Human Resources Outsourcing Trends
Current and projected trends in Human Resources Outsourcing include transitioning to the cloud and online payroll, promoting workplace wellness programs, opting for selective outsourcing, and social media recruiting.
Globally, the HR outsourcing market is forecast to "reach $53.9 billion by 2020." The US accounts for the largest Human Resources Outsourcing market in the world. The growth in the market is attributed to the increased "need among enterprises to increase operational efficiency, reduce costs, streamline operations and set up compliance management." Benefits administration and payroll services are the most outsourced HR processes. In the US, the demand for benefits administration is projected to increase due to the continuing healthcare reform in the country.
According to the PrismHR 2017 US trends report, "HR service providers reported 27% growth for 2016." PrismHR reported that 63% of HR outsourcing companies had "50 employees or less" and only 25% had "100 employees or more" in 2015. By 2016, 40% had at least 100 employees which resulted in a 60% gain in a single year.
The majority of "HR service providers who responded (41%) serve between 1,001–5,000 worksite employees." Mid-sized Human Resources Outsourcing organizations with 5,001–10,000 worksite employees experienced the most growth at 31% in 2016. During this time period, organizations with under 1,000 worksite employees saw the least amount of growth at 15%. In 2017, 23% of HR service providers expected to grow by at least 25% and 31% expected to grow by 11-25%. Growth has steadily continued for all consumer types and 73% of organizations reported that they "retained 86% or more of their" clients.
The report notes that 59% of Human Resources providers consider their ideal target market to be in the "16-100 worksite employee range." However, 18% reported that they did not have a target market size. This is likely due to the fact that "scalable HR technology" has allowed organizations to service any size client. These clients were mostly acquired through referrals at 40% followed by networking at 27%.
THE CLOUD + BIG DATA
More businesses are switching over from "locally hosted servers into the cloud." HR Outsourcing companies are using the cloud for it's "efficient data security process," it's workforce support capabilities, and it's advanced customizable reporting and analytics. The cloud also allows providers and clients to access information from multiple locations. This allows individuals to work together that are miles apart and gives people in different locales access to data while "the cloud security will protect the information that is stored."
Outside of information storage, the abundance of big data and analytics is also being used in the hiring process. Algorithms and insights are being used to develop recruitment strategies and to improve retention rates. This is essential now that the definition of "talent" in terms of the HR job pool is changing in the US. To meet this need, employers are seeking out a "diverse range of job candidates" with an emphasis on potential rather than experience. Workforce support like the processing of employee benefits and other functions can also be automated and streamlined with the use of the cloud.
It's projected that payroll trends from 2016 like apps, cloud-based options, data security, and analysis were expected to continue in 2017. Apps have allowed both HR employees and managers to access their payroll information regardless of whether they are near a computer. This flexibility is a growing demand that also connects to the increasing popularity of cloud-based payroll options. In 2014, Deloitte reported that 14% of "organizations had a cloud-based payroll service, while 26 percent more were considering it." It was reported by Bloomberg BNA that in 2016, 55% of HR respondents planned to redesign "their end-to-end HR processes" to a cloud-based system.
By moving payroll data to a third-party server, information becomes available through any internet connection. Cloud-based software "gets routinely updated, data is backed up, data entry is simplified, and access from anywhere becomes possible, including through smart device apps." Relying on the cloud also saves money since paper checks will no longer be needed. As cloud-based options become more prevalent issues of data security are increasing. Ensuring that information is protected is a major focus for these organizations. While safeguarding this information will continue to be a priority, analyzing the data is another growing trend. According to The Wall Street Journal, some companies are using payroll data to predict when employees are "most at risk of leaving their jobs." Other predictive data points are being analyzed to "spot anomalies that could suggest payroll fraud, trends in hours worked, or overtime pay, all of which can help them make better decisions about human capital management."
WORKPLACE WELLNESS PROGRAMS
Wellness programs are a growing trend that aims to promote the health of employees that then translates into increased productivity. According to the CDC Foundation, on average, each employee loses $1,685 in productivity due to absenteeism. To combat this, in 2016, the Society for Human Resource Management reported that 24% of "organizations increased wellness benefits" which was more than any other kind of benefit. 88% of these organizations reported that their wellness initiatives were either very or at least somewhat effective "in improving employee health." The study showed that 77% of organizations reported that their programs reduced the cost of healthcare and 53% aimed to promote a positive health and wellness culture in the workplace.
This trend allows Human Resource providers to "assess the skills available in-house and then outsource in the fields" where there is a deficiency. In this scenario, skills that are already available will not be duplicated and the outsourced employee can focus solely on the functions that are missing in-house. Some fields for selective outsourcing include "compliance, candidate recruitment, non-harassment training and development of an employee manual."
SOCIAL MEDIA RECRUITING
The prevalence of social media has provided employers with another source of potential employees. Platforms like LinkedIn can streamline the recruitment process because user profiles showcase resumes, skills, and other relevant past work experiences. Social networks also make it easier for employers to organize "group chats, and specialized social networks for work organizations." This allows faster and more efficient "communication between the employer and the employees."
In conclusion, the current and future trends for Human Resources Outsourcing include switching to the cloud, transitioning to online payroll, social media recruitment, promoting workplace wellness programs, and selective outsourcing. Globally, the market is expected to grow to $53.9 billion by 2020 which will likely translate to a growth in the US market since it is the largest HR Outsourcing market worldwide. Benefits administration is one of the most outsourced HR processes and is projected to grow due to the continued healthcare reform in the US.