus on growth from administration

If non-HR experts are handling HR operations for your SMBs, it will take them a lot of time to figure out the essentials of administration. This could result in tedious paperwork, unlimited errors, and waste of your valuable time. Startups need to do a lot within a limited time. They can hardly waste time on any one activity. By collaborating with an HR outsourcing partner, SMBs can free up a lot of their time and engage in other meaningful tasks.

Staying compliant with the rules and regulations

Staying compliant with all employment regulations and legislations is a must for any HR team. But it is challenging to stay compliant with so many regulations, especially when these legislations change around 75 times each year.

So what is the way out here? The smartest thing you can do is hand over these responsibilities to an HR outsourcing agency that can handle all these regulations, legislations, penalties, and any other legal aspects. This can not only free up your valuable time but can also help you mitigate a lot of risks.

What are the Advantages of Outsourcing HR Functions?

Here’re the benefits of outsourcing HR functions:

  • First thing first, HR outsourcing saves a lot of time for startup entrepreneurs. They help with dedicated HR professionals who can take care of major to minor HR operations. This allows you to prioritize other critical activities without worrying about employees’ well-being.
  • HR outsourcing agencies can help you develop new HR policies and finetune the existing ones. That way, you can expect all your policies to be revised and updated as per the legislative requirements.
  • HR outsourcing can streamline the recruitment and onboarding process of an organization. An expert HR outsourcing company can ensure that only skilled candidates whose profiles match with a particular job requirement are hired. They also take care of onboarding the employees with needful paperwork.
  • Sometimes it gets challenging for startups to train new employees with organizational processes and technologies. As a result, employees may have a tough time understanding the requirements of your organization. An HR outsourcing company can take care of training the new employees with organizational processes, policies, and regulations. Hence, employees can start working for your company with motivation and comfort.

“Can my HR Operations be Outsourced?” – Well it Depends on Your Company’s Needs

Now the question is, can you outsource HR operations for your startup?

Well, why not!

Depending on your organization’s needs, there are a variety of HR outsourcing services that you can select. Below are some examples to get you started:

You can opt for the HR tools and technologies

You may have an expert internal HR team. However, you may lack the apt tools and technologies to support your HR operations. In that case, you can invest in an  HR outsourcing partner who’ll help you with effective HR tools that can accelerate your internal HR operations and reduce manual errors.

You can opt for Professional Employer Organization (PEO)

You can also think of associating with a PEO agency where you enter into a co-employment partnership with an HR outsourcing company. The PEO will help you with administrative responsibilities and offer several other scalable solutions to optimize spendings, increase efficiency and mitigate risks.

You can collaborate with an Administrative Service Organization (ASO)

ASOs can help you with various administrative services associated with HR operations. Some of the popular services that ASOs can help you with include payroll management, risk, compliance, performance management, employee retention programs, etc.

Check our blog to understand the difference between PEO and ASO.

How Multiplier can help with your HR Outsourcing needs?

Looking to onboard national and international employees with an efficient HR outsourcing partner? Your search should end at Multiplier. We’re a next-gen HR outsourcing company offering the following services:

Want to learn more? Start your Free Demo!

Hiring and onboarding using Multiplier ensures you hire remote talent with locally compliant, fool-proof job contracts, offer emphatic benefits and disburse salaries accurately with absolutely nil errors in payrolls.

Hiring and onboarding using Multiplier ensures you hire remote talent with locally compliant, fool-proof job contracts, offer emphatic benefits and disburse salaries accurately with absolutely nil errors in payrolls.​

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