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10 Benefits of Outsourcing HR

HR & Compliance

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10 Benefits of Outsourcing HR

Long gone are the days when HR used to be straightforward, concerning only hiring and employee compensation. Nowadays, it has become a complex and indispensable part of business, taking care of employee experience, performance, health, and well-being in addition to the typical pay-related functions. 

Each area demands adequate skill and knowledge, from recruitment to employment relations, from learning and development to performance management.

Clearly, a single person or a small department can not handle all the HR tasks your business requires. It demands a team of experts who can drive efficient results. 

Fortunately, there is a solution that provides you access to these experts. HR outsourcing! The practice has become so common that a survey shows about 78% of respondents feel favorably about outsourcing relationships with other companies.

The benefits of HR outsourcing are not all about cost reduction, they can also help you generate higher profits. Keep reading to learn why outsourcing is necessary and the advantages of outsourcing HR functions for your business.

What is HR Outsourcing?

Human Resource or HR outsourcing is a practice in which you hire an external organization to handle your human resource activities and administrative tasks. It refers to a contractual agreement between an employer and a third-party provider.

The employer transfers the responsibilities and management-specific or entire HR functions, like payroll, compliance, benefits, and administration, to the service provider. This allows you to focus on other essential activities and gives you the peace of mind that experts are performing your HR tasks.

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Which HR Functions Can be Outsourced?

Deciding whether to outsource your HR functions is challenging. What are the chances that third-party companies will perform the tasks optimally? But consider this: Do you have the time to create and regularly improve HR-related processes?

What about implementing the latest technology and trends and maintaining it as required? Organizations have, therefore, turned to outsourcing solutions to strengthen their HR domain.

There has never been a better time to consider how you can harness the advantages of HR outsourcing. Here are some functions you outsource.

1. Payroll and Benefits Administration

Managing payroll and benefits can be a full-time job due to its complicated and laborious nature. The more diverse and larger your employee groups are, the more delicate it becomes to handle their payroll and benefits. Understanding the correct way to manage payroll is essential to ensure you are legally compliant.

HR outsourcing firms are well-versed in tackling the intricacies of payroll benefits. They can assist you in automating direct deposits, rolling out compensation and incentives, managing paid time off, and maintaining an accurate record.

2. Recruitment and Onboarding

Hiring and onboarding are among the most crucial tasks in business. However, talent acquisition is easier said than done. Your best chance of building a diverse team in the shortest time lies in your ability to navigate the barriers to effective recruitment. 

It includes accessing an established pool of qualified candidates and a tailored platform for an exceptional onboarding experience. Outsourcing your recruitment process to a third-party platform offers a facility that makes it happen.

3. Employee Training and Development

As the saying goes, “Change is the only constant.” Continuous training equips employees with relevant skills to adapt to novel technologies, processes, and trends. Further, training and development programs help identify and nurture high-potential employees for higher responsibilities.

Outsourced agencies specialize in their work. Thus, they can provide customized training programs, workshops, and skill development courses. It also saves you from developing in-house training materials, resources, and facilities.

4. Legal Compliance

Compliance ensures a firm follows and adheres to all policies and codes of conduct. You do not choose whether to comply with industry standards and law; it is a part of your duty towards the community and stakeholders. You must conform to the specific regulations when expanding your business into a new market.

Different states and regions have disparate local tax policies and labor laws. These further vary depending on the industry, business size, and type. An outsourced HR team aligns with precise regulations and ensures you stay compliant. 

5. Performance Management

Evaluating employee performance is vital for employees and employers alike. You need a formal way to assess their work and provide feedback. It goes hand-in-hand with increasing employee morale and motivation. 

Performance management services include creating a performance appraisal system, maintaining employee records and files, managing performance challenges, and giving a hand to leaders when conducting performance reviews.

Minor errors in payroll and legalities can lead to a bad reputation, tax penalties, or lawsuits. Hence, you must ensure you outsource HR functions to credible and trusted service providers.

10 Benefits of Outsourcing HR

You may have a highly qualified and capable HR professional in your firm. So what impact does outsourcing offer your business? Well, that is a great question. The truth is HR is extensive, stringent, and specialized. About 45% of companies spend a day per week or more on administrative HR issues.

