Why Outsourcing HR Is Important For Your Business

Oct 10, 2023 | HR Related

Any organization’s human resources management is a crucial but challenging role, and many choose to outsource it. The majority of businesses that outsource human resources tasks do so by becoming members of a professional employer organization (PEO).

A PEO manages everything including recruiting and integrating staff to administer benefits, creating training programmes, and ensuring compliance with laws and regulations regarding employment. A PEO is more than simply a payroll processor. Although outsourcing HR may not be appropriate for every company, there are several benefits to offloading it to recruitment firms in Singapore, particularly in terms of time and cost savings.

HR outsourcing: what is it?

When a business owner contracts with a third party organization such as a HR recruitment company to manage some or all of the HR services for the firm, this arrangement is known as HR outsourcing. Payroll processing, employee benefits management, talent recruiting, and more may all be outsourced by your business.

HR outsourcing types

If you want to outsource your HR, you have two primary choices: a PEO (professional employer organization) or HR outsourcing (HRO). Each alternative offers a wide range of services that are mostly redundant; their varying legal structures are what set them apart.

A PEO employs a co-employment model, therefore for tax and legal purposes, your workers will be listed on the books of your PEO provider. However, you continue to have influence over your staff members, including what they work on, whether they are promoted or let go, and other things. Although some service providers let you pick and select the precise services you want them to undertake, a PEO generally handles all of your HR-related responsibilities. With this approach, the PEO carries the complete financial and legal burden of all the employment practices used by your business.

Since an HRO does not operate under the co-employer model, your workers will continue to appear on your company’s records and you will be held liable for their activities. The services an HRO provides for you are a little more flexible; you may subcontract one or two duties, if that’s all you want, or all of them.


Reduce costs through outsourcing HR work

The ability to reduce costs for your business by outsourcing HR tasks to a HR agency is one of the largest benefits. Cost-saving measures include the following, among others.


Reducing the cost of salaries

Small and medium-sized enterprises (SMEs) might end up spending several hundred thousand dollars on HR personnel, according to the size of the HR department. That cost can be greatly decreased by outsourcing certain jobs to a PEO.


Reduces costs of recruiting and training

According to statistics from the Society of Human Resources Management, training a new employee costs more than $1,200 and hiring a new employee costs $4,129 on average. A Singapore job agency or PEO offers the tools necessary to control hiring costs while also assisting employers in making sure they hire the best candidates to lower turnover and related costs.


Avoiding sanctions for breaking work norms and legislation

By spending less time on HR-related tasks, you have more time for strategic sales and growth objectives, which boosts revenues. According to research, despite putting in an average of 50 hours or more each week, business owners only devote around 30% of that time to running their real operations. The remainder of their time is devoted to doing admin and other work. Therefore, using a PEO to handle HR tasks can result in a return on investment that is far more than the cost of the service.


Inexperience causes errors

The HR department may be outsourced, as was already indicated, freeing up your time to concentrate on other responsibilities. If you’re a small company owner like many others, you manage your own human resources, which can take a lot of time away from other crucial activities. In reality, according to a poll, 81 percent of small business owners manage HR on their own, and more than 30 percent questioned if they were following all necessary procedures.

In order to avoid breaking the law, managing employees nowadays is difficult and calls for specific understanding. The majority of small business owners just lack that expertise, which causes them to make payroll mistakes, neglect to keep accurate records of their employees, or fail to put in place efficient personnel management procedures. These knowledge deficits not only put the firm at danger and cost money, but they also force business leaders to invest more time than required on these duties.

By freelancing human resources, that time may be used for tasks that will help the organization grow more effectively. You may focus on defining goals, creating a strategic plan, promoting, and selling instead of spending time on paperwork or resolving payroll and benefits difficulties, all of which will ultimately result in more money.


HR function contracting benefits hiring

Working with a PEO not only results in lower hiring expenses, but also frequently results in superior hires. Some businesses claim they are losing out on top talent because they can’t compete with other businesses as more job seekers hunt for positions that not only pay well but also provide a full benefits package. In fact, according to a poll, 22% of small firms said they were unable to compete with a competitor’s perks and pay package for talent. Offering more alluring benefit packages, like insurance and training possibilities, is achievable with a PEO.

The hiring process is streamlined by outsourcing HR services. With the aid of a PEO, you can create a productive hiring procedure and make sure that every step, from the original job title to the interview stage, is intended to draw in the best candidates. Some HR companies will even handle the first steps of hiring and recruiting for you, so you only need to get engaged once the application pool has been reduced to the most qualified people.

A PEO can also assist with the induction programme once employees have been employed. According to surveys, workers are more likely to adapt into the business culture more quickly and successfully when there is a clear and standardized onboarding procedure in place. As a result, turnover rates are reduced and workers are better able to get started quickly. And when hiring has been completed, a PEO may assist with performance evaluations, saving time and providing unbiased information.


Outsourcing HR work enhances compliance

One of the key responsibilities of any HR department is ensuring compliance, which is a diverse and difficult task. Laws governing employment and wages are constantly evolving, and businesses must comply with not just federal but also state, county, and municipal employment laws. That doesn’t even take into account the fact that certain businesses must abide by union and industry laws, which only makes things more difficult. By consulting the professionals, you may avoid the substantial financial repercussions that might result from breaking these guidelines.

The legality of your staff management procedures is another benefit of outsourcing HR functions. Companies are required to adhere to specified standards and rules when resolving employee concerns, such as harassment allegations, punishment, and termination, and failing to do so might expose you to lawsuits and fines. A PEO will assist you in handling these matters by ensuring that your policies are just, legitimate, and clear and that any measures you take are compliant with the law.


Offers superior advantages

Due to the expense and administration requirements of health insurance, voluntary contribution programmes (such retirement programs or cost sharing), employee assistance programmes, and other benefits, many small firms find it difficult to provide full benefits to their workers.

Strong benefit packages are typically associated with big businesses that have the financial wherewithal to make investments, but joining an employee group provides smaller businesses access to more possibilities that they wouldn’t otherwise have. In fact, some businesses choose to confine their outsourcing of human resources administration to benefits alone in order to provide more alluring benefits packages to attract top employees.

Beyond simply offering additional alternatives, outsourcing has improved benefits as well. PEOs are knowledgeable and can assist with answering queries and informing your employees in ways that you might not be able to accomplish effectively.


For who does HR outsourcing work?

Theoretically, HR outsourcing is available to every company in need of it. If your business encounters any of the following difficulties when conducting your HR duties internally:

  • Time spent on HR-related work is excessive compared to other company requirements.
  • Cases of past or anticipated litigation or exposure to risk
  • Lack of funding for new hires or to pay salaries and perks for internal HR workers HR duties shared by employees from other areas
  • Lack of internal HR personnel to adequately balance hiring and employee management duties


Concluding words

Display your requirements in a way that makes them appear like golden chances. Keep in mind that you are marketing yourself as a brand so that competent candidates may pick you.

Working with a recruitment agency in Singapore will help you supplement your recruitment efforts and boost the productivity of your own recruiters and human resources staff. A recruiting company in Singapore can guarantee that your position is published in all the appropriate places since they have access to the leading job boards. Thankfully, job recruitment agencies in Singapore like WGT Group can do the tedious job search for you. Let your job seekers find their dream job as you sit back and relax!

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