A talented workforce is the most important asset a business can have. But is this always something that should be carried out within the business, or should you outsource staffing?
Here we explain why it can be a good idea to outsource staffing, whether internationally or locally, and explain the best mechanisms for doing so.
What are the risks of managing staffing entirely in-house?
While your workforce is essential to your business’s operations it is not your core business. This means that there are several disadvantages to sourcing and administering your staff in-house. These disadvantages include:
- You may not be completely familiar with all your employer compliance and tax obligations;
- You may not have the recruitment connections and networks to ensure you source the best staff for your business.
These disadvantages compound when expanding internationally as you are unlikely to know the new compliance and business environment in a new country as well as in your base country.
What are the benefits of staffing outsourcing?
When you outsource staffing, you engage a trusted third party to take over your recruitment, payroll, tax and compliance obligations. In addition to mitigating the risks set out above, there are a range of other benefits when you outsource staffing. We set these out below.
Co-ordination across all business locations
When you outsource staffing to trusted employment professionals, you can ensure that one approach to staffing and payroll administration is taken across your wider organization. When this process of engaging with staffing outsourcing is not carried out internally, it is likely that there will be significant variation between different business locations.
The benefit of one staffing partner across all business locations is especially clear for international businesses that may have legal entities across multiple countries.
Outsourcing solutions are often co-ordinated across business locations using technological tools. A recent Deloitte survey reveals that 90 percent of businesses have indicated a preference for cloud solutions for co-ordinating their outsourcing.
Better benefits for staff
A specialist employment partner is often able to get better deals on employee benefits (such as health insurance and pension schemes), compared to regular companies. This is because the core business of these firms is employment: ‘Economies of scale’ apply to get better deals on benefits for their staff.
Specialist employment partners provide outsource staffing and human resources services more cheaply than most firms would be able to do so themselves.
An outsourced staffing provider has the know-how and processes to quickly acquire and onboard new staff for your business. They can also respond quickly to any staffing issues as they arise.
Are there any downsides when you outsource staffing?
Businesses that engage with staffing outsourcing services are part of an ongoing trend known as ‘Business Process Outsourcing’ or ‘BPO’. That is, businesses outsourcing to third parties, processes which are not core business and might be more competently carried out by a third party for a better price.
In most cases BPO and outsourcing employment responsibilities is a useful way for a business to ensure that it maintains its competitive advantage in its area of core business focus.
There may be some cases where it makes sense to carry out all human resources tasks in-house, rather than outsourcing. This could occur, for example, with very large multi-nationals that have their own tailored approach to human resource management that they wish to apply.
It is worth noting, however, that in most situations where you may be looking to outsource staffing, (such as the Global PEO model discussed below), the client business still remains entirely in control of their staff on a day-to-day level.
For example, a Global PEO or staffing agency will only terminate or renew contracts of staff in close consultation with a client company.
How to outsource staffing the right way
Once you have decided that it makes sense to outsource staffing, what is the best tool for doing so? There are a range of outsourcing partners that you could choose that offer slightly different sets of solutions:
A recruitment agency seeks out talent for your company that you may not otherwise find through traditional hiring methods. While the outsourcing of recruitment is growing at a steady pace, the overwhelming majority of this outsourcing is for temporary and fixed-term, rather than permanent positions.
More critically, recruitment agencies only perform one function – recruitment. They do not themselves hire the staff, nor do they provide ongoing human resources solutions;
Sometimes called a ‘staffing company’ or ‘temp agency’, these agencies specialize in temporarily lending workers to client companies. When this is carried out on a longer-term or project basis the company might be known as an ‘employee leasing’ company;
Domestic Professional Employer Organizations (Domestic PEOs).
These companies (sometimes called ‘National PEOs’), especially common in the United States, take on the administrative responsibilities of an employer, but often share employment responsibilities with a client company as a ‘co-employer’: This means that, the client company still remains legally responsible (and liable) for a range of employer obligations.
A Global PEO acts as the ‘employer of record’ for staff based throughout the world. A full-service global PEO provides recruitment, payroll, tax, and compliance functions on behalf of all its clients. Sometimes this suite of solutions is known as ‘Global Employment Outsourcing‘ or ‘GEO’.
Global PEOs usually set up local entities in the countries in which they operate. These local entities can recruit and employ staff on behalf of client companies.
Unlike ‘Domestic PEOs’ in the US, these local entities associated with Global PEOs become the sole employer for the workforce, rather than ‘co-employer’. This means that the Global PEO takes on all the legal and tax obligations (and liabilities) of an employer. This leaves the client company free to focus on their core business, without needing to worry about compliance risks.
- Whether you are expanding locally or internationally, it is worth considering whether you should outsource staffing to a specialist third-party firm. This will save your business money and time, as well as reducing the risk of non-compliance with tax and employment laws. In many cases, the best option for outsourcing employment and human resources services is a Global PEO.
- A Global PEO, such as New Horizons Global Partners, can offer the full suite of staffing outsourcing solutions for all your business locations.