September 5, 2018
Comprehensive Guide to Outsourcing Human Resources
- Human resources, or HR for short, is a staple component for any business.
- Today’s business sector is definitely different from how it used to be before the turn of the millennium, what with the rise of cutting-edge and accessible technologies, the opening-up of new global trade hubs, and the evening-out of playing fields for big multinationals and small-to-medium enterprises (SMEs) alike.
- Two things are evident in the case of still-growing businesses. First, they may not have the numbers—and therefore the money and machinery—to operate large and fully equipped in-house HR departments like big business magnates.
- One way to look at the financial impact of outsourcing human resource functions is to consider the average cost of hiring a fulltime employee who can handle HR tasks.
- Outsourcing can offer companies of all sizes myriad ways to fulfill business processes with high levels of performance, at high levels of value.
- We put our faith in the Philippine BPO sector, and we believe it should be your starting point in scouting around for HR services.
Human resources, or HR for short, is a staple component for any business. The key element that an HR department engages is, of course, the human element, or the aspects of business operations that involve, among the following: managing personnel, overseeing payroll and taxes, keeping all employee records, monitoring compliance to national and federal labor laws, recruitment, and training and development opportunities, just to name a few.
Today’s business sector is definitely different from how it used to be before the turn of the millennium, what with the rise of cutting-edge and accessible technologies, the opening-up of new global trade hubs, and the evening-out of playing fields for big multinationals and small-to-medium enterprises (SMEs) alike. But one thing that remains unchanged is how anchored an institution’s successes (and failures) are in its employees.
A quote by renowned HR specialist Ken Robinson comes to mind: “Human resources are like natural resources; they’re often buried deep. You have to go looking for them, they’re not just lying around the surface. You have to create the circumstances where they show themselves.” We agree with Mr. Robinson in that finding the good people, persuading them to stay, and keeping up system that nurtures their true potential is the timeless formula for lasting success. But we also make the case for finding these hidden jewels— “diamonds in the rough” just waiting to shine through—in an innovative new business model. That model is outsourcing.
For those still new to the unique trends of business process outsourcing (BPO), contracting strangers offshore may be a source for the jitters. How can it be assured that professionals outside the company can handle complex tasks, such as processing classified information, updating employee service records and wages, and making sure that company policy is properly aligned with the law?
Two things are evident in the case of still-growing businesses. First, they may not have the numbers—and therefore the money and machinery—to operate large and fully equipped in-house HR departments like big business magnates. As such, allocating a lot of funds and manpower to a business process that is not profit-generating in the first place may cause severe bleeding. Second, they still do need the expertise, and a fully operational HR system outside of an in-house department will still work wonders—and that is the gap that outsourcing will help close.
Outsourcing can offer companies of all sizes myriad ways to fulfill business processes with high levels of performance, at high levels of value. This certainly applies to HR, as HR services are now as widely contracted offshore as customer service, finance and accounting, web development, and digital marketing.
We also put our faith in the Philippine BPO sector, and we think it should be your starting point in scouting around for HR services. The country’s reputation for global standard delivery is one of the best out there, and they have a deep pool of talent for people rightly suited to this job. HR is also the perfect channel for Filipino values that we’d love to showcase to the world, and that we’re sure your business would benefit from: exceptional hospitality, adaptability, attention to detail, and family- and community-orientedness.
Thus, here’s our comprehensive guide to this topic. Our discussion comprises the benefits of outsourcing your company’s core HR functions; the HR services typically offered through the outsourcing model; an assessment of the typical cost of outsourcing HR to a Philippine BPO company; some tips on how to commission the right HR provider; and a stalwart case for choosing a Filipino contractor for the job.
Notable benefits of outsourcing your HR department
In a nutshell, the benefits to outsourcing HR lie in how appropriate an outsourced HR model is to the scale and operations of your company, and how that infrastructure can competently serve your needs. It’s a good idea to look toward some necessary changes if your current administrative processes cause a pileup of work, and a decrease in productivity. This type of situation definitely happens when a company accumulates more than 10 employees.
This section notes that outsourcing HR will most greatly benefit SMEs, which do not yet have the need to centralize according to much wider-scale business practices. Here are some notable benefits to subscribing to this type of model.
