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Reducing Costs Through HR Outsourcing

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To meet global expansion targets, arranging top-quality HR services for overseas employees without going over budget becomes an issue.

Perhaps you need to provide HR services for employees that are being transferred overseas for a project. Or maybe you’re looking to provide payroll and benefits for new remote workers in foreign countries. In these cases, HR outsourcing (HRO) services may be a way to reduce costs, avoid bureaucratic hassles, and ensure a higher level of regulatory compliance.

 

What is HR Outsourcing (HRO)?

HR Outsourcing is an agreement for providing and managing HR services for an employee or multiple employees via a third-party company. Usually this is done through a separate legal entity in your target market.

You can do this in several different ways. Typically, companies do this through a global PEO (Professional Employer Organization) or Employer of Record services.

The most common reasons why a company would choose to outsource their HR services are:

 

Lower Costs

First, outsourcing your HR functions to a professional services provider is a great way to reduce overall costs. Furthermore, almost every element of your HR functions can benefit from boosted efficiency and reduces unnecessary costs or fees.

 

Access to Expert Knowledge and Systems

Next, a professional services outsourcer gives you access to expert support and advice for whatever you need. You can make the most of special legal, financial, regulatory, and business assistance from across the world. HRO provides this through a single point of contact.

The support and advice of a group with in-depth knowledge of local or overseas markets gives a considerable advantage to companies wishing to grow efficiently.

 

Organizational Streamlining and Scaling Ability

Fulfilling all HR functions requires managing an entire department or team full-time. This need naturally scales with the size of the business and the number of employees. As a result, wages or overheads can quickly get out of hand as a company begins recruiting and operating in multiple countries.

By outsourcing HR functions to a professional service provider, the work of an HR team or department can be managed through a single point of contact. So, this minimizes your company structure and overheads by adapting your desired services easily and as needed.

 

Turnover Reduction

One of the primary reasons companies outsource their HR functions if the security of knowing needs are met by experienced professionals. Companies who seek professional HR services see a decrease in employee turnover by up to 10-14% due to better training and support systems.

Your employees can know all their basic HR requirements are being met wherever they are in the world. This way, they can fully focus on the jobs you need to succeed.

 

What is the Average Cost of Outsourcing Payroll?

Organizing all aspects of payroll for employees can quickly add up. According to the US SBA (Small Business Association), employers should expect the real costs of hiring employees to be up to 1.2-1.4X employee salary.

HRO saves on indirect costs like time and salary for payroll managers, potential fees, or fines for mistakes. Payroll outsourcing services alone may save as much as 27% per employee on costs, according to NAPEO.

 

How are Costs Reduced Through Outsourcing HR?

Recruiting

First, HRO with a professional recruiter ensures you gain access to larger talent pools. It also limits the time and fees spent on arduous screening, selecting, and interviewing processes.

Furthermore, these recruitment providers will also offer back-end solutions that can improve your onboarding and employee management efficiency long-term.

 

Tax and Benefits Management

Next, an experienced HRO provider with good networks and resources in your market of choice can offer competitive employee benefits packages like insurance.

Individual income taxes differ widely from region to region in particular. Even minor mistakes with tax filing can be damagingly costly.

 

Management Time and Cost

Day-to-day supervision of HR functions adds up over time. These keep you away from other tasks and decisions directly related to company growth.

An experienced HRO provider uses the best of modern payroll software to ensure quick and effective payroll functions. In this way you reduce the amount of time required to manage complex tasks and ensures accurate payment.

 

Compliance Assurance

Finally, it’s essential to consider risk management strategies when expanding overseas. A survey by the US National Federation of Retailers found 69% of small businesses felt “overwhelmed” by HR tasks and regulations. This feeling was only increased when dealing with requirements outside their home market.

Ignorance of overseas regulations or sudden changes can leave you looking at hundreds or thousands of dollars in fines at a moment’s notice.

  

How Can You Outsource HR Effectively?

There are two main forms that HRO normally takes. These would be either though a PEO (Professional Employer Organization) agreement or via an EOR (Employer of Record). PEO and EOR services can offer considerable savings in how they streamline and manage HR costs.

With a PEO, the third-party company only provides a range of HR services. Through an EOR, the third-party provider legally and officially hires employees on a company’s behalf.

However, these options may be subject to different restrictions depending on the regulations of your market of choice.

A good example of the use of PEOs and EORs would be a company wishing to enter China.

Employers in China should expect to face costs related to payroll in China from anywhere between 25-50% of employee salary based on job title and location. A global Employer of Record or provider of payroll services in China can help to manage these costs.

For more about the pros and cons of these two structures by reading our breakdown here.

 

How INS Global Can Help You Expand

To meet the constantly changing demands of today’s more globalized market opportunities, efficiency is key. HRO solutions offers business owners the chance to have your HR needs taken care of professionally, easily, and efficiently.

INS Global is an international HR outsourcing company with more than 15 years of experience providing international employment services.

Outsourcing your HRO needs to INS Global reduces your direct costs and saves you indirectly through reduced overheads or time spent on arduous process functions. As a result, our global Employer of Record (EOR) and payroll process services can save you time and money when its most important.

To learn more about the way HR support options can benefit your organizational productivity and efficiency, contact our team of experts today.

 

 

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