Outsourced Human Resources 101

What is human resource BPO?

Human resource BPO is the practice of handing HR duties, such as hiring, payroll, and onboarding, to an outside outsourcing firm.

• It lets companies run core HR tasks without building a full in-house team.
• It helps startups and SMEs cut costs and scale faster.
• It covers staffing, development, pay, safety, and employee relations.

Human resources (HR) handle the welfare of staff. In short, they take part in recruitment, hiring, onboarding, training, and even payroll. As a result, they keep the workplace steady. This matters most as a business grows and hires more people.

Established firms have built their own HR teams. Startups, however, often have a small budget for this. So they may need to break the bank to fund a full team. Good thing there is another way to meet their needs. That way is business process outsourcing (BPO).

Human resources is one of the most important parts of an outsourcing company. For example, HR pros come up with plans that make the workplace easier to run. Still, human resource BPO sector practices may differ from the “traditional” setup. As a result, the processes can be more rigid than many people think.

Defining human resource BPO

Human resource business process outsourcing (also called human resource BPO, HR BPO, or HR outsourcing) is the act of handing HR duties to outside agencies. For instance, it can cover sourcing, hiring, and onboarding, plus firing and offboarding. So outsourced HR duties match what in-house HR teams do.

The only difference is that the parent company works with an outsourcing firm.

Role of a service level agreement in human resource BPO

UK-based HR site Personnel Today notes that HR outsourcing works well when both sides create a service level agreement (SLA). In short, this document sets the standards each side must meet. It also lists the consequences if they fall short.

As a result, working together on human resource BPO deals is key to avoid problems and risk. The SLA should govern the whole arrangement. For example, it defines the required standards of both parties and any penalties for non-compliance. Still, it must be worked out with great care to lower the risks.

5 main areas of human resources BPO

These five main areas of HR stay the same, whether in-house or outsourced. According to Lumen Learning, these five phases of HR services serve as the core. Without them, HR work would see little progress.

1. Staffing

Think of staffing as sourcing candidates, hiring new people, and interviewing them. So HR staff do this based on business needs and the current headcount. In addition, some clients outsource staffing to recruitment firms. As a result, those firms handle the first recruitment cycle and wider talent acquisition.

HR functions also cover tasks like payroll and benefits admin. Meanwhile, HR processes help streamline work, such as onboarding and reviews. So HR tasks cover daily work like attendance tracking and compliance.

2. Development

Onboarding and training are part of the development phase of human resources. Both matter for new hires. For example, onboarding helps them adjust to the culture and their teams. As a result, when onboarding is done right, it pays off in the long run.

3. Compensation

Benefits come as salary, non-taxable allowance, transport allowance, and rice allowance, among others. Some more exciting perks are account bonuses and prorated year-end pay, such as 13th, 14th, and 15th-month pay. Payroll handles the payout, while HR sets the details of each package.

4. Safety and health

The HR department handles all staff concerns, including health and safety at work. For example, it sets safety rules when staff return to the office or shift to new work setups. In addition, it follows government orders on safe working practices. This matters most when the industry relies on heavy human labor.

5. Employee and labor relations

Disagreements between staff cannot be avoided. Still, HR can step in to calm the situation and ease the tension. When a dispute or memo comes up, HR handles it with care. So the team also acts as the voice of staff during major company changes. As a result, strong employee engagement helps keep morale high.

Why consider human resources BPO

Outsourcing firms made their services easy to reach for SMEs, thanks to cheap tech. As a result, this works well for firms whose staff grow in number. So there are many reasons a business should consider human resource BPO:

• To cut costs. First, firms outsource to save on labor and resources. For startups, in-house hiring can be costly on a small budget.
• To build a wider network. Outsourcing does not just add local staff. Instead, it opens a wide pool of talent to choose from, which is why many firms turn to offshore staffing.
• To grow more easily. Outsourcing HR lets firms scale staff fast. As a result, they gain the freedom to build teams for other work.
• Better tax compliance. These teams are experts at filing documents, such as social security and tax papers. So employers get high accuracy and fewer errors, which helps avoid penalties.
• SaaS advantage. These teams use different HR software for better HR management. With SaaS, they run payroll, onboarding, and training in one place.
• Extra employee benefits. Finally, HR outsourcing may help employers grow their perks. For example, it can add life insurance, wellness training, retirement plans, and bigger bonuses.

Human resource BPO services you can avail

With the service level agreement set and agreed by both sides, it is time to look for HR BPO services you can use with no worries.

Recruitment

From job posts to interviews, recruitment is a whole process on its own. So many firms hand it off to save time.

The RPO subsector

Recruitment process outsourcing is a fairly young part of the HRO industry. In short, it means handing every recruitment effort to outside providers. As a result, working with a dedicated HR team can boost workforce management and keep operations smooth.

Payroll

Outsourcing payroll is not new. In fact, many firms hand payroll to freelancers and contractors. For a full view, see this guide to payroll management.

Background checking

Background checking sounds simple. Still, it can make or break someone’s contract. So it is another HR service you can outsource.

Temporary staffing

Temporary or seasonal staffing is common in certain industries, such as retail during the holiday peak. As a result, HR outsourcing adapts to each firm it joins. So each team in the HR outsourcing department grows as a tight-knit group of pros.

Human resource BPO companies

India and the Philippines are among the most popular places to outsource HR management. For example, the West goes to these countries for low labor costs, strong tech, good English, and 24/7 service. As a result, the Top BPO companies there, and in the Philippines in particular, promise the best service for clients.

Human resources BPO: The future of the industry

HR in the outsourcing industry is a thriving subsector. So there is little doubt that outsourcing some HR functions to agencies will pay off in the long run.

Some may think human resource BPO is the wrong move. Still, it comes down to the culture and the path a company wants to take. It is true that some core functions should not be outsourced. In the end, though, it is the company’s choice whether to hand off duties or not.

Key takeaways

• Human resource BPO hands HR duties to an outside firm, which helps startups and SMEs save money.
• A clear service level agreement sets standards for both sides and lowers risk.
• The five core HR areas are staffing, development, compensation, safety, and employee relations.
• Common HR BPO services include recruitment, payroll, background checks, and temporary staffing.

Frequently asked questions about human resource BPO

What does human resource BPO include?

Human resource BPO covers HR tasks handed to an outside firm. For example, it can include recruitment, payroll, onboarding, background checks, and benefits admin.

Why do companies use human resource BPO?

Companies use it to cut costs and scale fast. In addition, it gives access to a wider talent pool and better compliance. As a result, it suits startups with a small budget.

What is the role of an SLA in HR outsourcing?

An SLA sets the standards both sides must meet. It also lists penalties for non-compliance. So it keeps the arrangement fair and clear.

Which HR functions should not be outsourced?

Some core functions stay in-house, such as culture and key strategy calls. Still, the final choice rests with each company.

Which countries lead in human resource BPO?

India and the Philippines lead the field. For example, both offer low costs, strong English, and round-the-clock service.