Definition of Human Resources Outsourcing
Human resources outsourcing involves delegating all or part of the management of human resources to an external service provider. This can be a one-off assignment or long-term support.
With Human Resources outsourcing, all HR functions usually managed by an internal department are now managed by an external department, which is therefore not located at the heart of the company.
It therefore consists of entrusting to an external service provider :
- Complete or partial operation of human resources management software;
- Support for one or more HR processes;
- Or even the management of an HR function such as payroll, recruitment, training or administrative management of personnel.
I- Different types of Human Resources outsourcing
To implement its HR outsourcing strategy, several solutions are available to the company, choosing the appropriate formula based on the type of business to be outsourced, the duration or the length of the need.
Thus, outsourcing can be partial (a few professions) or total (the entire HR function), one-off or continuous, local or offshore.
Below we present some examples of these different types :
1- Consulting
It involves entrusting a mission to a consulting firm or consultant. It’s a perfect solution for managing a time-bound mission with precise specifications, such as an HR audit or opening a new site in a new country.
2- Time sharing
This is an ideal formula for recurring, long-term assignments. Shared time allows the company to call on the skills of an HR expert (a few days to a few weeks per month) depending on their needs and depending on the workload, on site or remotely, benefiting from the fact that he has just become perfectly familiar with how your organization works.
3- Managed services or impartition
It allows the management of IT resources to be delegated to an external service provider.
4- Subcontracting
It allows the delegation of one or more HR functions of the company such as payroll management, recruitment, personnel management, etc. tasks considered time-consuming, repetitive and with low added value.
5- Off-shoring
The subcontracting company provides a specific service to the client at an international level and in an off-shore manner.
6- In-house
The service is contracted from an external company, but is carried out on the premises of the requesting company.
7- Off-site
Unlike the In-house type, subcontracted services are performed on the premises of the subcontracting company.
8- Co-sourcing
Responsibilities and risks are shared between several companies. Location may vary.
II- Usefulness and good reasons for outsourcing Human Resources
Human Resources outsourcing offers many advantages for the company : saving time and increasing efficiency, reducing and controlling costs and access to specific expertise.
The decision to outsource the HR department is the result of a strategic choice that the company adopts to make the best use of its human and financial resources..
In fact, the company that decides to outsource human resources management is motivated by the need and desire to focus its efforts on its core business.
Overall, the HR outsourcing strategy is truly beneficial. It provides the client with several advantages, including :
1- Recruitment freedom
Hiring HR employees is not limited to the recruitment process, but it is necessary to take the necessary measures to train and retain them to ensure the sustainability of positions, through continuing education and career development in order to avoid excessive turnover which risks increasing the costs linked to recruitment and onboarding.
With outsourcing, the company frees itself from these costs, and gains in terms of time saved on recruitment.
2- Save time and increase efficiency
Human resources management involves many tasks that can be difficult, for example, managing payroll and tracking leave can take several days.
Indeed, certain aspects of human resources management are time-consuming, repetitive or have little added value and are not profitable if carried out internally, hence the interest in outsourcing them.
Moreover, external service providers, experienced in the practice and with a diversity of experience and clients, provide rapid solutions which offer the company great flexibility, thus enabling it to gain in efficiency.
3- Reduction of operating costs
Human Resources Outsourcing is also a way to save money, especially for large companies that employ hundreds of people. Human resource management can be a drain on operating budgets.
By entrusting certain operations, in particular recruitment and training, the company could reduce the costs associated with managing these tasks, because external service providers allow their clients to benefit from economies of scale, allow them to automate certain tasks, making them less expensive, or even reduce payroll costs.
4- Access to advanced skills and expertise
Some tasks require a certain skill orspecific expertise that the company does not have internally, and that itIt can be difficult to train existing staff to acquire the necessary skills and know-how.
This is why calling on an external service provider is the ideal solution for the company.ensures that you benefit from an expert in the field, whether it is new know-how or skills, linked to digitalization, changes in regulations or a specific one-off project.
III- How to succeed in HR outsourcing
Human resources outsourcing meets the operational and strategic requirements of the company.
To create the necessary conditions for its success, a range of measures should be taken into consideration before starting any outsourcing operation :
- Define outsourcing objectives : the company determines which tasks to outsource and which to keep in-house. It then proceeds to draw up precise and clear specifications. This includes all the details on the tasks to be handled by the external service provider;
- Choose the appropriate and qualified service provider with the skills and expertise necessary to carry out their mission;
- Set up a steering committee; this will monitor the missions entrusted to the outsourced service provider;
- Communicate with the service provider : the company must be transparent and regular to limit the risk of errors and possible blockages. Smooth communication will help maintain a healthy relationship with the service provider over the long term;
- Communicate about the outsourcing choice in order to inform stakeholders but also all employees who might view outsourcing negatively;
- Plan for backsourcing or exit planning before even starting outsourcing : when the service provider no longer meets your expectations or increases its costs, it will no longer be difficult for them to terminate the contract.
IV- Most frequently outsourced Human Ressources areas
With the aim of focusing on the company’s core business, managers resort to human resources outsourcing missions and activities, which concern support functions, with time-consuming and repetitive tasks, therefore administrative in nature and without added value, or even complex missions, which require a certain technicality, in-depth know-how or a long processing time.
In this context, the HR activities most outsourced by companies concern :
1- Payroll management
A task that involves performing payroll calculations, paying salaries, and representing social security for the payment of contributions and deductions.
Thus, outsourcing this mission allows the company to free themselves from complex tasks which, if not performed correctly, can lead to serious sanctions.
2- Recruitment
Talent recruitment is a vital task for all companies. In the hiring process, it is important to conduct in-depth interviews or recruitment tests, which allow you to get to know the candidate better.
However, this requires a significant investment of time and energy, and of course, sufficient internal resources are required to cover all these tasks with reasonable quality.
3-Specialized audit services
Even if the company has a human resources department, in most cases, especially if it is a VSE or SME, it lacks a level of specialization that allows it to analyze, detect or correctly interpret all the internal processes and problems related to human capital management. In fact, the personnel in charge of human resources generally have a more generalist specialization.
4- Staff evaluation
The company can use the performance appraisal model to detect weaknesses in its employees’ knowledge, skills, and performance, and therefore identify the necessary training needs.
A task that the company can delegate to an external company if it is unable to carry it out internally due to lack of resources, time, or skills.
5- Employee training
With the aim of continuously improving the company’s human resources in terms of professional skills and abilities, training is essential as a tool for the professional development of employees and strengthening their skills to carry out their tasks at work.
In this regard, the company can call on an external service provider specialized in this area by outsourcing the entire training process or one of its tasks.
It should be noted that payroll processing is one of the most commonly outsourced HR functions, followed by training and recruitment.
Conclusion
In summary, human resources outsourcing allows you to adjust your resources according to the company’s real needs, which can vary regularly depending on the context, seasonality, or a specific project.
This allows you to perfectly control costs, optimizing productivity, promoting efficiency and flexibility, and supporting value creation within the company.
On the other hand, and before outsourcing an HR function, the company can resort to the application of the 4C rule, which is a method for determining whether the task, activity or even function can be outsourced, which is as follows:
- Complex : Does the task require expertise?
- Time-consuming : Does the task require processing time?
- Criticism : What is the risk that managing this activity poses to the organization in the event of an error?
- Limited : How many people are involved in an HR process? Which departments are involved?.