Business Process Outsourcing (BPO)

What Is BPO?

Business process outsourcing (BPO) 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 operational tasks related to that part of the business function.

For example, a BPO company handling payroll would collect and process employee paperwork, classify employees, and distribute checks and direct deposits. The company would 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?

BPOs can function differently depending on the type you choose and which tasks you want to outsource. There are a few popular BPO models to choose from:

• Administrative services organization (ASO): Specializes in providing a-la-carte core HR functions in a way that is accessible to businesses of all sizes
• Human resources administration: Manages all or some of a company’s HR tasks using proprietary technology and processes
• Managed services: Offers full-service HR outsourcing and is 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 of the tasks that HR departments often place in the hands of their chosen BPO.

Recruiting

Recruiting can be a long process, taking on average 44 days to complete. Once you have 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.

When a suitable candidate is selected, a BPO can also perform background checks and negotiate salaries on your behalf.

Onboarding

Contracting with a BPO 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

A BPO 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

Benefits administration can be cumbersome, especially during the open enrollment period. Outsourcing this work to a BPO allows a third party to ensure your employees receive proper notices and documentation, process enrollments, 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. A BPO can help you properly address these grievances by conducting thorough, unbiased investigations that are fair and respectful to all employees.

Benefits of BPO

There’s a reason why 57% of business executives outsource HR functions to a third party. 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.

Saving Money

Outsourcing 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.

Reducing Risk

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.

Reducing Administrative Burden

If your HR team is overloaded with work, you’re not alone. Surveys indicate that 83% of HR leaders report that they are expected to do more now than ever. Outsourcing to a BPO can reduce that administrative burden for HR leaders. Working together, this approach ensures that the team can get the work done well.

Thinking 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.

Risks of Business Process Outsourcing

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

Data Privacy

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, 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.

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 dealing with HR altogether. For this reason, it’s crucial to ensure that your company contracts with high-quality BPOs that deliver impeccable service and continue to monitor employee satisfaction surveys for evidence of growing dissatisfaction.

Loss of Control

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. 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.