The Ultimate Guide To Employee Outsourcing in Nigeria

Outsourcing is a business strategy that involves contracting with outside vendors to take over specific tasks. In the case of employee outsourcing, your company hires a third-party company to handle human resources tasks such as recruitment, payroll and benefits administration.

By outsourcing your employee functions, you can save time and money while freeing up your team to focus more on challenging tasks and take on more demanding assignments.

This guide will extensively cover: 

• What is employee outsourcing? 
• How does employee outsourcing work? 
• Services offered by employee outsourcing companies
• When should you consider employee outsourcing?
• Benefits of employee outsourcing
• How to transition to an outsourced staff model 
• How to choose the right outsourcing partner 

What is employee outsourcing? 

Employee outsourcing is the strategic use of a professional employer organisation (PEO) to support HR functions traditionally performed by an internal HR. By outsourcing these tasks, companies can focus on their core competencies and achieve higher productivity and profitability.  

In the same way, employee outsourcing allows companies to farm out HR functions such as recruitment, onboarding, training and development to specialised PEOs. It also offers companies a unique opportunity to address gaps in talent management, succession planning and other operational needs.  

For example, suppose your company is scaling rapidly or entering a new market. In that case, talent outsourcing can help you develop an agile, flexible, cost-effective outsourcing model that supports your business needs as it grows. 

How does employee outsourcing work? 

Staff outsourcing starts with a contract (service level agreement) between you and the professional employer organisation. 

The service level agreement (SLA) provides a unique benchmark for measuring and monitoring the performance of your service provider and the terms and conditions under which services are provided. These include: 

• Who will perform each task  
• The duration of the outsourced services 
• Level of expertise required (in some cases, only certain types of staff can be hired)
• What kind of equipment and materials will be needed to do the work (for example, does it require a computer or other specialised knowledge?)
• What happens if the contract is breached (where one party cannot fulfil the terms of the agreement) 

Once you have reached an agreement with your outsourcing partners, they will start providing their services on your behalf. 

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What types of services do employee outsourcing companies offer? 

According to a recent report by PrismHR, professional employer organisations offer several HR outsourcing services. These include but are not limited to: 

• Human Resource Management 
• Workplace productivity improvement 
• Performance appraisal results coordination 
• Employee training needs analysis and facilitation 
• Payroll administration and benefits management
• Supervision and reporting through the help of human resource business partners (HRBPs)
• Recruitment and selection processes, including hiring, onboarding, outplacement of employees, and background checks and verification services 

When should you consider employee outsourcing? 

According to Allegis Group’s Talent Advisory Industry Benchmark Study, 83% of the 1,400 employers surveyed believe attracting and retaining talent is a growing challenge for their organisation. 

In the same study, the talent advisory organisation found that 51% of companies have open positions for which they cannot find qualified candidates. Hence, companies have various reasons for considering staff outsourcing as a viable talent and people management strategy.

However, businesses should consider staff outsourcing when: 

• The company is in the start-up phase and needs a quick, reliable, and professional workforce. 
• The business is seasonal, and you would like to scale back during off-peak periods. 
• Specific tasks and business processes are so extensive that they require a dedicated team. 
• You are looking for long-term solutions but are not ready to hire full-time staff.
• You need time to focus more on your core business functions.
• Business needs or current workload exceed resources.
• Your employees are not as productive as you would like them to be.
• You do not have the time, skills, or expertise to perform a business function. 

What are the benefits of employee outsourcing? 

Companies outsource their workforce to professional employer organisations (PEOs) to reduce HR administration and improve workforce management.

Here are other benefits that companies gain from talent outsourcing:

• Reduce and control operating costs 

A company’s total operating costs are the sum of all expenses (including wages, benefits, taxes, etc.). By outsourcing staff, companies can benefit from economies of scale and more flexible contract terms without investing in infrastructure and managing an HR department. 

• Manage business risks 

Outsourcing employees reduces operating costs and helps companies manage their risks by shifting some of the burden associated with the employment lifecycle from employers to service providers, such as recruitment, onboarding, and payroll. 

A reputable HR service provider will be well-versed in local labour laws and can resolve any issues that arise efficiently and promptly. 

• Access to professional expertise 

In the same way, outsourcing staff can help businesses access the expertise of an experienced team focused on delivering specific tasks or services that are important to your business. 

