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A well-functioning human resources (HR) department is vital for improving productivity, enhancing employee engagement, and reaching organizational goals. Sadly, this is far from reality. HR departments are overwhelmed with pressure to meet employee expectations and stay ahead of evolving regulations and technological advancements.
Although your HR department is your organization’s pillar of support, it can crumble when challenges and issues become too unbearable. As such, there is a growing demand for human resource outsourcing. As of 2024, the market value of HR outsourcing was $42,455.08 million USD. By 2032, its value could amount $68,978.07 million USD.
If you’re looking to jump on the HR outsourcing train, now’s the time to do so. This article tackles the 10 advantages of human resource outsourcing, written in detail to help you envision these benefits.
6 Signs You Need to Take Advantage of HR Outsourcing Services
HR outsourcing can be an intimidating and exciting venture for any business. Before reaping the advantages of human resource outsourcing, let’s take a look at whether this strategy is right for your business:
- Lack of Top Talent: Being unable to attract and retain the right talent can be rooted in poor employer branding, mediocre compensation and benefits packages, and a severe lack of growth opportunities.
- Outdated Technology: Using outdated technology leads to slower operations and costly errors.
- Inefficient HR Processes: Manual processes and poor technology integration make HR services more cumbersome and time-consuming.
- An Increase In Compliance Issues: Whether these issues are caused by human error or negligence of compliance changes, your company has ended up paying hefty fines for non-compliance.
- Higher Expenses: Your company can’t keep up with labor and overhead expenses incurred from maintaining an internal HR department.
- Limited Perspectives: Working with an internal team means less exposure to fresh ideas and best practices.
10 Benefits of Outsourcing Human Resources
From access to high-caliber talent to streamlined HR management, HR outsourcing offers plenty of benefits to businesses. Below, let’s explore the top 10 advantages of human resource outsourcing:
1. Work With Top HR Talent
Onshore outsourcing HR severely limits your talent pool to your geographic location. If you need specialized expertise, expect higher labor costs that reflect the vast knowledge and experience of high-caliber human resources professionals. On the bright side, what’s great about offshore outsourcing HR is the choice of talent available at your fingertips.
Need an HR compliance officer or a C-level recruitment specialist? The best HR outsourcing companies can provide you with cost-effective, top-performing HR talent who are screened and vetted by expert recruitment teams.
These professionals not only meet your desired qualifications in terms of skills, experience, and knowledge, but they’re also culturally compatible with your organization.
2. Manage Labor and Overhead Expenses
Maintaining an internal HR department gives you better oversight of your team. Though true, labor and overhead costs can soar quickly. The Society for Human Resource Management (SHRM) found that the average cost of hiring an employee is $4,683 USD and $28,329 USD for executives.
This makes ramping up headcount less viable during peak seasons for recruitment, performance evaluation, and compliance. However, outsourcing HR functions to an HR outsourcing provider can slash your labor and overhead expenses by a fraction. Outsourced HR employees are cheaper, which makes workforce scaling a more attainable goal from a financial standpoint.
Outsourcing companies also provide employees with the equipment, tools, and technology to deliver outsourced HR services. Unlike running an internal human resources department, there’s no need to pay for additional rent or utility bills.
3. Upgrade Outdated HR Technologies
Here’s the truth: There’s no “right” time for a technology upgrade. However, leaving upgrades to the backseat for far too long can cost your HR department dearly. Productivity loss, delays, errors, and security threats — all these can undermine HR operations, deteriorate efficiency, and increase your company’s risk of non-compliance.
While an IT professional may provide a band-aid solution, continuously using legacy software can increase costs by 20% to 25% each year. If you’re looking to balance technology upgrades with cost savings, HR outsourcing is your best bet.
Equipped with state-of-the-art HR platforms and AI tools, HR outsourcing providers can support your department’s HR responsibilities with less financial investment from your end. Plus, it gives your internal HR department peace of mind knowing that they can rely on the provider to secure sensitive employee data.
4. Boost Operational Efficiency
Efficiency is your HR department’s best friend. Efficiency translates to a smooth workflow and organizational success. Obviously, you won’t achieve these if your HR staff is powering through endless tasks and experiencing burnout.
One of the benefits of outsourcing human resources is boosting operational efficiency. With the help of automation tools, outsourcing companies can streamline repetitive and time-consuming administrative tasks, such as interview scheduling, application tracking, and payroll administration.
In effect, your internal team won’t be slowed down by low-value tasks and can dedicate more time to core business activities.
5. Maintain Compliance With Laws and Regulations
Organizations mostly rely on HR professionals for compliance. Thus, they shoulder the responsibility for knowing all relevant federal, state, and local employment laws, workplace health and safety standards, and data privacy regulations. Amendments or changes? HR staff need to update themselves — or risk paying a higher price for non-compliance.
According to Globalscape, non-compliance can cost companies an average of a whopping $14.82 million USD (versus the cost of compliance at $5.47 million USD). Unfortunately, internal HR professionals are already overwhelmed with cumbersome administrative tasks. This makes meeting compliance standards more challenging, thus increasing your company’s risk of fines, penalties, and lawsuits.
Working with an HR compliance officer from an external HR provider can help your business avoid compliance issues. Using their knowledge of employment laws, workplace standards, and data privacy regulations, an HR compliance officer can ensure that every business function adheres to legal requirements in your home country.
Because an HR compliance officer has experience with international compliance, they can promise that your organization’s employment practices comply with global labor standards and the country’s local laws.
6. Attract Talent
Nowadays, employees have higher standards and expectations. In addition to fair compensation and attractive benefits, they also want purpose, work-life balance, and a non-toxic workplace.
