Has Your Company Considered Outsourcing Your HR Business Processes?

Spend Matters welcomes this guest article by Ana Gomez of GEP.

In the last few years, the enterprise’s investments on business process services is increasing annually mainly because of the need to reduce costs and improve efficiency, improve customer services, enhance employee productivity and optimize business processes. Human resources will be one of the major areas for firms to spend on.

We can understand business process outsourcing (BPO) as the concept of assigning manpower and specialized entities to perform specific tasks within the organization while ensuring quality levels of service, increasing administrative functions' productivity and reducing costs. The BPO market is growing in different areas, and the human resources BPO industry has gone through a lot of change over the last decade and is consolidating as one of the functions that can increase the market value for the companies.

HR BPO can be defined as the operation of human resources processes for an organization by a third-party supplier. This consists of support multiple business processes within the HR domain from the following categories:

  • Payroll
  • Benefits Administration
  • Hiring and Recruiting
  • Education and Training
  • Personnel Administration

The HR BPO industry is growing due to the increased demand for effective and easily deployable global payroll solutions, increased customer involvement from the small and medium business market and increased regulatory stipulations and concerns, especially in benefits administration. Also, the changes in the current economy are making it not only desirable but necessary for the companies to outsource part of fully their HR activities.

Companies that are offering HR BPO services are facing the challenge to adapt to a rapidly changing worker profile, managing the risk of a develop and execute a global operation and to have the ability to hire and retain talent while they have to lower the labor costs.

Some of the reasons to outsource HR activities are to optimize or control costs, focus on the core of the business, access additional capabilities and experts and mitigate any risk that they can face. While selecting a HR BPO vendor it is important to consider the following factors: proven track record, cost of the services, guaranteed the services levels required, flexible contracting, previous experiences and grade of specialization.

In spite of the benefits to outsource part or all of the HR business processes, some companies still face some obstacles to outsource. This is because it is a process that requires a lot of involvement, and the change has a huge impact in the structure and organization of the company. Fear about losing the control, impact in the culture of the company, resistance of the HR or employees in general and customer service to the employees being affected are the principal issues faced to implement or decide to outsource a HR processes.

If a company does not want to outsource HR processes, some of the strategies to achieve cost-savings when processing HR activities in-house can be centralizing operations or create a shared services structure where the employees perform tasks related to HR, payroll, benefits or accounts payable, depending on the need at the current time. Additionally, to reduce processing cost, the standardization of policies and procedures related to payroll and benefit calculations is helpful. This also helps to reduce the complexity by standardizing pay and benefit policies across different groups of employees.

Reduce the operating cost, access to in-depth HR expertise, access to new technology, ensuring the risk management and compliance should be the principal market drivers for a company to consider HR BPO.

HR BPO is a business function that is in a mature stage, and in the coming years it will be adopted more by companies that want to focus on their core business and optimize their costs.

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