In this way, businesses can keep up with the latest technological developments and access a pool of specialised talent without compromising on the quality of work. 

• Better focus on core business 

Business leaders often find that by transferring responsibility for non-core activities to an external provider, they can better focus their resources on the activities that drive business growth. 

As a result, outsourcing staff can also be more cost-effective, especially for labour- or resource-intensive activities that add little value to the business. 

• Enhanced talent management 

Staff outsourcing can help organisations streamline their talent management processes by contracting out human resources responsibilities to a company that specialises in these functions. This allows them to focus on their core business operations without worrying about compliance and other administrative matters. 

Recommended reading: 6 areas of your business you should consider outsourcing

What is the best way to transition to an outsourced staff model? 

The prospect of moving from an internal to an outsourced corporate structure can be both challenging and exciting. The biggest concern, however, is the loss of control and the inability to directly manage the work of an outsourced team. 

While this concern is valid, the following steps can ensure a seamless transition: 

• Use the right outsourcing partners. Consider an experienced outsourcing partner with a proven record of accomplishment and a dedicated team that can help you meet your needs and mitigate risks during the transition process.  
• Understand your objective. Next, understand what you want to accomplish by transitioning to an outsourced model. Do you want to save on labour costs? Do you want to focus on your core business while your service provider handles day-to-day operations? Make it clear from the get-go. 
• Set up a transition plan. Once you have established the goals and expectations of your outsourcing partner, the next step is to develop a transition plan. This includes what actions need to be taken before the new model is introduced (e.g., training employees) and what needs to be done after implementation (e.g., job protection). 
• Communicate clearly with your staff. The key to a successful transition to an outsourced model is communication. For your team to embrace the new model, they need to be fully informed about the reason for the change and how it will affect their day-to-day work. 

How do you choose the right employee outsourcing partner? 

The decision to hire an employee outsourcing partner should not be taken lightly. Business owners and managers must research, evaluate and consider the options before deciding. 

Hiring the wrong outsourcing partner can negatively impact your company’s culture, budget, and bottom line. Here are some things to keep in mind when looking for a partner: 

• Company culture 

When choosing an employee outsourcing partner, it is crucial to consider the culture of the service provider. Do they have a keen sense of family? How does the company treat its employees? Are there opportunities for advancement and development for those willing to put in the time and effort? 

Over 50% of business leaders say that company culture impacts productivity, creativity, profitability, company values and growth rates.  

• Level of expertise 

Besides company culture, the right outsourcing partner should also have the right mix of expertise and experience, as this will directly impact how much work they can do for you and how quickly they can complete tasks. Do they have experience in your industry and with your type of work? What kind of projects have they worked on before, and who are their clients? This will help you determine if they are the right fit for your business. 

• Company size 

Size matters, especially regarding pricing models, scalability, and availability. Larger companies have economies of scale that allow them to offer cheaper prices, have a technological edge and mitigate risks flexibly. 

Smaller companies are agile and nimble but often have limited resources. You need to ensure that your outsourcing partner can meet your needs and keep up with the growth of your business. 

• Service offerings 

You must be able to rely on your outsourcing partner to complete today’s tasks and continue growing with your business. What are the long-term plans for the outsourced function? Will your partner be able to scale as your business grows? Do they have an outstanding track record of providing quality outsourced employees? 

Above all, conduct in-depth research on each provider’s services and check whether they cover your specific needs.

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What’s next? 

Employee outsourcing is a sustainable business practice that helps companies increase productivity, reduce costs and boost efficiency while improving the quality of services provided to clients.  

As companies seek to outsource time-consuming, repetitive, and specialised activities to focus on their core competencies, employee outsourcing has emerged as a timely talent management strategy that can help businesses access professional expertise.  

By providing highly skilled professionals on an as-needed basis, employee outsourcing enables companies to quickly and efficiently meet both long-term and short-term project needs without exposing themselves to the associated people risk.  

Through our passion, commitment, and dedication to improving performance, we have worked with various organisations in different sectors to help them achieve their business goals through effective outsourcing solutions.  

Our staffing solutions are tailored to each client’s needs and are supported by our in-depth industry knowledge and global perspective. 

For more information about our outsourcing solutions or to schedule a consultation with our team, please email info@mactay.com.