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Outsourced Human Resources 101

Human resources (HR) handle the welfare of the employees, where they get involved in recruitment, hiring, onboarding, training, and up to payroll. 

They stabilize the office environment and are crucial to a business, especially when they grow and hire more people.

While established enterprises have built their internal HR department, startups often have a limited budget to hire their own team. They need to break the bank to provide the resources needed.

Good thing there’s another way to comply with their needs: Through business process outsourcing (BPO).

Human resources is one of the most important departments in an outsourcing company. HR practitioners often come up with plans and strategies that will make the workplace easier to navigate.

Human resource BPO sector practices may be different from the “traditional” setting. The processes may be more rigid and less lenient than others may think. 

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Defining human resource BPO

Human resource business process outsourcing (aka human resource BPO, HR BPO, or HR outsourcing) is the process of offloading HR duties and responsibilities to outsourcing agencies.

From sourcing, hiring, and onboarding to firing and terminating, outsourced HR duties encompass what in-house human resource departments do.

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

Role of a service level agreement in human resource BPO 

According to an article published by UK-based HR website Personnel Today, HR outsourcing works well when both parties should create a service level agreement (SLA). 

This document sets the standards each party needs to follow and includes consequences if they don’t. Working together on human resource BPO agreements is important to avoid any problems and risks. 

“The operation of any HR outsourcing arrangement should be governed by a service level agreement. This will define the required standards of performance by both parties and any penalties for non-compliance.

The article also highlighted the importance of a service level agreement, adding that it “must be negotiated with great care to mitigate the risks.”

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Defining HR Business Process Outsourcing

5 main areas of human resources BPO

These five main areas of human resources will always be the same—whether in-house or outsourced.

According to Lumen Learning, these five phases of HR services serve as the department’s core. Without these, human resource activities would see no traction or improvements in the time being.

1. Staffing 

Consider staffing as sourcing for candidates, hiring new employees, and interviewing them. HR personnel does the staffing according to the business need and the current headcount.

Some clients outsource their staffing efforts to recruitment agencies and firms, letting them handle the first recruitment cycle.

2. Development

Onboarding and training are part of the development phase of human resources.

These two are pertinent to new hires as onboarding will allow them to adjust to the company’s culture and their respective departments.

Almost everyone knows that when onboarding new hires is done right, it will pay off in the long run.

3. Compensation

Benefits come in the form of salary, non-taxable allowance, transportation allowance, and rice allowance, among others.

Some more “exciting” benefits are account-specific bonuses and end-of-the-year prorated compensation, e.g., 13th, 14th, and 15th-month pay.

While payroll handles the distribution of monetary incentives, the HR department usually handles the specifications of each compensation package.

4. Safety and health

The human resource department handles all employee concerns, including their health and safety in the workplace.

For instance, the department will be responsible for implementing safety precautions if and when the company has decided to go back to the office after the mandatory lockdowns are over.

They handle orders from the government about safe working practices, especially if the industry they are in is heavy on human labor.

5. Employee and labor relations

Disagreements between employees can’t be avoided. But what the HR department can do is to mediate the situation and de-escalate the tension. 

When an employee serves a dispute or receives a memo, practitioners handle the issue with care and discretion.

The department also serves as the voice of the employees on behalf of any major changes in the company.

What are the five main areas of HR?

Why consider human resources BPO

Outsourcing companies made their services available for SMEs with the help of easy access to technology. This became perfect, especially for those whose employees grow in numbers. 

There are different reasons a business should consider human resource BPO:

  • To cut costs. Primarily, they outsource to cut costs on labor and resources. For startups, hiring in-house employees can be expensive since they only have a limited budget.
  • To establish a more diverse network. Outsourcing doesn’t just give them the chance to hire local employees. Instead, they have a wide range of talents to choose from.
  • To expand the business more easily. Outsourcing HR services enables them to scale their employees easily. This gives them the flexibility to employ teams for other functions.
  • Better documentary and tax compliance. They are experts in handling and filing documentary requirements, particularly employees’ social security and tax documents. Employers can ensure that these teams do it with high accuracy and fewer errors to prevent penalties.
  • Software-as-a-Service (SaaS) advantage. These teams use different software for better HR management. With SaaS, they can streamline their duties, such as payroll, onboarding, and training, in one place.
  • Additional employee benefits. With outsourcing HR, employers may even get the opportunity to expand the benefits they give to their employees. It can include life insurance policies, wellness training, retirement plans, and bigger bonuses and incentives. 

Human resource BPO services you can avail

With the service level agreement on course and on par with both parties, it’s time to look for HR BPO services that you can avail of with no worries.

Recruitment

From job postings to interviewing potential candidates, recruitment is a whole process in and of itself already.

The RPO subsector

Recruitment process outsourcing is a relatively “young” subsector of the HRO industry. This refers to the act of outsourcing any and every recruitment effort to external service providers.

Payroll

Outsourcing payroll is not new anymore, as many companies often outsource their payroll departments to freelancers and independent contractors.

Background checking

As simple as it sounds, and yet it can make or break someone’s employment contract, background checking is another HR service that you can outsource.

Temporary staffing

Temporary or seasonal staffing is a practice that certain industries do—especially during the peak seasons of holidays. The retail industry is known for its temporary staffing processes.

Human resource outsourcing innovates with any company it lodges itself into. 

It’s a sub-industry that works in so many different ways that each team in the HR outsourcing department is a tight-knit community of professionals growing together.

Human resource BPO services you can avail

Human resource BPO companies

India and the Philippines are among the most popular countries to outsource processes, especially HR management.

The West goes to these countries because of cheap labor costs, high-quality equipment, strong English proficiency, and 24/7 service. 

The Top BPO companies in these countries, especially the Philippines, guarantee the best service for their clients anytime they need it.

Human resources BPO: The future of the industry

The human resource in the outsourcing industry is a thriving subsector. 

There’s no doubt that outsourcing some HR functions to outsourcing agencies will pay off in the long run.

While some might think that human resource BPO services may be a wrong decision, it still boils down to the culture and the path the company will take soon. 

It’s true that some core functions can’t be or shouldn’t be outsourced. It is still the company’s decision whether they’re going to offload responsibilities or not.

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About OA

Outsource Accelerator is the trusted source of independent information, advisory and expert implementation of Business Process Outsourcing (BPO).

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Outsource Accelerator offers the world’s leading aggregator marketplace for outsourcing. It specifically provides the conduit between world-leading outsourcing suppliers and the businesses – clients – across the globe.

The Outsource Accelerator website has over 5,000 articles, 350+ podcast episodes, and a comprehensive directory with 2,300+ BPO companies… all designed to make it easier for clients to learn about – and engage with – outsourcing.

About Derek Gallimore

Derek Gallimore has been in business for 20 years, outsourcing for over eight years, and has been living in Manila (the heart of global outsourcing) since 2014. Derek is the founder and CEO of Outsource Accelerator, and is regarded as a leading expert on all things outsourcing.

“Excellent service for outsourcing advice and expertise for my business.”

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