Every minute your HR professionals engage in routine tasks could have been used to offer strategic support to your business. Outsourcing would save time and effort from redundant tasks. That is what outsourcing aims to accomplish. Some notable advantages of HR outsourcing include:

1. Attracting and Retaining Top Talent

Approximately 47% of HR departments consider employee turnover and retention the biggest challenge. Finding the right people for the job is undoubtedly daunting, and retaining them even more so.

Outsourced hiring and retaining processes can curtail the associated challenges. In short, outsourcing HR simplifies recruiting and onboarding and ensures you catch the best fish in the pool.

2. Improved Employee Engagement

Happy employees mean a happy workplace, which equals a successful business. Unfortunately, about 51% of employees feel disengaged in the workplace. 

Outsourcing certain administrative tasks allows your HR teams to focus on strategic initiatives to enhance the overall employee experience. Engaged employees thus benefit from well-designed programs, which lead to higher job satisfaction and productivity.

3. Offers Flexibility

One of the most sought-after advantages of HR outsourcing is flexibility. Nearly 35% of firms having less than 1,000 employees outsource one or more HR functions. You can scale your HR operations up or down based on business needs.

The agility broadens your horizons and allows you to respond swiftly to evolving demands without being constrained by internal resources.

4. Reducing HR Costs

About 64% of companies regard cost savings as the primary driver of outsourcing. Outsourcing eliminates the need for substantial eye-watering investments in HR infrastructure, technology, and personnel. 

Its cost-effective approach often assists you in lowering expenses while maintaining quality HR services. Instead, you can utilize your capital for the priority needs for sustainable growth. You can frame objectives, grow revenue streams, and plan strategies to improve customer loyalty.

5. Facilitates Remote Hiring

Many companies have turned to remote workers. Why not when working from home increases productivity by up to 13%? The reason behind it is simple. Remote workers have a better work-life balance. After all, they are not spending their hours commuting and have more time outside of work. 

Outsourced recruiters efficiently shortlist remote candidates and ensure they possess the necessary skills and qualifications.

6. Increased Efficiency

Time is money; at least, it is in a business. It is about productivity, and productivity is directly related to time. An in-house HR team navigates piles of paperwork, compliances, employee benefits, and risk mitigation while performing their fundamental task. 

Entrusting a professional service provider with these time-consuming HR tasks saves your resources for other activities. Outsourcing frees up this time for your HR team and contributes to the efficiency of your business.

7. Seamless Expansion

An in-house HR team is not viable when planning for international expansion. The increased workload, understanding of international regulations, payroll management, and time zone differences, among other factors, can confuse your employees.

Among several benefits of HR outsourcing is you can tap into new markets while focusing on your local employees. The outsourced HR specialists handle the heavy lifting of meeting diverse employment logistics and managing international employees.

8. Enhanced HR Tech

HR tech is significant in helping your employees and managers stay productive and automate core HR requirements. Technology can accelerate your HR function from Artificial Intelligence and Machine Learning to automation and everything in between. 

However, it falls between HR and IT and requires cross-functional work. HR outsourcing enables you to tick HR tech off your list. Outsourced HR partners undertake and manage it on your behalf.

9. Legal Compliance

Keeping up with complex and ever-changing employment laws and regulations is a challenge. The lengthy paperwork required when hiring a new employee alone is tedious. However, avoiding or ignoring the relevant practices and standards is not a choice; it can put you in a legal mess. 

An outsourced HR service streamlines the process and ensures your company is in line with compliance and rules in terms of employment law.

10. Better Data Security

A study states that 64% of workers question the security of their personal data due to scandals over data misuse. Further, one in two employees would consider leaving if the employer does not use workplace data responsibly. 

HR outsourcing providers leverage robust security measures and compliance protocols. It minimizes data breaches and safeguards sensitive employee information.

Manage Your Global Team With Skuad

Skuad allows you to work on your core business growth objectives without worrying about HR functions. Skuad’s unified platform offers a seamless solution to hire and onboard global talent, manage payroll in 100+ currencies, and comply with local employment laws.

Book a demo with Skuad to learn how it can simplify your expansion plan and help you build and scale a global team without any hassles.


Q. Why is HR outsourcing important?

HR outsourcing enables you to prioritize core tasks without compromising human resource management. It streamlines recruitment processes, ensures compliance, and enhances productivity. It also allows you to respond to changing needs, implement technological innovations, and seamless global expansion.

About the author

Catalina Wang is a Human Resource Consultant. She manages recruitment, onboarding, and contract administration staffing for many organizations and remote teams. She’s passionate about efficient HR management and the impact of tech on hiring practices.

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