Why Multinational Companies Need Human Resource Outsourcing Services Nowadays
Human Resource Outsourcing (HRO) refers to the practice where businesses delegate part or all of their HR management tasks to specialized outsourcing firms. This approach is adopted to enhance efficiency, reduce costs, mitigate risks, and focus on core business activities. It also allows for the unified management and coordination of employees in various countries, aligning with your company’s global strategic objectives.
Foreign enterprises investing in China face several HR management challenges, including:
- Legal and Regulatory Differences: The labor laws, social insurance, and tax regulations in China can significantly differ from those in the home countries of these enterprises. It is essential for foreign businesses to understand and comply with Chinese regulations to avoid legal disputes.
- Cultural Differences: The cultural disparities between China and the home countries of these enterprises, such as values, communication styles, leadership approaches, and work habits, require foreign businesses to respect and adapt to Chinese culture. This involves developing cross-cultural communication and collaboration skills.
- Talent Market Competition: The Chinese talent market is highly dynamic. Foreign enterprises must compete with local and other international companies for top talent. To attract and retain skilled employees, foreign businesses need to develop competitive compensation, career development, and employee care policies.
- Reducing Management Costs: Outsourcing firms typically provide services through HR specialists, experienced HR managers, and legal advisors. This arrangement allows enterprises to save on the costs and management of employing such staff. Moreover, outsourcing solutions can be tailored to the needs and budgets of overseas companies, helping them save on human and financial resources.
EOR, PEO, and Headhunt, Which One Should You Choose?
| Employer of Record (EOR) | Professional Employer Outsourcing (PEO) | Headhunt | |
| Main Purpose | Providing local employment and management services for companies without a registered entity in China. | The outsourcing of the entire HR department. Providing comprehensive HR services, including payroll, benefits, and compliance, for an entire workforce. | Finding and recruiting talents for high-end or key positions for the company. |
| Employment Relationship | Employer of record is the legal employer responsible for compliance and payroll. | Co-employment relationship, where the PEO and client company share certain employment responsibilities. | Typically focused on permanent placements. |
| Cost Structure | 1. Service fee: 10% of all wages and social security expenses to be paid to employees. 2. Compensation management fee: RMB 300/person/month. 3. Deposit: 2 months' salary (to be used as a potential compensation for any economic damages). |
Monthly Management Fee: RMB 300/person/month. | One-time fee (usually around 20% of the employee’s annual salary) based on successful recruitment. |
| Relationship with Employees | Nominal employer has a direct employment relationship with the employee, but the hiring company holds management rights. | Direct employment relationship between the hiring company and the employees. | No direct employment relationship; the company signs contracts with employees. |
| Client Control | Client retains operational control, while EOR handles administrative and legal aspects. | PEO and client share control, but PEO manages HR functions, payroll, and benefits. | The client company has direct control over the recruitment process and the hired candidate. |
| Contents of Services | Salary payment, individual income tax declaration, social insurance withholding, legal compliance, and more will be included in this service. | Including compliance with onboarding and offboarding procedures, including personnel salary management, recordkeeping, social insurance compliance, compensation solutions, and benefits management. | If the intended employee does not pass the probationary period, a new candidate will be provided. |
| Typical Use Cases | Useful for companies expanding into new markets or dealing with international employment. | Suitable for companies looking for a full-service HR solution, especially for small to midsized businesses. | Used when companies need specialized, high-level talent for key positions. |
When Choose Employer of Record (EOR)?
Nowadays, the business environment is complex and fast-changing, and companies must focus on their core area of expertise to thrive in their careers. With the right talent in place, you can land new clients, build capability, close a skills gap, test a new market, or develop a new product.
If your company is expanding into new markets or operating in multiple countries, an EOR can help navigate complex international employment regulations, compliance, and payroll requirements, allowing your company to focus on core business activities. This is especially beneficial for organizations that want to streamline operations and offload non-core functions, bringing more advantages than hiring them in your companies directly.
When Choose Professional Employer Outsourcing (PEO)?
Choosing a Professional Employer Organization (PEO) can be advantageous in various situations, depending on your business needs and objectives. If you are a small to mid-sized business lacking a dedicated HR department, a PEO can provide a full suite of HR services, including payroll processing, benefits administration, compliance management, and employee relations. PEOs often achieve cost savings through economies of scale. By pooling multiple clients' employees together, they can negotiate better rates for benefits and insurance, resulting in potential cost savings for your business.
When Choose Headhunt?
Headhunting is the active searching and recruiting of talented individuals who may be employed elsewhere. The company often works with a headhunt agency (the headhunter) who will target and approach the desired individual on behalf of the employer and offer a job opportunity.
The key advantage of headhunting is that it enables companies to find and recruit highly skilled individuals. By taking active and positive actions, you may get access to your ideal candidates who are not looking for a new job and seeking a career change. This surely enlarges your talent pool and will be truly beneficial for your company when your position requires specific skills or expertise. In addition, headhunting can be more time-effective due to its highly targeted candidate requirement.
Why Choose Hongda as Your HR Partner?
With an experienced HR specialist team, Hongda can help you build a wide range of solutions and deliver you the best services to reach the best talent in the market.
Whether you are looking for permanent placement, temporary employees, or contract staffing, you can always work with Hongda to get the most qualified candidates, especially when it comes to Hongda’s EOR services. Let’s see what can be included in our services!
- Recruitment of employees: Sign labor contracts with employees on behalf of your company, including hiring, extension, termination, and conversion to permanent employment with follow-up contract management service.
- Compliance with onboarding and offboarding procedures.
- Comprehensive salary solutions and benefits management.
- Employee management: retention of employee records, attendance, bonus and allowance management, expense and claims management, and vacation management according to the local laws.
- Social insurance compliance services: purchase and management of employees’ social insurance in accordance with local labor laws.
Salary payment: receive wages and social insurance funds from the client and manage the payment of employee salaries.
