The Many Benefits of Outsourcing HR Business Processes

March 22, 2024
Business Process Outsourcing

Many businesses are known for a great product or service — cars, coffee, healthcare, grocery stores. The product or service is the heart of things, but every business depends on secondary functions to help operate successfully. While a business, especially a small or medium-sized one, may have its main objectives covered, a lack of resources and budget constraints may keep it from covering the other vital tasks that help the business grow and thrive.

Outsourcing business HR processes may be the answer to this problem.

What Is HR Business Process Outsourcing (BPO)?

When a company enters into a contract with a third-party service provider to perform agreed-upon HR business functions, it’s called HR business process outsourcing. Working with an outsourcing company helps organizations to maximize their efficiency by helping with tasks that are:

  • Not part of their core purpose
  • Common to many businesses
  • Able to be done faster, better, and cost-effective by a vendor

The difference between front-office and back-office outsourcing

When you hear about BPO, it may refer to front-office or back-office processes.

Front-office processes are a popular outsourcing niche that typically runs client-facing functions like:

  • Customer service
  • Sales
  • Technical support

Back-office BPO usually helps with administrative tasks that support the organization's overall framework, like:

  • Payroll processing and accounting
  • Benefits administration
  • Talent recruitment, onboarding, and retention
  • Risk mitigation
  • HR compliance
  • Information technology
  • Applicant tracking
  • Training and performance management

Organizations may use BPO to help "fill the holes" in their operations. When Deloitte's 2022 Global Outsourcing survey asked respondents to name the top internal challenges the company faced, 50% said it was talent acquisition.

In the same survey, 76% of executives indicated that IT functions are outsourced. The other most-commonly outsourced functions were:

  • Legal — 64%
  • Tax — 61%
  • HR — 57%
  • Finance — 51%
  • Manufacturing and supply chain procurement — 50%

Benefits of HR Outsourcing Business Processes

Finding a reputable provider to help with HR processes may seem intimidating. However, numerous benefits from BPO can make it worth the effort.

Cost-effective

While each pricing outsourcing model may vary, working with a BPO provider may help with cost in that optimizing the workforce work.

Increases focus on core functions

Many times, handling time-consuming tasks like payroll processing and navigating HR compliance rules and requirements can suck resources away from revenue-generating initiatives. Covering these tasks with a BPO provider can help free up time so you can pursue economic growth and find new business opportunities.

Improves efficiency and performance through experience of vendors

BPOs often specialize in their field, making them savvy subject-matter experts. They understand the tasks and can typically perform them more efficiently and accurately than an employee trying to juggle them as an afterthought.

Stays up to date on issues and technology

Since the specific functions are their bread and butter, BPOs generally stay abreast of trends and technology that increase their speed and productivity. They will typically invest in new technology and enterprise software sooner than a small business with a limited budget.

Leverages expertise in HR

HR rules and requirements in the current business environment can be confusing and time-consuming. However, it must be done, and done properly. The right software outsourcing provider will help you navigate so you can keep an eagle eye on current and ever-changing rules and requirement, and so you can comply and your processes are in line.

Establishes an entryway to a global workforce

A BPO may have a global presence in multiple countries. Accessing this infrastructure can help organizations set up a presence quicker than if they were working alone and give them a competitive advantage.

Facilitates the ability to scale

Scaling operations can be difficult when companies try to hire every employee they need to perform every function. Using a BPO provider can help make scaling an easier process. This is especially important to companies that do seasonal work and need to adjust business operations on a regular basis.

Offers better services for employees

Providing robust benefit options that can measure up to their top competitors can benefitmany organizations. Working with a BPO can help a business offer a wider range of employee health insurance and other valuable benefits that wouldn't be possible otherwise.

Gathers advanced data collection and analysis

While smaller businesses may struggle to find the time to compile and translate workforce metrics, BPOs may have tools in place to help perform data analytics. They can help with strategic planning by providing process improvement analyses, compensation marking, performance management and other reports.

Role of Outsourcing in HR Processes

HR processes can be a good fit for outsourcing if organizations don't have an HR department or their current department can't handle all the required tasks. Perhaps the HR team isn't experienced in certain business processes, or they just don't have enough bandwidth to manage all the tasks.

Options for HR outsourcing

Companies can choose from many HR outsourcing options, depending on their specific needs, budgets, and goals, including:

  • Professional employer organization (PEO). A PEO is a full-service human resources outsourcing organization that can assist companies with a wide variety of HR administrative tasks. PEO and the company is in a co-employment relationship. The PEO is the co-employer and provides specific employer-related responsibilities as allocated in the agreement.
  • Administrative services offering (ASO). An ASO does not enter into a co-employer relationship with an organization. ASOs help manage an organization's daily administrative tasks but do not provide sponsored employee benefit programs or workers' compensation coverage.
  • Managed services. This option helps take care of a limited number of services agreed-upon by the outsourcing company and organization. Managed services plans are good options for companies that need specific tasks handled but want to keep others in-house. In the Deloitte survey referenced above, 62% of executives said the primary driver for using managed services outsourcing was to increase the pace of technology and digital transformation.

Outsourcing and Business Growth with TriNet

Outsourcing is a proven business model that can contribute to a company's success in several ways. It can be cost-efficient, cost-effective and help optimize your workforce. A study by the National Association of Professional Employer Organizations found that the average annual cost savings from working with a PEO is $1,775 per employee.

TriNet couples modern technology with HR expertise. Small and medium-sized businesses can harness the power of TriNet's scale — the technology, access to benefits and HR expertise helps to power approximately 23,000 SMBs and about 331,000 worksite employees.1 Set up a demo today to learn how we can help your HR processes and support your company so you can comply and thrive.

This communication is for informational purposes only, is not legal, tax or accounting advice, and is not an offer to sell, buy or procure insurance.

This article may contain hyperlinks to websites operated by parties other than TriNet. Such hyperlinks are provided for reference only. TriNet does not control such web sites and is not responsible for their content. Inclusion of such hyperlinks on TriNet.com does not necessarily imply any endorsement of the material on such websites or association with their operators.

1As of December 31, 2023

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