- It will save much time and money. This is the most obvious tradeoff: outsourcing will reduce the already-high cost of managing employees and adjust variably to the scale, time period, and budget that the company needs. By subscribing to outsourced HR services, your company can skip hiring, training, and compensating new sets of workers from scratch; plus there’s no need to allocate additional funds for office space, equipment, and software just for these tasks.
- You can depend on a standard of service delivery. Because you’ll be paying for assured levels of competence in HR-related work and the technology to fulfill it, you can expect that your company’s HR work will be done according to a regular, focused standard. While your commissioned HR partner fulfills its core competency, you and your employees can dedicate more hours to profit-generating activities.
- You’ll be duly assisted for compliance and protected from risk. Aside from helping you save time and money, your outsourced partner can also zoom into affairs pertaining specifically to labor and employment, such as state and federal regulations. It can allocate the time, plans, and system requirements to make sure that your company follows labor laws year by year and avoids fines, lawsuits, or sanctions. In addition, the HR services provider can audit company-wide policy and ensure that the company’s own house rules are being enforced.
- You’ll be assured steadiness of business operations and greater competitive advantage. Again, having a functional body designated to take care of HR-related tasks will keep your business in tip-top shape. With this reinforced business infrastructure available even offshore and at high value, SMEs can foster a growth mindset, increase their value, and win a fighting chance to survive against competitors.
Services typically offered when outsourcing HR
When looking around the digital marketplace for potential contractors, you should first get some new perspective on how much human resources has evolved as a field of practice. It’s a far cry from how we might perceive HR or the stereotypes that we have for it, which probably includes endless piles of paperwork, nagging from HR staff to update employee records, or mandatory training and development-related seminars.
Rather, you should think about the HR specialists (HR firms, individual consultants, and the like) as catering to the global market with very dynamic and specialized wares. It’s actually a pretty exciting time to get into outsourcing, as there’s much to learn about the types of services, technologies, and support that are widely available to you. Some of the key services now out there are the following:
- Payroll management. Payroll management encompasses keeping track of services tendered from your regular employees, and making sure that they are paid accurately, on time, at the prescribed intervals for payment. Say goodbye to mountains of payroll-related paperwork; the payroll management technologies that outsourcers have at their disposal are pretty awesome, as they can accommodate payroll data in real-time, using secure and up-to-date platforms.
- Compliance. Another service that a number of outsourced HR specialists offer is technical expertise on compliance. State and federal labor laws and regulations do change over time, and it will get hard to pin down, let alone fully understand, all of these amendments on your own. One of the key areas of study for these professionals is compliance and adeptness with rules that pertain to 401(k) plans and health insurance coverage in the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), for example. Proficient HR contractors can also conduct HR audits and operational reviews as needed.
- HR system management. This is a service that doesn’t differ much from what we expect of in-house HR departments, which tend thick folders full of classified information. You can avail of an outsourced service to manage online employee databases, and thus accurately and safely keep all pertinent professional data on attendance, leaves, logs, travels, expenses, and the like. Your provider must understand the need for confidentiality and security in managing all human resource data.
- Recruitment. You can also outsource for the specific function of recruitment or headhunting. Your provider can engage in vacancy monitoring for jobs within your company, start searches and job postings on relevant recruitment platforms, screen CVs, conduct interviews through Skype and other means—in general, focus on the task of finding new talent for your company.
- Developing policy and collaterals. It’s also possible to seek technical expertise on deliverables that pertain to the survey of company HR policies and the assembly of HR-related collaterals such as employee handbooks, presentation decks, and the like.
These general services are the most likely available from outsourced HR firms, but there is also the option to look to consultants for some more specialized functions or services. These include (but are certainly not limited to) performance management, capacity building or training in focused areas, workplace investigation, strategic development, leadership training and development, and corporate coaching.
Typical cost of outsourcing HR
Here’s the rub on one of the most important factors of adapting the outsourced HR model: the costs and what determines their nature. It may be intimidating that outsourcing costs in general seem to vary so widely, but the common formula for many is based on manpower, i.e. the cost per full-time employee (total costs of operation, divided by number of billable full-time employees).
Our quickest answer on what to expect from outsourcing HR is a cost margin that reflects the size of your business, the number of employees you have in your stable, and the extent of HR services that you’ll be commissioning.
