Why are HR Outsourcing Services on the rise?

Businesses, big and small routinely outsource all kinds of corporate tasks when they can be done more efficiently or effectively from a professional external provider. Globally, the demand for outsourcing different kinds of corporate tasks is on the rise for the past few years. However, Human Resources Outsourcing (HRO) lately is experiencing a steep rise in demand.

HRO is a way for smaller companies to get expertise without hiring additional personnel or investing in HR systems at high costs. For larger companies, compliance can be an enormous risk, so outsourcing helps avoid such risks.

What is HRO?

Human Resources Outsourcing (HRO) refers to the process where an external supplier manages HR activities, such as payroll administration or recruitment, or perhaps the whole human resources function.

The reason behind the growing demand

With constant developments in labour law and employment regulations, according to a global research report (Global Industry Analysis Inc., 2016) “businesses are now expanding their outsourcing horizon to include complex, time-consuming activities like human resource administration.” Organizations outsource various HR functions including payroll, employee management, employee benefits processing, and employee recruitment to service providers. The market is witnessing increasing demand especially from small to medium companies, due to cutthroat competition to reduce operational costs, enhance productivity and profitability.

The Society for Human Resources Management (SHRM) conducted a survey of hundreds of companies globally about their outsourcing habits and here’s what they found are the six most common reasons that companies outsource (Gray, 2013):

  • 26% of companies outsource to save money. When an external provider’s fees are lower that what it costs for the company to do an HR function internally.
  • 23% of companies outsource to focus on strategy. Outsourcing time-consuming administrative tasks allows a professional, business or organization to concentrate on core business activities.
  • 22% of companies outsource to improve compliance – It is increasingly challenging to stay in compliance (labour laws, employment regulations, etc.) and increasingly risky to not meet requirements. Therefore, outsourcing these activities is a way to avoid such risks.
  • 18% of companies outsource to improve accuracy – Having too many tasks at hand might reduce accuracy. Outsourcing a function to an expert, who is focused on and accountable for this function, helps avoid haphazard job execution.
  • 18% of companies outsource due to a lack of experience in-house – Handing off a task where an organization lacks competencies, to someone with expertise is a great business decision.
  • 18% of companies outsource to take advantage of technological advances – With big data worth tapping into, but costly technology needed to really delve into strategic analytics, outsourcing can offer solutions without a significant investment.

Which HR functions are being Outsourced the most?

According to the SHRM survey (Gray, 2013), of those organizations who outsource, here are the 9 tasks most commonly outsourced:

  • 84% outsource employee assistance/counselling
  • 74% outsource retirement planning
  • 73% outsource pension administration
  • 72% outsource temporary staffing
  • 68% outsource background checks
  • 57% outsource training/management development programs
  • 54% outsource executive development/coaching
  • 53% outsource employee benefit administration
  • 49% outsource payroll

How is this relevant to the Cypriot business environment?

Cyprus is very well placed as an international business and financial centre. Its euro-zone membership, good airline connections and telecommunications, and an increasing alignment with the European position in matters of culture and trade make it an effective bridge between West and East.

It is therefore evident that the labour market is Cyprus is no longer local. Many Global and European companies have relocated their headquarters, and others have branches here. Subsequently, HR is an increasingly strategic area of business, as many domestic industries struggle with a skills gap and growing competition from global organizations.

However, most small to medium companies (the backbone of the economy) do not have the needed resources, internal competencies or know-how to manage efficiently and effectively their HR functions, and therefore be able to attract, retain and develop their workforce and remain competitive. Therefore, HRO is a smart solution for these companies. By outsourcing some or even the whole human resources function they acquire the right expertise in a cost-efficient way, and have more time to focus on their core business.

PowerImage / MISCO Cyprus can be your HRO partner

Our HRO service or as we call it HR Business Partner, is a simple and smart solution to minimizing the risks associated with being an employer and gives business owners and key staff members more time to focus on what they do best; Running and growing their business.

As a leader in our industry with dedicated HR experts and advisors, and over a decade of experience in Cyprus and abroad, we at PowerImage / MISCO Cyprus are able to provide a customized solution based on our client needs. We use professional analysis to evaluate existing HR practices and to design customized solutions for our clients – a process which includes the implementation of programmes, tools and procedures to help a client’s HR operation evolve into a strategic function which fully supports growth and success.

Bibliography

Global Industry Analysis Inc. (2016). Human Resource Outsourcing (HRO) – A Global Strategic Business Report. San Jose, CA 95138, USA : Global Industry Analysis Inc.

Gray, N. (2013). 6 Top Reasons for Outsourcing Human Resources Fuctions. San Francisco, CA : Job Science.

Stephanie Dikaiou Fessas

Stephanie Dikaiou Fessas

BA Marketing, NLP Master Coach
Human Resources Advisor, Certified Vocational Trainer
Stephanie Dikaiou Fessas