The cost of third party human resource services

The trend of third party human resource services is becoming increasingly popular thanks to helping businesses save costs and optimize work performance. Choosing the right outsourcing partner will help improve business efficiency. However, to gain maximum benefits from outsourcing, an accurate assessment and understanding of its costs and potential is vital.

1. Factors affecting the cost of third party human resources

The cost of third party human resources can vary depending on many factors such as:

  • Services provided: Outsourcing specific HR functions will determine the costs involved. Core functions such as payroll and benefits administration often require higher costs than ancillary functions such as training and development.
  • Business size and HR outsourcing costs: Large companies with complex HR requirements often incur higher costs due to the need for diverse and highly specialized HR services from suppliers.
  • Geographic location: Choosing partners in countries with low labor costs can bring cost benefits, but issues such as time zone differences, cultural differences, and language, factors that can affect communication and management effectiveness.
  • Partner expertise: Professional staffing companies with deep skills and experience in a given field may command higher prices, but they also bring added value through work results quality and long-term cost-effectiveness.​

2. So, What are the real costs of HR outsourcing?

To better understand the true cost of third party human resource services, a thorough review of specific HR services and costs is an indispensable step. Here are some key aspects:
 

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​​How Much Does It Cost To Hire third party human resource services?

2.1. Recruitment

The process of recruiting new employees is an important but also costly business activity. Although it may seem that initial costs may be high, investing in quality human resources will contribute to business growth and performance. According to the Society for Human Resource Management, the average cost per hire amounts to about $4,700. Depending on the steps and complexity of the recruitment process, this cost can increase significantly, especially for companies that do large volumes of recruitment. Therefore, the financial burden of recruitment needs to be considered when evaluating HR outsourcing.

2.2. Training and development

A report by the Association for Talent Development shows that, on average, each company spends about 1,280 USD/year per employee on training and development purposes. This number fluctuates depending on the complexity of the training program and the number of participants.

2.3. Compliance management

Complying with legal regulations can be costly and complicated. According to the Competitive Enterprise Institute, large companies report that the cost of maintaining compliance can be up to $10,000 per employee. This is the general standard. Depending on the industry and specific regulations, this cost third party employment agency may vary.
 

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​HR third party human resources solutions- cost effective solution with Faro Vietnam

2.4. Salary management

Managing compensation accurately and effectively is critical to employee satisfaction and compliance. A report by the National Small Business Association (NSBA) revealed that the average cost for payroll management is $12,000/year. This cost can be affected by the complexity of the payroll system and the number of employees.

2.5. Compensation and benefits

Offering attractive benefits packages is essential to attract and retain talent. According to the Bureau of Labor Statistics, the cost of compensation and benefits is about $10.88/hour per employee, equivalent to 30% of the total cost of hiring an employee. This means that an employee earning $100,000 per year would cost the company $125,000 to $140,000 per year after benefits. This level of pay also varies based on the specific benefits offered and the number of employees enrolled.

3. Compare the costs of HR third party employment agency and internal HR management

Outsourcing third party human resource services can be a smart strategy to improve efficiency and reduce costs, however, the true cost of HR consulting services needs to be carefully considered before deciding. Salary costs when outsourcing are often much lower than the costs businesses incur when hiring full-time employees. Businesses that outsource their human resources department often save more than 50% compared to the cost of hiring full-time personnel.
To understand the cost of third party employment agency, it is necessary to carefully consider both direct and indirect costs, potential challenges, and benefits. A comprehensive and strategic approach to outsourcing will help companies make smart decisions that suit their unique needs and maximize the value gained from their HR outsourcing strategy.

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