The Inside Scoop on HR Outsourcing

By: Brigitta Glick, SPHR
Thursday, December 5, 2013

Many organizations are realizing cost savings, increased productivity, increased employee satisfaction and a sharpened focus on their core competencies by outsourcing some or all of their human resources (HR) responsibilities and tasks.

There are many reasons to outsource, and the trend today is to selectively rather than completely outsource the HR department. Instead of having full-time in-house specialists in fields outside an organization’s core business, outsourcing clients enjoy access to expertise that can step in at a moment’s notice to add extra muscle or knowledge to HR projects and high-priority initiatives.

Commonly outsourced HR services include payroll and benefits administration, recruitment, training, succession planning, relocation, government compliance, and HR legal services.

The need to outsource some or all of a company’s HR functions has created a dynamic and, sometimes, confusing array of new businesses. We now have PEOs, ASOs, HROs, RPOs and many variations in between. Knowing the differences is crucial to understanding how each might address a need you have in your organization.

  • A professional employer organization (PEO) facilitates a co-employment arrangement. The PEO becomes the employer of record for tax purposes, and it charges a service fee for taking over the HR, benefits and payroll functions of the client company. PEOs typically secure workers’ compensation insurance, and some PEOs offer background and drug-screening services for client companies. In this arrangement, the client company continues to direct the employee’s day-to-day activities.
  • Administrative services organizations (ASOs) were established by the PEO industry to provide for selective rather than all-encompassing administrative support. Common services an ASO provides are payroll and benefits administration. ASOs differentiate themselves from PEOs in that the employer remains the employer of record for tax purposes.
  • Human resources outsourcing (HRO) is another arrangement in which an organization delegates some or all of its day-to-day implementation tasks. This arrangement enables an organization to focus on HR strategy while simultaneously capitalizing on the focused competencies and economies of scale the consulting partner brings to the department.
  • A recruitment process outsourcing (RPO) provider acts as a company’s internal recruitment team for a portion or all of its jobs, overseeing the entire recruiting/hiring process from soup to nuts, from sourcing to recruiting through the onboarding of the new employees. A properly managed RPO will improve a company’s time to hire, increase the quality of the candidate pool, provide verifiable metrics, reduce costs and improve legal compliance.

In all cases, outsourcing any or all of your HR functions requires several factors for success. It is key for senior management to support the outsourcing mission and openly communicate support of the new arrangement to employees. It is imperative for both of the partnered organizations to have a clear understanding of their roles and responsibilities as well as the terms and conditions and service-level agreement set out in their contract. Opportunities abound when outsourcing relationships are clearly understood and leveraged to meet the goals of the business.

Brigitta Glick, SPHR

If you’re considering the benefits of outsourcing some or all of your organization’s HR activities, learn more about the process by calling Brigitta Glick, SPHR, President of Provenir, at 210-479-3444, or visit