6 Types of HR Outsourcing: From Talent Acquisition to Performance Management

6 Types of HR Outsourcing: From Talent Acquisition to Performance Management
Article by DesignRush DesignRush
Last Updated: February 24, 2023

Nearly half (45%) of small business owners spend at least one day a week on administrative human resources issues. Additionally, 35% of managers and owners of businesses that have been operating for 10 years or less spend six to 10 hours per week on such issues.

Business owners dislike managing employees mainly because of personal problems that employees have that conflict with work. However, such problems are rarely avoided. If you want to save yourself from these types of headaches, you can outsource your business’s HR operations.

In this article, we’ll look at the different types of HR outsourcing and the benefits you can reap by applying this to your business.

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HR Outsourcing Type #1: Talent Acquisition

It takes an estimated 30 hours to hire one employee, with the most time spent on interviewing applicants (seven hours). This amount of time is spread over one or two months.

The hiring process is among the most common types of human resource outsourcing simply because it is tedious and costly. If you want to find the perfect employee that fits the job description and company culture, but you want to avoid spending countless hours on recruitment, outsourcing the hiring process is your best bet.

Search for the best HR outsourcing company that will take care of placing appropriate job ads, sorting through applications, reaching out to potential candidates and interviewing them, and making job offers.

HR Outsourcing Type #2: Benefits Administration

An employee satisfaction survey found that 78% of employees will likely stay with a company that offers a good benefits package. You should offer your employees a retirement plan, health insurance, and more on top of their salaries to keep them happy.

Like many different types of outsourcing, the goal of a benefits consultant is to help you save time and money. They do this by curating a budget-friendly benefits package that will positively impact employee retention. They are then in charge of setting up the plan, enrolling your employees, and managing the program.

HR Outsourcing Type #3: Employment Law Compliance

Businesses have to comply with so many laws regarding benefits, tax, workers’ compensation, and employment. If you’re a small business owner trying to wear too many hats in your business, it can be hard to keep track of all the laws you need to comply with. It may be time for you to look into HR outsourcing types, particularly one that helps you with employment law compliance.

Experts in HR compliance can help keep you updated on state and federal laws surrounding employment to ensure that your company adheres to them. They can also come up with company policies to prevent legal issues that result in penalties and lawsuits. Implementing practices, such as harassment policies and paid time off policies, can save you from headaches down the road.

HR Outsourcing Type #4: Payroll

This is among the most commonly utilized types of human resource outsourcing — and with good reason. A recent survey by SD Worx found that 44% of employees were paid late, of which 48% received inaccurate payments. Needless to say, this type of oversight negatively impacts employee retention and reputation and even hurts your chances of attracting top talent.

Luckily, payroll processing can be outsourced. Your HR outsourcing agency can take care of disbursing payments to employees and calculating deductions so you won’t get in trouble with the IRS. If you have an accounting department that’s already swamped with tasks, outsourcing payroll can help free up their time so they can focus on generating important financial reports for the business.

HR Outsourcing Type #5: Employee Engagement

In the US, employee engagement has been on a downward trend since 2021. Engagement among part-time and full-time employees dropped from 36% in 2020 to 34% in 2021 and 32% in 2022. Now is a critical time for business owners to pay attention to how engaged their employees are and focus some of their efforts on remedying any perceived disengagement among the workforce.

One way to mitigate employee disengagement is by bringing on the right HR consulting firm. They can help with strengthening workplace relationships, providing employee counseling, and mediating conflicts, among other things.

HR Outsourcing Type #6: Performance Management

This may be one of the less commonly utilized types of HR outsourcing, but it’s still worth mentioning. This business process involves setting expectations, coaching, monitoring performance, providing continuous feedback, and rewarding employees that supersede expectations. If an employee, unfortunately, doesn’t meet expectations, the HR agency has to implement the appropriate disciplinary action according to the company handbook.

Benefits of HR Outsourcing

Outsourcing human resources processes have gained popularity worldwide because of its many benefits. In 2022, the human resources outsourcing market was valued at USD 34.9 billion worldwide and is projected to reach USD 46.5 billion by 2027.

Let’s look at some of the advantages of these types of HR outsourcing.

Lowers Costs

An irrefutable benefit of different types of outsourcing is that it saves you money. Why? Firstly, you can hire agencies from anywhere in the world, particularly from areas that don’t cost as much as your local hires. Secondly, HR agencies are likely to have built relationships with benefits providers, so they’re in a better position to negotiate the rates of benefits packages for your company.

Saves Time to Focus on Core Business Processes

If you’re a small business owner, utilizing any of the different types of human resource outsourcing can help you focus on core processes, such as growing your business. If you have an in-house HR staff, outsourcing the tasks that they need help with will free up their time for other tasks.

Improves Efficiency

An outsourced HR provider can help improve your business’s efficiency by developing policies and procedures that your requirements, mitigating risks that would take up so much of your time and money, improving employee engagement and satisfaction, and managing performance.

Types of HR Outsourcing — Key Takeaways

So, there you have it. Those are the different HR outsourcing types you can utilize for your business. Now that you know about the HR processes you can outsource, you just need to find an appropriate HR agency or consulting firm to maximize the benefits of this type of outsourcing.

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