Nearly 35% of companies with up to 1,000 employees outsource at least one HR function. The most commonly outsourced HR functions are employee training activities and recruitment.

But what are other HR functions companies can outsource? And what are the benefits of outsourcing various HR functions? 

In this article, we will look at what HR outsourcing entails, its benefits, and present the top HR functions companies can outsource so they can focus on their core business. 

What is HR Outsourcing?

Human resource outsourcing is when a company hires another company to handle some or all of its HR tasks. 

Rather than internally managing processes like hiring, payroll, and employee benefits, the company contracts with an external HR services provider. 

This allows the company to focus on its core business activities, while the external provider oversees their various HR functions. 

This practice is prevalent globally and can significantly save companies time, money, and effort while ensuring efficient HR management.

The growing demand for HR outsourcing services is reflected in the numbers. New research shows the global Human Resource Outsourcing market, which was valued at USD 36070.0 million in 2022, is projected to grow at a CAGR of 4.28%, reaching USD 46382.88 million by 2031. 

 

Benefits of HR outsourcing services

So, how do companies benefit by outsourcing one or more of their HR needs? 

There are several benefits to outsourcing HR functions:

• Saves time

HR functions and efforts don’t take a minute. Many HR services take a while to perform and can strain your HR team. Services like creating an HR strategy, creating and updating your company’s HR policies, or even identifying your team’s training needs. All of these take a significant amount of time to perform. 

By outsourcing some HR functions, you can free up your team’s valuable time, allowing them to focus on more strategic tasks and priorities.

• Boosts productivity

When non-HR staff handle HR tasks, they struggle to perform their duties. They’re weighed down by tasks they’re not familiar with and end up struggling to be productive and can easily suffer from burnout. 

That’s why outsourcing HR functions helps your team focus on their jobs and increases productivity.

• Saves money

One of the top benefits of outsourcing HR needs is eliminating the need to find work for full-time HR professionals. 

Working with HR outsourcing companies allows you to pay only for the specific services you require. For example, if you need recruitment services, you specify your needs and get only that service.

Alternatively, if you want bigger services like creating an employee engagement program, overhauling your HR practices, or other such services, an HR agency would be a good alternative to weighing down your one-person HR team.

• Provides you with many services

Third-party HR service providers, like Tawzef, offer a variety of HR and consultancy services, allowing you to choose what you need.

As your business grows, the provider can easily meet your evolving needs. More on those services later. 

• Better benefits for your employees

Outsourcing HR functions to a firm like Tawzef gives you access to their extensive network of companies and service providers, including medical insurance, banks, and HR software. 

This can make your company more attractive to current and future employees.

 

Top HR functions that can be outsourced

Whether you need to fulfill administrative or hands-on duties, there are several HR functions you can easily outsource.

Here are 12 of the most commonly outsourced HR functions:

1) HR administration

Administrative functions involve transactional tasks like providing advice on procedures and policies, hiring assistance, and employee development.

These can involve  HR software and tools such as self-service portals, like the human resources management system (HRMS) or in-person HR support.

2) Training and development

There are many ways to offer training and development for your employees and teams. You can hire external contractors, develop internal programs, offer training and development software programs for employees, or a combination of all of those. 

However, figuring out what your individual employees and your teams need can be tricky.

Outsourcing training and development functions can provide access to specialized resources and expertise without spending tons of money on internal program development.

HR outsourcing companies offer tailored programs for organizational and employee needs. In addition, they can assess your employees and help you decide how to develop them. HR agencies can also help you determine the training and development KPIs you should measure after each training program. 

3) HR strategy 

Outsourcing your HR strategy can save time and money. More importantly, it can help guide various aspects of your business. A good HR strategy helps you improve your recruitment process and practices, increase employee retention, among other benefits.

4) Payroll

Managing payroll involves meeting various regulations and responsibilities, such as payroll setup, tax filing, processing cycles, deductions, time and attendance tracking, and leave reporting. 

Payroll outsourcing allows you to focus less on time-consuming HR tasks and get reliable services, which is vital to avoid costly errors and legal issues.

5) Recruitment 

One of the most frequently-outsourced HR functions is recruitment. That’s because the recruitment process is long and time-consuming. In addition, working with HR agencies means getting access to a larger talent pool, along with additional recruitment services. 

By outsourcing your recruitment, you can get more resumes and candidates, fill tricky positions like managers and team leads. In other words, HR companies can help you find the top  candidates quickly.

Tasks include writing job descriptions, posting positions, resume review, interviews, which could be several stages, and paperwork handling.

6) Compensation and benefits 

Companies often outsource benefits administration to HR professionals to enhance benefits packages, manage programs, and determine competitive compensation and benefits to attract and retain top talent. This can help you significantly reduce employee turnover, a common HR challenge. 

7) Compliance & taxes

Any business needs to ensure it’s compliant with local labor laws and regulations, and file taxes. 

By outsourcing compliance to HR agencies and consultants, companies get expert help with managing wage disputes, company policies, workers’ compensation, employment law, harassment claims, safety programs, and other areas of compliance. 

Staying updated with labor laws, employment standards, taxes, and regulations is crucial. And outsourcing firms specialize in ensuring businesses remain compliant.

8) Salary surveys

Besides compliance, it’s important your company offers adequate pay to its employees. Doing so helps foster employee growth and achievement. 

Working with HR agencies can mean access to salary surveys  to make sure you’re offering competitive salaries, in line with the market. Keeping up with surveys also helps you ensure your long-term hires are being adequately compensated so they don’t look for other companies with better salaries.

9) Background checks 

When hiring, it’s important to conduct reference and background checks. 

However, these processes, especially reference check phone calls, can be time-consuming. Many companies use third parties for these types of checks.

10) Recognition and rewards

Employee engagement contributes to retention, empowerment, and increases productivity. It also improves teamwork and contributes to  higher employee morale. 

Implementing rewards and recognition programs is crucial for motivation, engagement, and retention. 

However, creating an in-house program is time-consuming. It’s why many companies don’t have an internal recognition program.

However, outsourcing this HR function can reduce turnover and boost retention and productivity.

11) Risk management 

Outsourcing HR functions to professionals like consultants and agencies can reduce the risks of worst-case scenarios in employee relations and discrimination matters, helping companies avoid conflicts and lawsuits.

12) HR policies and handbooks 

When staff and departments are overwhelmed, this can lead to compliance mistakes. Which can be costly. 

Outsourcing HR documentation management ensures compliance with HR policies, letters, handbooks, and contracts, keeping your business on the right side of the law.

 

Outsource your HR functions with Tawzef

As a recruitment agency and HR consultancy, Tawzef has been helping companies outsource various HR functions so they can focus on core business operations. 

Tawzef acts as your HR consultant and business partner, providing a wide range of HR services that grow with you. 

Not only does Tawzef help you overcome various HR challenges, but also helps you manage employees internally through payroll and manpower outsourcing services. 

Tawzef specializes in providing HR consultancy services to small and medium enterprises (SMEs) and startups. Over the past 15 years, we’ve helped companies in a variety of industries. From hospitality to manufacturing to e-commerce to construction to finance to banking, among others.

Outsourcing HR functions allows you to bring in an expert for an area you may not be familiar with. To maximize your partnership with an outsourcing provider, such as Tawzef, you should have an outsourcing agreement in place. 

This agreement will outline the services you need and the expected deliverables.

 

Get in touch with Tawzef to learn more about how we can help your business grow with HR services and solutions.