What You Need to Know About How HR Outsourcing Pricing Works

As your company grows, so do your HR needs. But often, business owners and general managers aren’t aware of their exact needs. To many, HR is just payroll. But what other HR services can you outsource and what is the price of those services?

Is it better to hire people in-house? Outsource? Have an in-house HR executive and complement the rest of your needs with an HR outsourcing company?

Managers often get frustrated that their different teams handle many administrative tasks that make them work slower.

Or worse, make them burn out faster. But the problem is that business owners don’t know who to give these tasks to and how much it costs to outsource these services.

That’s what we’re talking about today. In this article, we’ll be sharing the top and most-commonly outsourced HR services and tasks along with how HR outsourcing services are priced.

HR outsourcing services: What can you outsource and why hire an HR service provider

Before you look at HR outsourcing prices, it’s best if you get a clearer picture of the various HR services you can outsource in the first place.

Let’s look at this list:

1)   Payroll processing

Payroll outsourcing is the top service often outsourced by small and medium-sized companies. Corporates can also outsource their payroll along with other services on this list.

However, payroll isn’t just about paying employees at the end of each month. It involves reviewing their working hours (if applicable), their attendance and absences, taxes, and other factors such as loans or pay advances.

2)   Manpower planning

Want to hire new people? Not sure if you should promote employees to new senior roles or look for people outside your company?

All this falls under manpower planning services and it’s a service you can outsource to an HR service and consultancy firm like Tawzef.  

3)   Compensation and benefits

Outsourcing employee benefits and compensation is the second most commonly-outsourced HR service.

Compensation and benefits (C&E) is a service that handles how much employees should get paid and what benefits companies should include in their packages. Senior managers, employees, and executives get different packages than juniors and other employees.

4)   Social and medical insurance

Social insurance is a must-have for companies today. Otherwise, you’ll be penalized by law. Not doing this correctly can result in heavy fines for your company.

But what is the process for getting employees listed in the country’s social insurance scheme? How can you manage this?

Similarly, offering medical insurance to your employees is an attractive perk to many. But small and medium businesses often find it costly to do so.

Working with an HR outsourcing services provider ensures you’re on the right track with all your employees’ social insurance paperwork and needs. It also allows you to explore different opportunities for medical insurance.

5)   Banking services

Smaller-sized companies and startups often struggle to get a business banking account. Working with an HR outsourcing company means you don’t have to worry about this.

If you outsource your payroll and C&E, the HR service provider can list your employees under their account and manage the entire process for you.

6)   Performance management

How do you determine if your employees are performing well and if your business is moving forward? Sure, numbers are important, but how do you track employee performance? How do you determine which employees should get a raise? And how much is that raise?

You’ll need to use key performance indicators (KPIs) for each role and seniority level and measure according to those KPIs. Your KPIs need to be correct to begin with or the entire process will be a mess.

That’s where employee performance management comes in. It’s a dual effort between your HR team and the employee’s direct manager.

However, if you don’t have an HR executive—or if you have an overloaded one—your performance management efforts tend to get delayed… forever!

Outsourcing this service to an HR consultancy means they can train your managers and senior employees to create KPIs, implement them, and measure them.

7)   HR strategy and consultation

Developing an HR strategy is important for all businesses. But it’s a generally long and costly endeavor, which is why few companies have a good HR strategy in place.

The good news is, outsourcing your HR strategy makes it cost-effective, easier, and more transparent than performing one in-house.

8)   Time tracking

Many companies often need to use time tracking software to track certain employee tasks and roles, which they then use to pay employees. Time-tracking software can be expensive.

Having an HR firm, on the other hand, means you can choose and manage the time tracking software from their end and get their benefits.

9)   Gap Analysis

When companies use a gap analysis, they aim to see where they are now, in terms of performance, and where they’d like to go. Gap analyses inform companies whether or not they’re meeting expectations and are effectively using their available resources, or if they need to improve.

“By defining and analyzing these gaps, the management team can create an action plan to move the organization forward and fill in the performance gaps,” explains Investopedia.

10)   Business process outsourcing

Business process outsourcing, known as BPO, involves outsourcing various information technology (IT) business processes to an external service provider.