To give a little more detail, expect that costs will be negotiated by your contractor based on the following:
- Scope of services to be commissioned;
- Volume of information to be handled;
- Technology type to be employed;
- Deal type;
- Industry vertical (type of industry in which HR services will be contracted, which could actually be different if you are a nonprofit small business, IT company, finance-based company, healthcare institution, design agency, or manufacturing company—for this, you will need to do the research).
Two types of payment scheme can be followed: fixed fee basis, or fee paid per employee to be managed (with a range of $20 to $200 per employee), or percentage basis, in which the fee is based on a certain percentage (from 2% to 10%) of each employee’s salary. You can avail of these services on pay-as-you-go schemes, which may be better if you need the HR services only for particular projects, or retained services, which is better if you are willing to invest in a loyal HR partner.
Another way to look at the financial impact of outsourcing human resource functions is to consider the average cost of hiring a fulltime employee who can handle HR tasks. Here’s a table indicating the average annual income of HR professionals in different countries:
|Job Title||Annual PH Salary in USD||Annual US Salary in USD||Annual CA Salary in USD||Annual AUS Salary in USD||Annual UK Salary in USD|
|Human Resource Assistant||$ 3,254||$ 39,124||$ 29,685||$ 34,027||$ 26,428|
|Human Resource Manager||$ 9,069||$ 64,476||$ 59,778||$ 62,690||$ 46,398|
|Payroll Analyst||$ 5,664||$ 55,184||$ 42,801||$ 62,808||$ 45,503|
|Payroll Manager||$ 13,321||$ 64,035||$ 51,870||$ 72,517||$ 40,338|
|Payroll Specialist||$ 5,482||$ 46,858||$ 41,221||$ 59,707||$ 35,703|
|Payroll Supervisor||$ 7,900||$ 58,764||$ 52,338||$ 60,040||$ 34,246|
|1 USD=53.44 PHP||1 USD=1.31 CAD||1 USD=1.35 AUD||1 USD=0.76 GBP|
This just goes to show that a company can greatly benefit from outsourcing HR functions to a country with a lower wage range and cost of living, like the Philippines. Doing so allows companies to choose from a wide range of affordable service providers and, in turn, enjoy world-class services without raising their overhead costs.
Top 10 tools for managing HR-related tasks
There are many tools that can aid HR service providers and small businesses alike in managing their HR-related tasks. The fact that these types of tools are available, and that there are professionals who’ve mastered them, should put you and your employees at ease. In no particular order, here’s a list of our top 10 tools for HR-related tasks.
1. Zoho People. Zoho has long been a favorite among managers and HR-related staff, and is probably one of the more familiar names to you. It’s a simple and streamlined application that can manage pertinent employee records, such as time-ins, time rendered, absences, holidays, and leaves. Zoho’s great for small businesses and is perfect if you want a clean-cut and organized set of processes without much additional customization.
2. Trello. Web-based Trello is easy to use, collaborative, and very visual. This is a great platform for project management in any department, as its features allow people to log details of their projects in real-time, all at the same time. For businesses like startups, with small teams full of people who work closely together on everything, Trello is a handy option. An HR manager can use Trello to track employee involvement on a project basis, making sure that all compensable tasks are fulfilled and that all team members are on the same page about their processes.
3.Workday. Workday is a software as a service (SaaS) or a platform that enables a third-party provider to host applications and make them accessible over the internet. Workday functions on cloud technology and is handmade for HR and financial management professionals, as it offers payroll, financial, and human capital management solutions. It can be used even by those without a high level of tech-savviness, and whoever uses it will be saved from the need to upgrade manually or sit through disruptive system updates.
4. Planday. The aptly named Planday, on the other hand, is used primarily as an employee scheduling system. The neat thing about Planday is that it can produce a shared overview of work schedules to the company heads, employees, and HR managers. In addition, the overview will be accessible across any device. This will prove especially helpful for companies that work on shift-related schedules and need to conscientiously align shifts, shift swaps, sick leaves, vacation leaves, and absences.
5. RUN by ADP. From the makers of ADP also comes RUN, which small businesses can employ for web-based payroll solutions. RUN is mobile-friendly, enables tracking of cash flow management, and allows HR managers to verify specific cash requirements before processing employee payout. RUN also has built-in reporting and analytics features, and your HR provider can quickly generate a report about your company’s monthly payroll activities.