Scope: The Human Resources management function has become so complex that virtually any element can be outsourced in “Human Resources Outsourcing” (“HRO”).
- RPO. In “recruitment process outsourcing” (“RPO”), a business organization that anticipates ongoing hiring requirements across multiple job categories and multiple locations may hire a service company to perform the job of soliciting, recruiting and “on-boarding” the new employees.
- PEO. In “professional employer organizations,” a service provider acts as co-employer (for purposes of tax and labor-law compliance) and thus has full authority to deal directly with employees for hiring and on-boarding and deal directly with governmental administrations for all reporting, compliance and audit purposes. PEO’s have become an industry supporting small to mid-sized businesses (“SMB’s”), who treat them as their “outsourced HR Departments.”
Technical Requirements: To adequately deliver outsourced HR support services, the outsourcer generally requires access to the business organization’s HR and accounting software. Certain specialized software products are available commercially, so that either the service provider or the enterprise customer can buy the license and use the software for HR needs, in accordance with the licensing terms. Alternatively, an RPO or a PEO might decide to develop and maintain proprietary software to avoid having to pay license fees, but such proprietary software packages can be an impediment to the business organization’s ability to re-bid the services and hire a replacement service provider.
Benefits: Providers of RPO, PEO and other HRO services offer substantial benefits, particularly for business organizations that are small, that need to hire and supervise employees across many jurisdictions or that have a high volume but also high volatility for recruitment. Outsourcing for an initial term of a few years may also help large organizations improve their processes so that, later, the process could be internalized or re-bid for newly competitive pricing.