About HR Outsourcing Service

In today's fiercely competitive business environment, companies seek for new strategies to compete with other businesses, which include outsourcing HR functions. With many different HR outsourcing services available, determining which one is right for your HR needs can be challenging. You know you need extra help managing your core HR operations, but you're not sure which HR outsourcing provider is best.

In this article, I'll help simplify your decision by sharing insights on the top HR service providers that can assist with employee management, legal compliance, staffing, and more.

What are HR Outsourcing Services?

HR outsourcing services are often utilized by organizations that lack an internal HR team or have a limited number of HR professionals on staff. HR outsourcing involves hiring a third-party organization to manage key human resources functions for the business. These functions include payroll processing, benefits administration, training and development, and regulatory compliance.

HR outsourcing providers add value by offering a structured and professional approach to managing ongoing employee relations and HR administration. This allows client companies to concentrate on their core operations and strategic initiatives.

By outsourcing HR tasks to specialized HR outsourcing firms, businesses can free up valuable time and resources to focus on their core activities. Moreover, HR outsourcing enables companies to leverage the expertise of professionals who are knowledgeable in HR best practices and compliance requirements.

6 Benefits of HR Outsourcing

1. Save Money on Administration Costs: While outsourcing your HR needs incurs a cost, it’s minimal compared to the value HR expertise can bring. Standard HR departments have many responsibilities requiring significant staff to fulfill them. As your company grows, your HR department needs to grow as well. When you outsource with a PEO (Professional Employer Organization) or EOR (Employer of Record), you gain access to scalable HR professionals and experts that expand with your workforce. HR outsourcing can substantially reduce overhead costs, particularly in areas like payroll processing, training, and salaries for HR expertise you would otherwise have to employ.


2. Stronger Risk Management: Staying up to date with dynamic employment-related laws at the local, state, and federal levels is challenging. Even small changes or updates may require adjustments within your organization to stay compliant. Outsourcing HR enhances risk management by providing best practices to help you avoid fines, claims, or severe penalties. PEO or EOR offers HR experts who are well-versed in ongoing changes to laws and regulations at all levels, ensuring your policies and procedures are up to date. This not only benefits your organization but also helps protect your employees.


3. Increased Efficiency: One of the most notable benefits of outsourcing HR is the time saved within your organization. An in-house HR team needs to handle piles of paperwork, HR compliance, risk mitigation, employee benefits, payroll processing, employee complaints, and other important HR functions. Outsourcing allows you to free up this time and increase overall company efficiency. This enables your workforce to focus on advancing the company’s strategic goals, growing revenue streams, and improving customer loyalty.


4. Faster Ramp-Up Time for New Employees: Expanding to new geographic markets can be challenging, but certain PEO or EOR has the HR expertise to help you onboard new employees in any state. They assist in navigating the complex process of hiring and onboarding outside of your typical locations, ensuring compliance with local, state, and federal employment laws and regulations. Organizations with a strong onboarding process improve new hire retention by 82% and productivity by over 70%. Additionally, an HR partner with advanced technology programs can manage HR in real-time, from employee onboarding capabilities on mobile apps and desktops to workforce analytics for informed decision-making.


5. Access to Expert HR Consultants: Outsourcing provides unbeatable access to expert HR consultants. HR is a rich and complex department, and you need professionals with the skills and knowledge to manage HR responsibilities effectively. HR outsourcing service solves this problem by providing a team of experienced HR professionals who understand the intricacies of payroll processing, benefits administration, risk management, and various other aspects of people management.

Main Types of HR Outsourcing

With various HR outsourcing options available, how do you know which one is right for your company? We'll simplify the terminology to help you understand each type of HR outsourcing.

HR outsourcing service has evolved into several forms, each offering unique advantages and disadvantages. Among these, three types of HR outsourcing stand out: BPO (Business Process Outsourcing), ASO (Administrative Services Organization), and PEO (Professional Employer Organization).

BPO redefines efficiency by transferring entire HR processes to third-party firms, while ASO offers a more tailored approach to handling administrative HR tasks. PEOs enter into co-employment arrangements, shouldering a significant share of employer responsibilities and liabilities. Each of these HR outsourcing models serves a strategic role, helping businesses reach their full potential.

1. Business Process Outsourcing (BPO): Business Process Outsourcing (BPO) in HR involves hiring an external service provider to manage various human resources functions. These tasks can include payroll processing, benefits administration, incentive management, recruitment, compliance management, and employee training. The advantage of BPO HR service outsourcing lies in its ability to lower operational costs, utilize advanced HR software technology, and access specialized expertise that may not be available internally. This allows businesses to focus on core business activities while ensuring their HR operations are handled by professionals.


2. Administrative Services Organization (ASO) Outsourcing Administrative Services Organization (ASO) Outsourcing allows companies to outsource their HR administrative tasks while retaining control over the employment and management of their workforce. Unlike PEOs, where there is a co-employment arrangement, an ASO enables businesses to delegate administrative HR functions, such as payroll processing, tax compliance, and employee benefits administration, without sharing employee responsibilities.
   This approach allows companies to benefit from the expertise of HR team and advanced HR information systems technology without relinquishing control over their entire HR function and strategy. However, a notable issue with ASO outsourcing is the lack of risk-sharing that comes with a PEO arrangement. Since there’s no co-employment relationship, businesses retain all employer-related risks and responsibilities, including compliance with employment laws and regulations.


3. Professional Employer Organization (PEO) Outsourcing Professional Employer Organization (PEO) represents a co-employment model where businesses partner with a PEO firm to outsource their HR functions. This arrangement differs significantly from ASO and BPO models, primarily in terms of employment responsibilities and risk sharing.

What are the differences?

Unlike ASOs, where companies retain full employer responsibilities while HR outsourcing service provider handles basic HR functions, a PEO or EOR becomes the co-employer of your staff, sharing legal responsibilities and often providing comprehensive HR services. While BPO focuses on transferring specific business processes or functions to third-party vendors, a PEO or EOR offers a more integrated approach, effectively becoming an extension of the client’s business.

This means that while BPO and ASO services are more transactional or business function-specific, PEO outsourcing covers a broader spectrum of HR-related responsibilities. This comprehensive approach helps businesses navigate the complex landscape of employment laws and regulations more effectively but requires a deeper level of partnership and trust between the business and the outsourcing provider.

Key Takeaway

HR outsourcing services offer businesses a more cost-effective, efficient, and flexible way to manage HR functions. By outsourcing non-core business activities to HR outsourcing specialists, businesses can focus on strategic initiatives, while improving compliance, and driving growth.

The complexity of Malaysia’s HR management and tax regulations means it may be advisable for foreign businesses to engage HR outsourcing provider who possesses extensive HR experience. As one of the leading HR outsourcing providers in Malaysia, Corford Solutions offers comprehensive HR services for your Malaysia businesses. Feel free to check us out at www.malaysiapayroll.com.