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A Guide to Staff Outsourcing

As your company expands, your challenges, especially in Human Resource (HR) Management multiply exponentially. The obvious reason for increased challenges is increased HR workload due to additional human capital.

Unlike large corporations, startups, project-based businesses as well as small and medium-size organizations have limited capacity for maintaining fully operational HR departments. Unfortunately, despite their limited capacity, they also face HR challenges just like large organizations.

In fact, the global business environment is experiencing unprecedented change, and (HR) should develop new capabilities if it wants to remain relevant.

So, what is really going on?

One word; Staff Outsourcing! It is predicted that In-house HR will downsize and outsourcing will increase.

In this guide, we extensively cover these topics:

  1. What is staff outsourcing?
  2. Why do companies outsource?
  3. How to choose a vendor for staff outsourcing.
  4. How to monitor outsourced staff services.

What is Staff Outsourcing?

Staff Outsourcing is, “the strategic use of a Professional Employment Organization (PEO) to support HR functions traditionally handled by an internal HR.”

It is a business strategy where organizations contract out major HR functions to specialized and efficient PEO’s.  The contractor becomes a critical business partner in supporting the organization to achieve its business objectives.

While exploring strategies to remain competitive, staff outsourcing is the preferred option. It removes the burden of increasing internal headcount while achieving more. Outsourcing additional headcount to a reliable PEO will allow your management team to focus on the core business.

The current global Coronavirus Pandemic (COVID-19) has greatly affected staff outsourcing. Growing unemployment rates have had a direct impact on outsourcing. This clearly seen as companies struggle to remain in business.

However, it is expected that when recovery begins, the bounce-back will be fast, and the outsourcing sector will be more relevant and popular than ever. 

Why do companies Outsource?

1. To reduce costs.

Let us take the example of an international engineering company that wants to implement a time-bound project-based assignment overseas. Project implementation would require the deployment of both international and local country resources. In this scenario, outsourcing the services would be a good model to use as it would be extremely expensive to repatriate all the business functions required for project success. These would include, operations, finance, procurement, HR and payroll management.

It would make immense business sense to only repatriate the critical operational teams. All the other non-core functions including HR and payroll management would better off if outsourced to a reliable PEO. This would significantly reduce project costs as opposed to investing in a full project team overseas for only a short period of time.

2. To enable internal resources to focus on the core business functions

Using this same example above, the project teams would be completely relieved to focus on the core project functions. Additionally, they would not need to worry about HR compliance overseas. All the other functions below are best handled by a professional outsourcing company.

All the above are critical requirements that would completely stress the project leadership. Thanks to staff outsourcing, internal project teams only need to focus on project milestones.

In a global outsourcing survey conducted by Deloitte in 2016, they came up with a great weighted summary of reasons why companies outsource.

Summary of reasons companies outsource

Summary of reasons why companies outsource.

How to choose a vendor for staff outsourcing

The need to choose the right staffing agency/ PEO cannot be overemphasized. Before you sign any contractual paperwork with any service provider, conduct detailed due diligence. This is key when confirming that they have the right capabilities to support your business.

Some of the critical factors that this staff outsourcing guide considers include;

1. How long has the company been in business?

Ensure you ask for proof of company registration documents to validate the information provided by the prospective company. This should also include their business permits and registration with professional industry bodies.

2. Find out if they have an in-depth understanding and knowledge about your business

Besides the information the prospective agency shares in relation to insights related to understanding your business, validating this information is critical. Ask for proof of recommendation letters or reference details of similar industry clients they have served in the past. Conscientiously call one or two of these clients to be sure the information provided is accurate.

3. Confirm they have the experience and expertise required to support your business.

Outsourcing your staffing function does not mean you should not worry about the competences of the staffing company. This should be of critical importance. After reviewing the recommendation letters from previous clients, request for the profiles of the key team. These are the people who will handle your account as well as the company leadership profiles.

Most importantly, if you are looking to outsource your end-to-end HR services, don’t forget to ask for Tax Compliance Certificates the agency you want to consider.

4. Request for a face- to- face meeting if possible or arrange a virtual meeting instead

Due to technological advancement, it is possible to have a virtual meeting when it is impossible to meet in person. It helps to put pick further competency cues during a meeting session just to help support your decision-making process.

5. Find out if they have invested in technology for process efficiency

Technology has a crucial role to play in the success of HR Outsourcing models. Make sure you choose to work with a vendor who has the right technological tools to support your payroll processes.

 6. Finally, discuss the price upfront.

How to monitor outsourced staff services

As much as it is important to trust your service provider “trust” must always be accompanied by accountability and transparency. Against this background, it is important that you monitor the quality of services delivered by your service provider at least periodically as agreed by both parties.

We have put together some tips to you ensure your service provider performs the outsourced functions with integrity and efficiency.

1. Set clear expectations

Outline expected operations flow the onset. It helps to bring to the attention of the service provider your internal policies and procedures that they will be required to adhere to. For instance;

  • What is your preferred grievance handling procedure? Both parties’ roles in the process need to be clearly articulated
  • Share how you handle Health and Safety measures you have in place and any envisioned role the service provider would need to support you with
  • Advise your leave policy and procedures that the service provider needs to follow
  • Cultural sensitization (Do’s and Don’t’s). It helps to make the boundaries clear.
  • Contact persons on your end for both HR and accounting functions as well as the key contact person
  • Don’t forget to bring to the attention of the service provider your policy on concerns and complaint handling as well as escalation protocol.

These examples are not exhaustive and need to be expanded depending on your business requirements but should help you start on the right footing.

 2. Keep a very close eye on the process for the first few months

Depending on the scope of the outsourced assignment, it helps to keep a close eye on the process to ensure a smooth transition. Both parties have only just met and you will be critical in responding to any emerging issues that need clarity. This will make the learning curve during the transition period shorter.

3. Get outsourced employees feedback.

Feedback from the outsourced employees is the litmus test that confirms the quality of services you are getting of value or not. You may choose to randomly get the views of a few outsourced staff based on their experience. For instance, do they get their salaries on time? Do they get an itemized payslip commensurate with their contractual agreement? Is the service provider proactive when they reach out for information concerning their employment? If your outsourced staff are happy, then that confirms your service provider is doing a good job.

4.Request for monthly accounting reports

Don’t wait for your outsourced staff to complain only to confirm your service provider is not compliant to agreed process deliverables.

Demand to receive monthly financial reports with evidence of all payments including net payment of salaries and submission of payroll statutory taxes.

Conclusion

This staff outsourcing guide has demonstrated that outsourcing has become an important strategic tool in today’s competitive business environment and demand is expected to increase during and post the current global pandemic.

The fact that the outsourced functions are critical to the achievement of your business objectives requires careful planning and process implementation.

According to research findings by Europe’s Journal of Psychology, organizations can achieve significant benefit from using external agencies to provide non-core services.

Organizations that rely on a single expert to manage their payroll can be significantly impacted by any slight changes, such as an employee quitting their job, taking a vacation or leave, falling sick, etc.

Such changes can make the payroll function vulnerable to interruptions and costly errors.

Our team-based approach enables us to provide reliable outsourced staff and payroll management services without interruptions or errors. There is always a dedicated team-player and an equally able backup partner.

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