Outsourcing originally comes from manufacturing. Back then, production steps were handed over to specialized companies. But why outsource at all? The fundamental impact on the company's cost structure is independent of the type of outsourced process: turning fixed costs into variable ones – and giving companies more flexibility. In addition, process costs are reduced due to efficiency advantages for the service provider, for whom the fulfillment of the outsourced process represents a core competency.
While initially only partial processes were part of the scope of outsourcing, the range of tasks performed by external providers has expanded noticeably. Within the scope of BPO, IT-intensive and administrative business areas such as human resources (HR BPO), finance, and logistics are outsourced to service providers. Outsourcing has had a lasting impact on numerous industries: For example, the internal value chains of established industries have become significantly shorter.
Depending on the scope of the outsourced processes, different forms of outsourcing can be distinguished: Hosting represents an initial approach to reducing costs, in which the service provider simply makes its computing power available to the customer for running the customer's own software. Application Service Providing (ASP), on the other hand, already envisages closer cooperation. Here, the service provider is responsible for hardware and software, allowing the outsourcing company to ignore the technical aspects of the process in its day-to-day business. Within the framework of Business Service Providing (BSP), the service provider also takes over the processing of individual business tasks for its customers. Business Process Outsourcing (BPO) takes it one step further: the service provider becomes deeply integrated into the company’s processes.
The core idea of HR BPO is that companies separate themselves from mainly administrative processes in whole or in part in order to focus on the to focus on strategically relevant processes that are most critical for achieving the company's goals. When HR runs smoothly, companies can fully focus on their core business – and increase efficiency at the same time.
Until now, companies have mainly used the support provided by Recruitment Process Outsourcing (RPO). In this case, a service provider strengthens a client's recruitment department and takes over the personnel recruitment processes. In contrast, HR BPO is a holistic HR outsourcing collaboration that also supports the client in other areas of their human resources.
The need for holistic HR BPO solutions is also being intensified by the transformation of human resources. What does this mean specifically for companies? Increased competition for skilled personnel, fluctuation, and evolving job profiles require recruitment to reinterpret its role. In addition to administrative tasks, HR is increasingly assuming the role of managing change processes and providing strategic advice to senior management. As companies focus on core functions, they are increasingly willing to entrust additional HR tasks to a service provider.
The service provider's experience, know-how, modern IT equipment, and economies of scale have a positive impact on the key indicators of process quality: costs, duration, and quality. Almost all companies, regardless of industry and market position, can benefit from HR BPO. In the past, the primary goal of HR BPO was to secure the service partner's IT and process expertise. Especially in the areas of payroll and travel expense accounting, the clear demarcation of the affected processes and their high degree of standardization across company boundaries facilitate the decision to outsource.
Surveys shows that reservations about business process outsourcing in the area of HR management are diminishing. Until now, many were worried about compliance, communication issues, or service quality. These concerns slowed down outsourcing projects in the past.. These uncertainties are particularly significant for the HR area, where particularly sensitive employee personal data is processed. However, cost awareness in HR is increasing, as demonstrated by the increasing use of benchmarking tools and the widespread introduction of employee self-management through Employee Self Service (ESS). At the same time, service providers can allay concerns about data security through extensive certifications and the use of state-of-the-art technologies.
Even beyond these standards, our HR BPO experts are well-prepared to meet clients' desire for greater strategic integration and long-term collaboration through their knowledge of numerous high-tech industries.
What risks and opportunities do companies see in HR outsourcing – and how do service providers deal with them?
The year 2025 marks a turning point in human resources management for many companies. Demographic change is intensifying, while at the same time, the shortage of skilled workers in technology-driven and social professions continues to grow. More and more companies are realizing that by systematically outsourcing HR processes, they can not only become more efficient but also more future-proof.
At the same time, technological developments are advancing rapidly: Modern HR BPO service providers are increasingly integrating AI-based tools, robotic process automation (RPA), and people analytics to implement application processes, contract management, and training programs in an automated, legally compliant, and personalized manner. This not only significantly reduces the workload on internal HR departments but also improves the quality of HR metrics management.