This third-party or external provider “owns, administrates, and manages selected processes based on defined and measurable performance metrics,” explains Gartner.

11)   Business strategy

You may think that every business needs to create its business strategy in-house. But the truth is, it’s one of those services that is best left to experts and professionals instead of spending lots of time and money on it in-house and not coming out with an effective and clear strategy.

Accordingly, the business strategy is one of the most commonly-outsourced business requirements.

Having a business strategy is like having “an organizational master plan…[It] is a long-term sketch of the desired strategic destination for a company.” (IMD.org)

Benefits of outsourcing your HR needs

You’re now thinking: I have a few of these tasks already and they’re loading my different team members. But should I outsource them? Should I hire an HR person? Should I seek an HR outsourcing company?

To answer all these questions, you’ll need to understand the benefits of outsourcing your HR services.

We’ve already briefly mentioned the benefits of outsourcing your HR needs in the above services. Here are few more benefits:

• Less administrative work for your employees
• Employees can focus on their jobs and be more productive and efficient
• Reduce the cost of hiring people full-time
• Outsource other services aside from HR
• Work and pay on a per project basis
• Make use of the HR service providers’ software for HR, IT, and others
• Get consultations about your business needs and how to grow
• Ensure jobs are clear
• Manage the entire recruitment process
• Have employee onboarding and exit strategies
• Enhance employer branding
• Better pricing packages
• Expert consultation services for businesses
• Conduct and train companies and managers to create and measure performance reviews

HR outsourcing prices: How it works

Now that we’ve covered the types of HR services you can outsource, along with the benefits, it’s time to look at how the pricing of HR outsourcing services works.

There are several factors that impact the cost of HR services required from a third-party, like Tawzef. Here are the most common factors:

• Number of services required

Naturally, the larger the number of services you need, the higher the price will be.

• Company size

Another factor that affects HR outsourcing prices is the size of the company. This is especially the case with payroll outsourcing and manpower planning and outsourcing.

With services like creating an HR strategy, the number of employees plays a role, but it’s not a major pricing element.

• Type of service required

As you have seen in the above list of commonly-outsourced HR services, some requirements are more advanced and will need more time to execute than others. In turn, this impacts the cost of the HR services requests.

HR outsourcing prices: Pricing for manpower outsourcing

Manpower outsourcing is a broad service that encompasses payroll. It also involves recruitment and listing the employees under the HR service provider instead of the company itself.

This means that the HR outsourcing company is to pay your employees at the end of the month and settle their taxes and insurance fees with the government.

In this case, the pricing of the outsourced HR service differs slightly from the points mentioned above.

With manpower outsourcing, here are the 3 factors that play the biggest role in pricing:

• Number of employees

The number of employees plays a major role here. How many of your personnel do you wish to offload to the HR company? If you have the HR company pay 10 employees, the cost of the service will be much lower than if you want them to pay 50 or 100 employees.

• Employee net salary

The net salary for these employees affects the pricing of the HR service.

• Benefits

Last but not least, the benefits these employees get affect the cost of the HR service provided to your company. Why? Because the HR outsourcing company is charged with paying and delivering benefits to your employees.

Benefits can include one or more of the following:

• Social insurance (mandatory)
• Income taxes (mandatory)
• Medical or health insurance
• Fund contributions like the government’s emergency relief fund or a fund by your company
• Bonuses
• Other benefits like vehicle allowance

Conclusion

Outsourcing one or more of your HR services offers many benefits to your business. And while HR outsourcing prices matter, it’s not always a matter of money.

HR outsourcing companies have broader and multi-industry expertise that an in-house HR executive or even HR manager may not have.

By hiring an HR service provider like Tawzef, you’d be getting a quadruple benefit: You’d be saving time, money, effort, and getting exceptional expertise.

Learn more about the different HR outsourcing services out there and how you can get many of the above-mentioned services with Tawzef.

Working with Tawzef means you get over 15 years of experience in providing HR services and solutions in Egypt, Saudi Arabia, the UAE and more.

In addition, you get additional special services like psychometric assessments, salary surveys, and more!

Learn more by reaching out to the Tawzef team.