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All You Need to Know about HR Outsourcing

A Blog on HR Outsourcing

By – Divya Jiwtani for Salahkaar Consultants

Human Resource Outsourcing refers to the process of utilizing the services of the third party to take care of its HR functions. This third party is responsible for Human Resources for the Company.

Outsourcing is the hiring of a third party outside the company to perform planned or existing activity that is or could be done internally. In outsourcing services or job functions are farmed out to a third party.

Human resource outsourcing definition

Human Resource Outsourcing also known as HR Outsourcing or HRO is a process of hiring of companies to handle some or all of a business’s HR tasks and functions. Since HR functions can be complicated and laborious, many business organizations opt for outsourcing either whole HR logistics or part of the HR responsibilities like payroll.

It is a contractual agreement between an employer of an organization and an external third-party service provider where, the employer transfers the management of, and responsibility for, certain HR functions to the external HR service provider.

Some business organizations may outsource their entire HR department while others might just outsource time-taking functions like administrative tasks, which therefore allow their internal resource to focus on the strategic level.

HR Outsourcing Services

These are a few services provided by Human Resource Outsourcing service providers:

  • Recruiting, selection, training, and development
  • Overseeing organizational structure and staffing requirements
  • Tracking department objectives, goals and strategies
  • Employee orientation programs
  • Administration of Payroll
  • Benefits Administration
  • Insurance Services
  • Performance Management
  • Policy Compliance Management
  • Labor Law Compliance
  • Talent Management
  • Audit and Wage-Claim Assistance

To have a free discussion on these matters and what will suit you better, you can write to us here

HR Outsourcing – Need

Factors those mainly are responsible for an organization’s decision to outsource its HR functions.


Some of the factors responsible for creating need of HR outsourcing are:

  • Enabling business organizations to concentrate on core operations.
  • Delivering cost savings – both direct as well as indirect cost savings.
  • It helps in creating a stable and economical operating platform.
  • Outsourcing can improve employee relations and ensures efficient Hiring Orientation.
  • Outsourcing services can come up with better HR Training and Professional Development.
  • Conveying risk and accountability for people issues to the service providers.


HR Outsourcing – 3 Types

HR Outsourcing is broadly separated into three types, these are:

1. Application Service Provider (ASP):

 An Application Service Provider is a specialized third-party group responsible for providing commercial hardware and software applications to support large organizations, which consists of application vendors like Microsoft, Oracle etc. These vendors have evolved application packages in order to support human resource activities in an organization.

An organization uses ASP Services to outsource either a portion or the whole of their information technology requirements. The major drawback of ASPs is that costs associated with application software are high.


2. Business Process Outsourcing (BPO):

Business Process Outsourcing or BPO refers to the method of employing a third-party service provider to carry out one more business functions in a firm. The main difference between ASP & BPO is that in BPO, the client is in direct contact with the employees via call centers.

BPOs are usually the first choice of Multinational Corporations (MNCs) as they operate in more than one country and employ a large number of people.


3. Total HR Outsourcing:

Total HR Outsourcing is a type of outsourcing, where the entire HR function is handled by the third-party service provider. There isn’t any particular HR department or team in the organization. All the functions of HR like sourcing, training, etc. are done by the third-party service providers depending upon the requirements on client organization.

To have a free discussion on these matters and what will suit you better, you can write to us here

HR Outsourcing – Advantages:                       

Top 20 Advantages of HR Outsourcing are:

1. The major advantage of HR outsourcing is that it allows the employees to focus on the long term goals that truly matters for the organization.

2. It provides flexible solutions and costs.

3. Eradicates the pressure to recruit, manage and motivate a diverse in- house HR team.

4. It improves employee relations and streamlines hiring orientation.

5. Removes non-operational distractions from the line.

6. It helps in saving time and also minimizes paperwork.

7. Provides reliable, professional compliance in various areas like employment, labor and immigration law, and payroll.

8. Reduces the fixed cost of managing employees.

9. Better risk management.

10. Cost-Effective services.

11. It enables you access to a pool of talent that has knowledge about the latest changes happening in the market.

12. Better management of employee performance and organizational development.

13. Increases the value of products and services, customer satisfaction and share-holders.

14. Ensures the smooth functioning of HR department.

15. Flexibility is another major advantage of Human Resource Outsourcing.

16. Maximizes organizational resources.

17. Helps in gaining market access and business opportunities through the service provider’s network.

18. Brings in a talented and skillful workforce to the organization.

19. Makes better technology and software system available for the organization.

20. It helps in acquiring innovative ideas.

Hey, would you like to get your company’s analysis done for an HRO need? Or need free best-written policies by an HRO team. If yes, do write to us here


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