Everything You Need to Know About Business Process Outsourcing (BPO)

Business Process Outsourcing, or BPO, is the practice of outsourcing business operations to third parties. BPO means that businesses who are struggling to carry out their day-to-day tasks can offload some of the responsibilities.

BPO is a common practice in businesses around the world. In fact, businesses are projected to spend $138.3 billion on BPO over the next 12 months. Used by range of businesses across a diverse selection of industries, business process outsourcing helps businesses save money and boost performance.

In this guide, we’ll take a closer look at BPO, what it means for businesses, and the advantages and disadvantages of the BPO process.

What is BPO?

Business process outsourcing is an outsourcing arrangement in which a business signs a contract with a third party to carry out one or more business functions. The third party typically takes on all, or a selection of, operational tasks related to that part of the business function.

For example, a BPO company that services payroll would collect and process employee paperwork, classify employees, and distribute checks and direct deposits. The company could also calculate and pay payroll taxes.

Business process outsourcing companies typically have the ability to handle a wide range of tasks, including both back office (e.g., human resources and accounting) and front office (e.g., marketing and customer service) duties. This can be great for businesses looking to relieve administrative burdens and streamline their operations.

What kinds of tasks are suitable for business process outsourcing?

BPO services can function differently depending on the type you choose and which tasks you want to outsource. Some of the top BPO provider models to choose from include:

• Administrative services organizations (ASO) specialize in providing a-la-carte core HR functions to businesses of all sizes
• Human resources administrations manage all or some of a company’s HR tasks using proprietary BPO technology and processes
• Managed services offer full-service HR outsourcing and are typically used by larger businesses to offload the entire HR function

The type of BPO you choose to work with will typically depend on the size of your company and the tasks you want to outsource. Here are some examples of the tasks that HR departments often place in the hands of their chosen BPO.

Recruiting

Recruitment can be a long process. Once you’ve identified the roles you want to hire for and the core competencies you need candidates to have, a BPO can write and distribute compliant job descriptions, screen applications, and conduct interviews.

Another advantage of BPO is when a suitable candidate is selected, they can also perform background checks and negotiate salaries on your behalf.

Onboarding

Contracting with BPO services can help you ensure your company doesn’t miss a beat in getting new hires acclimated to the job. The BPO can offer new employees a point of contact for questions and support, ensure they get set up with technology and other tools, and administer critical training programs so they’ll be informed and ready to take on their responsibilities.

Payroll

BPO processes can ensure that employees are paid on time. This includes classifying employees, tracking time and attendance, collecting and processing withholding and bank transfer forms, processing payroll, and calculating and paying taxes to the IRS. The BPO team can also field payroll questions from employees.

Benefits

Benefit management can be tricky, especially during the open enrolment period. Outsourcing administrative tasks like this to a BPO allows a third party to ensure your employees receive proper notices and documentation, process enrolments, and deduct premiums from pay. A BPO can also answer employee questions about plans, pricing, and how to take advantage of benefits.

Compliance

Compliance paperwork can easily become overwhelming and keep HR professionals from tending to more pressing tasks. A BPO can help a company reduce its compliance risk by handing that responsibility to someone else. The BPO will not only ensure compliance work is done on time but also stay up to date with changing regulations to give you peace of mind.

Grievances

Because of laws and regulations surrounding discrimination, harassment, violence, safety, and other issues, workplace grievances must be taken seriously. The top BPO providers can help you properly address these grievances by conducting thorough, unbiased HR investigations that are fair and respectful to all employees.

What are the advantages of BPO?

There’s a reason why the money spent on BPO services has consistently risen over the past decade. Business process outsourcing can bring so many benefits to organizations of all sizes. Here are four that your company can experience when partnering with a BPO.

Save money across your departments

Outsourcing business processes gives your company access to an entire team of individuals who work tirelessly to complete critical HR tasks on your behalf. This has the potential to save the company money since there will be less of a need to hire more full-time staff to keep up with the volume of work as the company grows.

Reduce the risk of compliance errors

BPOs employ HR experts on their staff who are familiar with current rules, regulations, and laws in a variety of sectors. When you outsource to a BPO, you’ll have less worry about making small compliance mistakes that can lead to big consequences. You’ll get access to experienced consultants who know how to keep your company out of trouble.

Take the weight off your team

If your HR team is overloaded with work, you’re not alone. Outsourcing to a BPO can reduce the administrative task burden for HR leaders. Working together, this approach ensures that the team can get the work done well.