Another driver for HR BPO services in 2025 is regulatory changes. With the entry into force of theBureaucracy Reduction ActIV (BEG IV), the written form was replaced by the text form in many areas – a step thatOutsourcing service providersenables even more processes to be handled in a legally compliant manner. Nevertheless, personnel decisions such as terminations, fixed-term contracts, or termination agreements remain subject to written form and should be handled with particular care, even within the framework of the BPO.
The strategic dimension of HR BPO is also becoming increasingly important: Companies today expect more than just operational relief. They want service providers that consider ESG criteria, diversity goals, and cultural fit – thus contributing to sustainable, employee-centric HR management.
Anyone considering implementing or expanding HR BPO in 2025 should take a structured approach: from analyzing outsourcing-ready processes to selecting a partner-based service provider to gradually integrating technological solutions. The following applies: The clearer the goals and the more transparent the processes, the greater the strategic added value.
In 2023, ARTS, in collaboration with Zittau/Görlitz University of Applied Sciences, conducted and published its first HR study on HR Business Process Outsourcing. We repeated this study in 2024 to further monitor industry developments. You can find the survey results in our white papers.
Experts in HR management agree: The BPO of business processes in human resources will continue to gain importance as a strategic tool. Accordingly, more and more companies are open to the use of HR BPO in personnel recruitment. However, this also entails a shift in the requirements profile for HR service providers. Their value-added contribution is shifting increasingly away from the provision and operation of IT solutions toward assuming an expert role with industry knowledge. For example, to meet client expectations for increased candidate quality, Talent Acquisition Managers are taking over the entire application and hiring process, from managing HR marketing channels to the final interview.
The benefits of HR BPO at a glance:
Companies of all sizes can benefit from this concept. Startups can also benefit from outsourcing their HR-related processes. The ability to grow quickly is often crucial for success, especially in these cases. Focusing exclusively on technical skills is often not effective. Ultimately, the fit between the candidates' personalities and the corporate culture is of particular importance. A practical example shows how ARTS experts support the high-tech start-up Lilium onsite in the targeted development of human resources.
To increase employee retention, it is important for companies to support employee satisfaction through professional HR management. For example, BPO service providers can ensure thorough onboarding for new employees or manage training, monitoring specified budgets and conducting learning assessments.
However, the assumption of administrative tasks also remains in demand. In particular, recurring, time-consuming tasks such as certificate preparation and contract management can be handled by service providers in a legally compliant manner.
Smaller companies can benefit from HR BPO services primarily through increased independence from temporary absences or turnover. When long-serving employees in the HR department of a smaller company retire, a significant upheaval often occurs anyway, involving the standardization of processes and the training of new employees.
The BPO service provider should always focus on the client's individual needs and requirements. Identifying outsourceable processes and developing various solution options should always be the starting point for a successful business relationship. Individually agreed contract terms and transparent pricing facilitate comparison of offers and ongoing quality control throughout the collaboration.
Our experts will be happy to support you in this transformation in various individual areas such as recruitment and assessment or take over the areas of administration or personnel development.
As a shared service center, we can also assume central management of your HR processes for internal and external employees, or share our specialist knowledge on HR topics with you in the form of consulting. We are also happy to support your human resources department on-site, providing interim management if there is a short-term shortage or your HR needs to be restructured.
In 2025, human resource management will be under enormous pressure to act – driven by demographic change, a shortage of skilled workers, digitalization, and increasing demands for sustainability and efficiency. How can companies leverage HR BPO to address the shortage of skilled workers and digitalization? HR Business Process Outsourcing has established itself as a strategic lever for successfully addressing these challenges. Companies that outsource operational processes while focusing on their core HR competencies gain not only flexibility but also competitiveness.
Our client projects show it clearly: demand for solid HR consulting and proven solutions is stronger than ever. This makes it all the more important to pool experience, further develop standards, and foster strategic partnerships between companies and HR service providers.
ARTS is your competent partner, offering tailor-made solutions across the entire HR process chain, from recruitment and onboarding to administration and training and interim solutions. Together, we will shape your HR system to be future-proof and effective.
Sources: pac-online.com | sciencedirect.com
