Outsourcing human resources management can save up to 30 percent of the cost and increase employee satisfaction as well.
Companies are experiencing important changes in human resources management and the Professional Employer Organizations, or PEOs, have been one response to these changes. Primary factors driving the growth of the industry include an increase in the complexity of laws and regulations governing the human resource function and the subsequent need for professional expertise to manage and maintain a workforce to deal with these new realities. PEOs concentrate mainly on small- and medium-size companies. The use of PEOs frees up managers to focus on their core competencies rather than on employment-related rules, regulations, and paperwork. This industry, which twenty years ago barely existed, is now growing at a rate of 30 percent a year.
In contrast to PEOs, Business Process Outsourcing firms, or BPOs, assume full responsibility for performing the work of the human resource function in large enterprises, companies typically with twenty thousand or more employees. The innovator and leader in the BPO industry, Exult, founded in 1998, now manages the full spectrum of employee process such as payroll, recruiting and staffing, training administration, employee-data management, relocation, and severance administration for a number of Global Fortune 500 companies. According to a study by McKinsey, the management consultancy, outsourcing human resources management in these ways can save up to 30 percent of the cost and increase employee satisfaction as well.
ACTION POINT: Are you outsourcing part of your human resource function? Why or why not?