Create more time to think strategically

What is BPO outsourcing’s greatest benefit? Working with a BPO company can allow you to take a more strategic approach to human resources because you are no longer bogged down with daily tasks.

This extra breathing room allows HR professionals to truly think long-term and set goals for the future. You’ll have a chance to align the HR function with the company’s goals and mission, ensuring that HR plays a crucial role in helping senior leadership arrive at their intended destination.

What are the risks of BPO?

Although outsourcing business processes can be beneficial, they aren’t without their drawbacks. Here are a few of the challenges you may encounter with BPO services.

Your data privacy may be at risk

Data confidentiality is vital. Employers are required by law to keep personal information safe, and doing so also helps build trust with employees.

When you partner with a BPO service, a third party will be handling your employees’ sensitive and personal information. Thus, you’ll need to ensure that the BPO firm has airtight data security measures to prevent a breach for which you may eventually become legally responsible.

An impersonal approach may lead to employee dissatisfaction

If you’re like most HR professionals, you likely pride yourself on providing personalized support to your employees. When you move HR functions outside of the business, employees now have to work with someone they don’t personally know to resolve sensitive issues like payroll problems and grievances with other employees.

As a result, employees may become wary of HR altogether. For this reason, it’s crucial to ensure that your company contracts with only the top BPO providers that deliver impeccable service and continue to monitor employee satisfaction surveys for evidence of growing dissatisfaction.

Your methods of working may change

Working with a BPO will require you to give up at least some control over your HR tasks. Many BPO firms have their own processes, procedures, and tools, and you and your staff will have to adapt to them. Though it’s great to choose a BPO that can cater to your preferences, you will need to be able to trust the third-party organization to do their job well.

Tips for choosing the right BPO vendors

Choosing the right BPO provider is critical to the success of your HR outsourcing. Still, it can be challenging to know who to trust for outsourcing your business processes. There are several things you need to know and do before and during the selection process:

• Understand your needs: Figure out which tasks you want to outsource and which you need or want to keep in-house.
• Request proposals: Submit your list of needs to a select group of possible vendors and request pricing and terms.
• Ask for referrals: Ask vendors for testimonials or referrals from other satisfied businesses in your sector to ensure quality of service.
• Negotiate the contract: Evaluate the contract of a selected vendor to ensure it meets your needs and clearly delineates which party is responsible for which tasks.
• Ensure support: Evaluate the vendor’s responsiveness throughout the negotiation process, as this is an indication of the type of service you will receive.

Remember that working with a BPO is usually a long-term relationship. That means you may require adjustments along the way. It’s important that your chosen BPO is responsive to your needs and willing to work with you to ensure the best possible service for your company and its employees.

BPO FAQs

Want to learn more about business process outsourcing? We cover some common questions on how BPO services can affect your business and when you might require them.

Where can I find BPO services?

Many business leaders find BPO services through online research, while others rely on testimonials and personal recommendations. Fortunately, there are many companies offering BPO services around the world. Some specialise in offering BPO while others provide it as an additional service. Some businesses that offer BPO services specialize in specific industries—healthcare or finance, for example. Other businesses offer a more general BPO service that can be tailored to another company’s needs.

BPO vs outsourcing: What’s the difference?

If you’re confused by the difference between BPO and outsourcing, you’re not alone. As BPO is a form of outsourcing, it isn’t always clear what makes them separate. However, it’s best to think of outsourcing as a generic approach to offloading tasks to third-party resources. Whereas business process outsourcing is a specific form of outsourcing that focuses on a defined business function.

What is a BPO example?

A common example of BPO is when customer support is managed by an outside vendor. This is often done when customer support is an important part of the business operation but requires 24/7 services and extensive resources.

A BPO that focuses on customer support may do the following tasks:

• Set up a new call center, or adapt an existing one
• Recruit and train staff to help with customer support
• Handle all forms of customer interaction, across multiple channels on a 24/7 basis
• Work with you to create a set of guidelines and processes that can be used by the call center

Get more done with BPO

If your business is struggling with workloads, or if you’re looking for affordable solutions to staffing issues, business processing operations could benefit your business.

They can be used for a wide range of purposes and can reduce workloads and save you money. However, as they take more work from you, they also reduce the control you have over your operations. BPO can greatly benefit your business but they’re not right for everyone. If you’re considering using a BPO, think carefully about what you need and how it will impact your business.