The early days of HR Business Process Outsourcing (BPO) were mainly driven by the promise of reduced costs. Today, decision makers are turning to HR BPO based on two factors that might be even more valuable: service and domain expertise.

Forward-thinking and strategic companies are now evaluating HR BPO as a way to effect improvements in efficiency, service and cost. BPO is designed to deliver the right combination of people, processes and technology to help an organization improve operational performance and deliver on its strategic objectives. In short, HR BPO has become a more viable option for large employers looking for a better way to manage their overall business.


HR BPO Benefits and Outcomes

HR BPO is the right solution for organizations looking to reduce operational costs while improving HR processes, compliance and service levels. HR BPO removes the high cost and administrative redundancies of HR, benefits and payroll processes by bundling them together into a single, integrated offering. The service provider not only assumes responsibility for hosting, maintenance, upgrades and incorporating new functionality, but also time consuming administrative functions. The streamlined processes and technologies produce efficiencies in administration, work flow and employee support that help reduce total cost of ownership with the HR function.

HR BPO can be a fully administered "Hire-to-Retire service solution. The following services are typically available as standard offerings from full-service providers:

Pre-Employment Services: Applicant Management, Screening Services, Reference Checks, Background Investigations and Employment Verification;

Workforce Administration: Complete payroll services, including Processing, Tax Reporting and Filing, Banking Services, Payroll Fulfillment and Wage Garnishments; Time & Labor Management, HR Systems Administration and Employee Data Management

Benefits Administration: Health & Welfare, Flexible Spending Accounts, Commuter Benefit Services and Carrier Enrollment Services;

Talent Management: Compensation Management, Performance Management and Learning Management.

Partnering with an established service provider delivers key competitive advantages, including leading-edge systems and applications (which are continuously updated), business processing services, industry expertise, and an overall better service experience for employees and managers, as they have access to self-service tools and support resources that may not have existed before. Service-oriented HR BPO solutions bring 21st century functionality to HR processes. With an increasingly mobile workforce, self-service technology, knowledge-based systems and toll-free call centers can be key components in improving workforce productivity, performance levels and retention rates. An end-to-end HR BPO solution also enables more accurate, transparent and timely financial oversight, strategic planning and budgeting, and service deliverables.

HR BPO benefits include:

" Cost savings, conservatively estimated at 15 percent or more;
" More reliable data and reporting through greater process discipline and state-of-the-art technology;
" More time to focus on strategic objectives, by eliminating the administrative issues associated with managing multiple vendors and software upgrades;
" Greater spending predictability based on variable cost models and service level agreements;
" Reduced risk through transference of local, state and federal tax and regulatory compliance. And, in the instance of multi-national organizations, the ability to consolidate and administer a global workforce on a single platform and solution.

The outcomes can be measured as cost efficiencies, improved service levels and strategic business advantages, including competitive hiring practices, paperless payroll processes, higher benefit enrollment and participation rates, as well as the peace of mind of meeting complex tax, hiring and regulatory compliance.


HR BPO: The Growing Demand

Traditional HR outsourcing solutions typically focused entirely on back-office functionality, such as payroll administration. Outsourcing enabled HR professionals to move away from transactional activities to deal with long-term planning, performance monitoring, innovation and improvement; however, these solutions offered little in the way of flexibility, customization or feedback.

Many companies today are turning to outsourcing to acquire strategic capabilities and expert counsel. Beyond cost-savings and operational efficiencies, large employers think in terms of desired outcomes: greater employee satisfaction and retention; full and defensible tax, hiring and regulatory compliance; and end-to-end transparency and accountability across the HR system. As a result, service is a central component of the HR BPO model's value proposition.

While HR BPO is a relatively new industry offering, demand is clearly growing among mid-sized and large companies worldwide. For example, ADP announced its 40th ADP Comprehensive Outsourcing Solution (COS) client in 2006 (COS is ADP's HR BPO solution). A short two years later, ADP has topped 100 live HR BPO clients*, and has a dozen new COS implementations underway, illustrating the growing acceptance of this solution.


Customized Solutions

Many HR BPO models consist of some combination of strategic front-office and back-office functionality. Naturally, the strategic function of any HR BPO solution is unique to each client. Clients today are looking for flexibility and choice. The best HR BPO offerings provide clients with the options and flexibility they need to best manage their business, whether they require single or multiple processes, domestic or multi-national solutions.

Another source of flexibility outsourcers can provide is an IT infrastructure designed to meet the needs of various sized clients. A BPO provider that hosts and maintains its own systems can provide the highest levels of reliability, economy of scale and security. Clients begin realizing operational improvements from the moment the implementation is completed.


Trends and Requests

While companies outsource HR business functions for a host of reasons, there are key drivers spurring the adoption of HR BPO. Based on ADP's experience, we are finding that companies today want more than back-office functionality; they seek a trusted partner with the industry experience and deep business process expertise to help them achieve strategic HR initiatives. Expert systems and processes are a given. What clients most value is access to trained specialists with working knowledge of their organization and business goals.

Recently, Sodexo, Inc. chose ADP to deliver and coordinate payroll and related services directly to the company's 100,000 U.S. employees. In discussing Sodexo's needs, Peri Bridger, the chief HR officer at Sodexo said, "We needed to outsource components of our HR functions to a company with deep domain expertise and one that could serve as a strategic, consultative vendor. These sentiments are typical of large employers and clients we speak with everyday and their needs drive our innovation and solution offerings.

Strategic and organizational changes, such as mergers and acquisitions, spin-offs and divestures, serve as catalysts for switching to HR BPO solutions. Among the benefits are rapid deployment and standardized processes and services. Using a flexible BPO solution, Credit Suisse successfully integrated new employees acquired through a merger while significantly reducing payroll staff. This integration cut payroll service delivery costs by 50 percent and has allowed the introduction of valuable new tools such as employee self-service, according to a recent IDC white paper commissioned by ADP to document the growth and benefits of HR BPO in the mid-market.

Finally, companies with a global market presence and workforce need global solutions. Multinational organizations should inquire about multilingual and multi-currency solutions. They should also expect access to consolidated reporting tools from a single database.

Today, at a time when companies are expanding globally, acquiring other businesses in other parts of the world, and cutting costs across the board, HR BPO is an important option for large businesses to consider managing payroll and HR processes effectively. With the right combination of people, processes and technologies any BPO provider will be able to meet the needs of large clients across all sectors and geographies.


Greg Secord is the Vice President of Marketing and Business Development for ADP National Account Services.

* Number includes both ADP COS and ADP GlobalView clients.