According to a new, comprehensive report released by Sandler Research, Human Resources Outsourcing remains one of the hottest and fastest growing outsourcing industries. With a projected compounded annual growth rate (CAGR) of more than 12% through 2018, the HR Outsourcing industry outpaces almost all other global outsourcing and employment markets:
- Finance and Accounting Outsourcing: 8.04%
- Staffing Outsourcing: 4.01%
- Document Outsourcing: 5.25%
- Healthcare IT Outsourcing: 7.62%
- Desktop Management Outsourcing: 4.65%
- Global Collaboration Services: 9.18%
- Human Capital Management: 10.05%
- Field Service Management: 4.00%
What is driving the growth of HR Outsourcing?
Due to the slow economic growth, organizations continue to face the challenge of ensuring maximum productivity within their organization, while minimizing costs. According to the report, this need to reduce operational expenditure is the major driver in the HR outsourcing market today, and is projected to continue in the coming years.
The second major driver is the need to attract qualified talent, and improve productivity.
While much of the report focuses on large, global organizations, the value and benefit of outsourcing human resources functions impacts small and mid-sized employers as well.
How do organizations achieve these objectives by outsourcing their human resources?
1. Reduce Operational Expenditures
HR Outsourcing firms establish professional, long-term relationships with large insurance companies and service providers. Through the clients they service, the HRO firm represents thousands of employees and negotiates favorable insurance rates and large-group discounts in various service fees and premiums. Known as economies-of-scale, the HR outsourcing firm provides small and mid-sized employers access to insurance programs and rates typically only available to their larger competitors.
The reduction in expenditures can be experienced in some, or all, areas of the employment life-cycle:
- Streamlined human resources systems
- More efficient on-boarding processes
- Employment compliance and reduced liability
- Management training courses
- Favorable Workers’ compensation premiums
- Minimized work-site injuries through on-site safety consulting
- Employment Practices Liability Insurance
- Group health insurance rates
- Cost effective voluntary employee benefits (life, vision, disability, etc.)
- 401 (k) and pre-tax plans
- Payroll processing and tax services
2. Attract Talent and Improve Productivity
Year after year, surveys and research reports indicate that employers who invest in their staff will yield greater returns and experience higher profit margins than their competitors who don’t.
“Investing in employees” means different things to different organizations. However, offering a robust employee health insurance package always ranks at the top of the list. Major medical, dental, life, vision and other voluntary benefits have become almost a given if a businesses wants to attract the best talent.
As stated previously, human resources outsourcing firms can offer robust insurance programs to their clients, at a fraction of the cost were they to procure them on their own. These insurance products are packaged and presented in a professional, organized manner that promote a favorable first-impression to would-be employees.
Additionally, the HRO firm will walk the new hire through the selection, deduction, and enrollment process. This turns a complex and daunting experience into a smooth, streamlined one. A dedicated employment benefits specialist is typically assigned to answer any questions the new employee may have. Ultimately, the entire recruiting, on-boarding and new-hire process will help attract the best talent and promote a positive workplace experience.
For those of us in the human resources outsourcing industry, the report comes as no surprise. For years HR outsourcing firms have been singing the praises of outsourcing to any employer who would listen. Now, with the positive forecast ahead, we hope many more businesses will consider it.