HR outsourcing: An alternative helping hand

HR outsourcing takes the more administrative responsibilities out of HR’s hands, leaving the function to focus on strategy and to create more value for organisations. HRM looks at key trends in HR outsourcing and factors to consider when engaging a vendor.

Whether it is an attempt to get more than an organisation’s fair share of talent in short supply, or simply to get an extra helping hand, companies are increasingly hiring third party services to handle critical business functions.

In fact, there has been an upsurge in demand for HR outsourcing in the UK alone.

According to the UK Outsourcing Index, HR services made up one-fifth of all outsourcing deals in 2014.

The study also identified that there had been £126 million (S$276 million) worth of HR outsourcing contracts in the same year, with private-sector companies behind 90% of the contracts signed.

Other markets are also showing an increase in demand for HR outsourcing.

HR services and staffing firms in India are expanding their teams and operations to cater to the demand for recruitment services, The Economic Times has reported.

The industry there is expected to grow by more than 40% a year over the next few years.

In Singapore, SMEs are now able to tap on public funding to help them outsource HR tasks.

In April, Minister of State for Trade and Industry Teo Ser Luck announced a new initiative under which, enterprise development agency SPRING Singapore will fund up to 70% of qualifying costs incurred by firms in HR outsourcing.

Currently, the republic has five main SME centres which offer a variety of support for companies. From June, they have been staffed with business advisors to provide HR and training advisory services.

This is expected to help more than 700 SMEs over the next two years.

Why hire?

Large organisations are known to have better capability to handle all their HR functions in house.

Despite this, some may want to increase productivity by handling only specific tasks. This is where HR outsourcing comes in handy.

“This enables HR to focus on more strategic roles rather than wasting resources by dealing with non-strategic and repetitive tasks,” Peter Lee, Director of Info-Tech says.

“The Ministry of Manpower, Central Provident Fund, and Inland Revenue Authority regulations constantly change, so it may be difficult for HR to keep up with updates.”

In the case of SMEs, the broad nature of HR functions may appear complex to maintain. That’s where HR outsourcing can be particularly beneficial, Lee says.

“Many SMEs still manage HR systems manually, by using Microsoft Excel to calculate salaries, and having manual punch cards and paper to record staff working hours,” he adds.

“By addressing HR gaps and promoting good HR practices, SMEs’ HR management capabilities can be improved and strengthened.”

Global player Resource Solutions specialises in recruitment process outsourcing (RPO) and is a managed service provider (MSP) for permanent and temporary recruitment.

Its managing director Simon Bradberry says companies engage its services for a wide range of reasons.

Some common reasons include reduction of recruitment costs, an inability to deal with high recruitment volumes, access to recruitment technology, and improved quality of hires.

Among other services Resource Solutions provides are third party consultancy, graduate recruitment, and payroll.

Weighing the good

Info-Tech is a software company that develops integrated HR systems for local firms in Singapore.

Among the systems it provides are a digital time attendance service, payroll, and internal web portals.

“One of the most frequently mentioned advantages of an HR information system is that you enter information only once for many HR-related employee tasks and need to update only one location if changes occur,” Lee says.

“Integration of data allows different parts of the system to ‘talk to each other’, allowing more meaningful reporting and analysis capabilities including internal evaluations and audits, and preparation of data for outsiders.”

Better known for its implementation of HR systems, Info-Tech showcases a unique factor.

“The majority of customers who purchase HR systems from us look for a one-stop solution which does not charge extra fees on system integration,” Lee shares.

“To encourage more SMEs to embark on their first steps towards a computerised system, we introduced a time attendance and payroll system.”

“This is a basic a step for them to move towards a new system, and once they see tangible results, they will move forward to get more modules.”

Bradberry says RPO services enable companies to deliver high quality recruitment solutions.

“This helps to reduce cost through efficient recruitment processes, salary and rate benchmarking, proactive direct sourcing strategies, and focusing on the provision of high quality candidates for every placement,” he shares.

“We engage with clients to understand their recruitment requirements and provide bespoke and cost effective solutions that fit their future needs, while delivering significant cost savings.”

