This article serves as a roadmap for HR professionals involved in the HR outsourcing process. It explains the types of agreements that prevail in HR outsourcing, specifies the business case for HR outsourcing, and discusses the role of HR in this process. It then examines various HR functions adapted to outsourcing: compensation, human resources management, external recruitment, relocation, employee reward and recognition, performance management. The article describes specific considerations for developing an outsourcing contract and transitioning from internal to external management of certain HR functions. It ends with the discussion of a successful management of the supplier relationship. In addition, it is important to know how an outsourcing agreement may not meet expectations and mitigate these risks. The main issues are listed below. Human resources managers, who spend about 25-30% of their time managing benefits, need to protect their company`s bottom line while maintaining employee satisfaction. One way for HR to achieve these goals may be to work with a third-party benefits administration provider – a practice called performance management outsourcing.
Through negotiated contracts, volume purchasing, and economies of scale, suppliers offer program benefits that many HR professionals may not be able to guarantee on their own. Suppliers may also be tasked with managing the most challenging part of performance management: the annual enrollment process. Key services offered by service providers include: HR agreements require clauses in contracts that increase the flexibility of the provider in the delivery of the HR service. Most often, such relationships are suitable for the long term, for example, five-seven years. For more complex service agreements, the approach to service scope should be less rigid. However, in the case of short-term agreements where there is a relationship similar to that of a supplier and a buyer, the agreements must be defined in the scope of services and the employer`s requirements. In addition, contracts must have some built-in flexibility to allow for changes in the business situation, technology and needs of the employer or buyer. Organizations with specific compensation management needs should seek more tactical sub-process outsourcing agreements to complement or improve their current services. An example of this approach would be the outsourcing of expatriate management, which is a sub-process specialty in compensation management and has an established supplier community. In order to reduce costs and focus more on strategic efforts, HR functions are often outsourced.
For this reason, HR professionals are encouraged to look for outsourcing solutions for businesses. Some HR functions that can be outsourced include: compensation, employee management, external hiring, relocation, employee reward, etc. U.S. employers are selective in outsourcing certain functions, including benefits administration, recruitment, and payroll. Selective outsourcing – as opposed to reliance on a single supplier – usually means outsourcing routine transactional processes and is popular because it can be tailored to the exact needs of a business. Below are important areas of HR expertise and the ways in which they can be outsourced. See Startups Outsourcing HR: When, Why, And If? and employers who are likely to outsource ACA reports. Outsourcing is not a panacea for recruitment, but many organizations are testing it and finding it useful. The success of outsourcing external recruitment depends on defining and implementing an effective talent search strategy, selecting a suitable area to test outsourcing recruitment in the organization, setting clear performance expectations and metrics, and carefully selecting a recruitment partner. Potential benefits include establishing a strategic partnership focused on attracting world-class talent that is critical to the company`s success. While most outsourcing arrangements include a number of pricing methods, best practices include a contract with primarily unitary pricing. The pricing model must achieve at least the following objectives: in many cases, outsourcing providers perform tasks in a different way than the methods most familiar to the organization.
The client company must have a good understanding of the supplier`s processes and how the organization can play a role in these processes. See I use a PEO that “co-employs” my employees. Am I responsible for Form I-9 compliance for these employees or is it the PEO? Outsourcing human resource management is often seen as the basis for outsourcing many other functional areas. .