That’s why attracting the right talent is a challenge in its own right. You need to identify your Employer Value Proposition (EVP), enhance employer branding, improve hiring processes, and prioritize diversity, inclusion, and equity (DEI). One bad hire can cost your business $17,000 USD, so you wouldn’t want to scrimp on recruitment and talent acquisition.
An external HR provider can support your talent attraction initiatives with fresh perspectives and insights into your hiring pipeline. To attract skilled and culture-fit candidates, your provider will employ AI technologies and analytics, refine job descriptions, and improve your employer branding. This reduces the financial repercussions of onboarding ill-fit employees or bad hires.
7. Enhance Career Development
A company invests in its employees because they are its greatest asset. Competitive salaries, appraisals, attractive benefits, supportive leaders, and an inclusive workplace culture can make employees stay in your organization. But there’s another thing that makes them stay — career growth.
Naturally, employees want to grow their careers and unlock their true potential. This is possible with self-learning and the help of your HR department. But if your in-house HR is swimming in administrative tasks, outsourcing HR is your solution.
Working with an offshore training and development specialist opens your mind to new perspectives and best practices on career development.
Utilizing their knowledge of instructional design and adult learning strategies, your outsourced training and development specialist can design professional development programs that support self-learning, maximize your employees’ potential, and meet organizational goals. As a result, your workforce will perform better and become more productive.
8. Provide More Competitive Employee Benefits
Companies offer a wide range of employee benefits, including medical insurance, paid time off (PTOs), scholarships, and remote work arrangements. Since job seekers look at an organization’s benefits, your own benefits can either attract or repel potential employees. Of course, the more competitive your benefits are, the more likely your existing employees will be happy, productive, and loyal.
Unfortunately, low employee engagement, lack of awareness, and poor employee-HR coordination are detrimental to effective benefits administration. This is where outsourced HR and benefits administration takes the spotlight.
An HR outsourcing provider can integrate a third-party benefits administration software into your system, streamlining benefits enrollment and verification and centralizing employee benefits into an accessible self-service platform. This minimizes errors and gives HR employees more time for core business activities.
Furthermore, outsourced benefits administrators can offer suggestions for designing attractive benefits that appeal to your employees. They can also leverage AI and data analytics to identify trends and tailor benefits according to a staff member’s unique needs.
9. Reduce Payroll Errors
Payroll processing is a meticulous HR function. While payroll is associated with numbers and calculations, it is more than meets the eye. It’s about compliance, credibility, reputation, and trust. In fact, every payroll error you address sets your company back an average of $291 USD — which can add up if left uncontrolled.
Consequently, payroll mistakes can lead to poor employee satisfaction, inefficiencies, and financial loss. If your company has missed payroll deadlines or faced compliance issues, it may be time to outsource payroll to an HR outsourcing company.
Outsourced payroll specialists can handle the bulk of your payroll, leveraging advanced payroll software to streamline the calculation of benefits, minimize data and calculation errors, and ensure that all payslips are delivered to the correct employee.
These payroll specialists can also help your internal team prepare payroll and annual tax reports on time, so your company avoids fines and lawsuits from non-compliance.
10. Streamline Human Resource Management
HR management is tough. Companies entrust HR managers with tasks involving compliance, recruitment, talent management, workplace discipline, and performance evaluation. Alarmingly, human resources is a department that’s rife with burnout. Whether it’s excessive workload or empathy fatigue, HR staff and managers also crave support for their struggles.
This is where outsourcing HR management comes into play. With their out-of-the-box perspectives and knowledge of HR best practices, offshore HR managers can assist your in-house managers with developing training programs, enforcing company policies, managing your workforce, and maintaining legal compliance.
Because outsourced HR managers leverage AI, workflow and processes are streamlined to reduce your internal HR management team’s workload. This enables them to focus on high-value internal HR initiatives.
How to Reap the Advantages of Human Resource Outsourcing
You can reap the advantages of human resource outsourcing by applying these two HR outsourcing best practices:
Tip #1: Choose the Right HR Outsourcing Provider
Choosing a provider is one of the most important steps to take when outsourcing HR. The right vendor has the following:
- Shared values and culture with your organization
- Secure IT infrastructure
- Strictly enforced data security practices
- Transparent and flexible pricing models
- Expertise in your software and outsourced HR function/s
- Professional and ethical HR talent
- Solid track record of providing outsourced HR
In some cases, the red flags show up when your offshore HR team is working on a trial project. But don’t let this stop you from finding the right vendor. Know what you want, set your expectations, and keep vetting outsourcing partners.
Tip #2: Measure the Performance of Your Offshore HR Staff
Outsourced HR services are only as good as the offshore staff behind them. To leverage the advantages of human resource outsourcing, set realistic performance standards and conduct regular feedback sessions.
This way, you can identify areas for improvement, assess your team’s ability to maintain compliance, and help your HR staff reach key performance indicators (KPI). The better your team performs, the more likely you’ll achieve organizational goals.
Enjoy the Many Benefits of Human Resource Outsourcing With KDCI Outsourcing
At KDCI Outsourcing, we can help you achieve the benefits of human resource outsourcing with our world-class offshore outsourcing solutions — carefully tailored to meet your organizational and staffing needs.
We source, vet, and onboard HR professionals who meet your requirements and exhibit values, ethics, and mindsets that mesh well with your organizational culture. With our expertise in automation and AI technologies, we can optimize all HR functions for efficiency and scalability.
Build a dedicated HR team and let’s elevate your HR with KDCI. Contact us for a quotation or proposal today!
