What Is Human Resource Outsourcing (HRO)?
Human Resource Outsourcing or HR Outsourcing is contracting to a third-party company that will handle all the company’s HR-related tasks and activities. HR outsourcing company takes care of administration, recruiting, payroll, and training of the employees.
The main reasons an organization chooses to outsource their accounting services it is time-consuming, and they might be lacking the software or technology that is required to carry out all the processes.
Rather than having a number of in-house employees for HR activities, companies can easily outsource them that gives the employees full benefit and flexibility in monitoring their payrolls, incentives, taxes, and benefits.
An organization can outsource all their HR tasks or only those that consume a lot of their time or for tasks that they are not equipped with to complete. As a result, it allows the organization to focus more on the core objectives of their business.
Why Outsource Human Resources (HR)?
Outsourcing can prove to be very advantageous to small businesses as well as medium businesses. The main reason is that the company’s accounting services are done by experts using the latest software or technology.
As a result, there will be fewer mistakes, more accurate results, and a streamlined process of all the activities. By outsourcing, an organization can cut down on the in-house employee expenses such as payrolls, benefits, holidays, employee taxes, and more. As the company outsources its non-core activities, there is more time at hand as well as resources to invest in the core-related processes of the organization.
Speaking in terms of cost, outsourcing HR to an HR outsourcing company has proven to be more cost-effective than employing in-house candidates to do the work. As third-party companies have more expertise in the subject, they produce very reliable results.
What Are The HR Functions That Can Be Outsourced?
An organization may either fully or partially outsource all their HR functions. If it outsources all of their HR activities, then the third-party takes full responsibility. That has control over all the HR-related functions.
On the other hand, if they partially outsource, then they work along with the third-party. Because they have only partial access to the organization. Irrespective of whether a company decides to outsource fully or partially, these are the most common activities that any company outsources.
- Payroll services
- Background screening
- Risk management
- Health-care benefits
- Performance management
- Drug screening
- Temporary staffing
- Retirement planning
- Employee assistance or counseling
Whom To Outsource HR?
There are 3 main types of HR outsourcing companies. They are:
Human Resource Organization (HRO)
Most of the Human Resource Organizations (HROs) let companies choose the types of activities they would like to outsource. In situations where only some HR activities are outsourced, there arises a co-management relationship or a shared relationship between the HRO and the business.
In other words, they share their responsibilities. Whereas, when all the activities are outsourced, the HRO takes full responsibility. HROs are best if chosen for organizations that employ a large number of people (say, 1000+).
Professional Employer Organization (PEO)
If an organization is small or medium-sized, (less than 200 employees) then outsourcing their HR functions to a Professional Employer Organization is beneficial. When an organization outsources its HR functions to a PEO, they enter a co-employment relationship with each other where the PEO plays the role of employer of record and the company is the on-site employer.
PEOs mostly offer outsourced payroll, background screening, performance management, and various other employment administrative tasks.
Administrative Services Organization (ASO)
ASOs mainly focus on providing administrative services for a company, as the name suggests. The services they provide include payroll services, compliance, safety management, worker’s compensation, and pension administration.