It is obvious that there are benefits to engage such firms, but there are several limitations as well.

For example, companies may not feel comfortable sharing confidential data with RPO providers.

To overcome this, Bradberry says Resource Solutions is used to signing confidentiality and non-disclosure agreements with its clients.

He also adds, “Some RPO and MSP solutions may suffer from a lack of stakeholder buy-in from clients, which can lead to a disjointed solution.

“We mitigate this risk by having a robust communication plan during the implementation stage of the solution, which ensures that all areas of our client’s business understand exactly what our role is and how we can benefit them.”

However, to prevent such problems from occurring, Resource Solutions has put in place several approaches.

“Part of supporting recruitment strategy and ensuring oversight of the RPO/MSP’s performance comes from a suite of reporting that’s tailored to different stakeholder groups,” Bradberry explains.

“We use proprietary talent source technology or a third-party Applicant Tracking System to track every stage of the recruitment process.”

A full audit trail of all recruitment activity also helps to ensure compliance with legislation and best practice.

This is supported by their in-house legal counsel and compliance teams who will provide expert support to account teams.

Creating impacts

The implementation of HR systems has indeed helped firms in various ways.

Bradberry says that there have been continuous improvements over the course of their client engagements.

Among the few key deliverables that Lee offers is a diverse talent pool of candidates sourced from a broader scope of recruitment channels. The company also offers enhanced employer branding propositions which are effectively marketed across different media, as well as mitigation of any recruitment related risks.

“These risks include undertaking rigorous background screening and ensuring compliance with in-country legislation,” Bradberry adds.

Lee also shares that there has been significant positive impacts on companies who invest in Info-Tech’s systems.

“They become capable of handling their workforce primarily via payroll and HR,” he says.

“Additional modules deployed will not only benefit HR but their company as well, through improved talent acquisition, benefit administration and resource planning.”

Are you stepping up to the plate?

Top executives rely more on recruitment and HR leaders for innovative business strategies grounded in data.

According to a CareerBuilder survey, 92% of business leaders think that HR executives have more influence in:

  • Providing talent data and research for strategies to meet business goals: 57%
  • Showing ways to increase efficiencies or cut costs: 57%
  • Knowing what the company does, but also how everything works: 52%
  • Working with other leaders to help solve business problems: 51%

 

Are you wasting time at work?

A significant number of leaders of small and medium-sized enterprises (SMEs) in the UK perform a lot of tasks outside their job descriptions, instead of outsourcing these to insurance brokers, recruiters or IT specialists.

According to research by British Insurance Brokers’ Association (BIBA), a quarter of SME leaders spend time finding insurance and another 26% find themselves drowned with IT issues.

This has costed them 53 hours on average, a year.

Nearly a quarter of respondents said they waste about three hours completing tasks that are not core to their business.

In total, 624,000 hours are lost each week on non-business critical tasks.

 

 

Are you facing these problems?

According to the Glassdoor Recruiting Outlook Survey, the top recruiting challenges are:

  • Do not see enough qualified candidates for open positions: 48%
  • Do not see enough candidates when filling a position: 29%
  • Not actively using social media to recruit talented candidates: 24%
  • Inability to track factors that influence candidates to apply: 20%
  • Inability of company’s hiring systems for application from a mobile device: 17%

 

Increased support for HR in SMEs

In line with efforts to help local businesses enhance their employee training and HR policies, a new non-profit group Workforce Advancement Federation (WAF) will collaborate with the Singapore Workforce Development Agency.

In July, the Minister of State for Trade and Industry Teo Ser Luck signed a Memorandum of Understanding between the organisations.

Among the deliverables that WAF will seek to provide are a platform for SME owners to discuss manpower management methods and mentorship programmes with leaders from matching industries.

 

Analysing the Workday advantage

Sandeep Aggarwal, Chief Financial Officer of Aon-Hewitt Asia-Pacific, shares his thoughts on the Workday finance and HR analytics platform. He says the cloud-based system is intuitive and easy-to-use, but still provides powerful insights across the functions.

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