Outsourcing your HR processes used to be unheard of and considered an extravagance by most companies. As businesses become global, however, it has become a strategic move for companies that want to streamline their operations, reduce overhead, and tap into the global talent pool. Subsequently, business owners can focus more on growing their business knowing that experts are taking care of their HR processes. In this article, we present eight HR outsourcing trends that will guide business owners in their decision-making.
1. More and More Companies Will Be Outsourcing Their HR Processes (ISG)
According to the 2023 ISG Survey on Industry Trends in HR Technology and Service Delivery, 60% of businesses worldwide are relying on outsourcing their HR processes more and more. It’s up from the 50% in the similar survey they did in 2021. Two of the primary reasons why they opted for outsourcing was because they saw significant improvement in their service quality and cost reduction.
2. Increased Use of Cloud-based Solutions in Different HR Services (Zippia)
The cloud has become an integral part of many organizations. As of 2023, 94% of businesses use cloud services and 67% of business infrastructure is based on cloud.
Cloud-based solutions offer a lot of advantages not only for a company’s HR team, but also for HR outsourcing providers. Its primary benefit is having a centralized platform that can be accessed anytime and anywhere. It also has the capability to hold vast amounts of data without the need of extensive hardware. Furthermore, cloud services offer robust security mechanisms that protect the most sensitive data.
With the scalability cloud services offer, HR outsourcing providers can easily tailor solutions for businesses of any type or size. They can also scale and adjust these solutions as companies grow and evolve, making it an invaluable tool for organizations looking to optimize their HR operations.
3. Companies Will Outsource HR Teams for Risk Mitigation (LinkedIn)
In a 2023 study conducted by Paychex, risk management is the top HR challenge that 56% of business owners (especially SMBs) face. Risk, in view of the workplace, categorically involves a wide range of employee-oriented aspects like maintaining workplace safety standards, safeguarding employee health, and complying with labor regulations. This has become more challenging after the pandemic.
This is where HR outsourcing providers come in. According to LinkedIn, 2024 will see shifts and changes in regulations—and businesses will need all the help they can get to navigate the risks and complexities associated with legal compliance, workplace health and safety, and many more.
4. Social Media Recruiting Will Be on the Rise (Content Stadium)
In 2023, recruitment is the second most commonly outsourced HR function, and when it comes to talent acquisition, social media has become a must-have in HR recruitment. Both in-house and HR outsourcing providers are leveraging the power of social media in attracting global talent. When it comes to social media platforms, the top three social media platforms for recruiting are LinkedIn (78%), Facebook (65%), and Instagram (58%). Meanwhile, an ADP report revealed that some companies use Snapchat and TikTok to attract young talents.
5. Use of AI for Various HR Processes Will Be on the Rise (SHRM)
According to SHRM, one out of four organizations use AI in their HR-related activities, such as recruiting, compliance, and employee engagement. Furthermore, in a study about the impact of AI in HR, the key areas where AI plays a critical role are talent acquisition and employee engagement. HR outsourcing providers, on the other hand, will also use AI to deliver more personalized solutions to businesses, helping them make decisions based on data-driven insights.
They will further leverage AI not only to automate repetitive tasks but also to enhance human capabilities. For example, by automating payroll processing and employee onboarding, in-house HR teams will have more time focusing on strategic planning and employee engagement.
6. HR Outsourcing Providers Will Use Recruitment Analytics Even More (Trinet)
Recruitment analytics is the process of gathering, analyzing, and utilizing data to make hiring decisions. HR outsourcing providers will continue to leverage this technology to streamline and refine the hiring process.
Using the data they gathered and analyzed, HR outsourcing firms will have more precision in identifying whether a candidate is a good fit. They will also be able to predict a candidate’s success rate in a specific role, which can help in reducing employee turnover. Additionally, recruitment analytics can help identify diversity gaps within an organization, allowing them to create a more inclusive hiring strategy.
7. More Experimentation With Blockchain in HR Outsourcing (Gartner)
According to Gartner, blockchain has supported the movement of $2 trillion goods and services around the world in 2023. That encompasses almost everything, including HR outsourcing. Although blockchain has been used primarily in financial services, its potential in HR is vast.
With blockchain, HR outsourcing providers can make HR processes more secure, transparent, and efficient. With its decentralized and unchanging ledger, HR firms can create secure-tamper-proof records of an individual’s history, verify candidate credentials faster and easier, and enhance how employee benefits are managed.
8. PEOs Will Gain More Popularity (LinkedIn)
According to LinkedIn’s 2023 PEO Market Report, the PEO market will increase at a significant rate between 2023 and 2030. It’s not surprising given the fact that it has helped a lot of businesses in streamlining their HR processes, from payroll to workers’ compensation. PEOs will continue to help businesses by managing complex regulatory requirements which are continually evolving, making them more difficult to navigate. This is very invaluable to businesses (from SMBs to large enterprises) because it allows them to focus on growing their businesses.
Bottom Line
HR outsourcing continues to be a dynamic industry which caters to the ever-changing needs of businesses all over the world. As we’ve explored, the trends that continue to shape the industry aren’t temporary, rather they are long-term changes which can utterly change how HR is practiced and perceived.
