How to Draft a Human Resource to Outsource Agreement

HR practitioners are asked to look out for outsourcing options for organizations. Any of the HR tasks that may be outsourced include wages, handling workers, foreign recruiting, relocation, rewarding staff, etc. HR outsourcing is a statutory document negotiated by an employer and a third-party provider where the employer assigns such HR functions to a third-party provider.

How to Draft a Human Resource to Outsource Agreement

How to Draft a Human Resource to Outsource Agreement

Introduction

In order to promote cost reductions and to spend more on strategic efforts, human resources (HR) roles are often outsourced. As a result, HR practitioners are asked to look out for outsourcing options for organizations. Any of the HR tasks that may be outsourced include wages, handling workers, foreign recruiting, relocation, rewarding staff, etc. HR outsourcing is a statutory document negotiated by an employer and a third-party provider where the employer assigns such HR functions to a third-party provider. There is a range of forms of HR outsourcing solutions open to the employer. It may be anything as basic as the document selection and evaluation process, for example, numerous universities in the United States and Canada have outsourced the document collection, evaluation, and follow-up process to the Law School Admission Council (LSAC) for their LL.M and J.D. Programs was outsourced to the whole HR branch.


 

Types

  • Software as a Service (SAAS): this is a model in which software licensing and distribution is hosted remotely by a vendor or supplier and is accessible to the user via a web browser. This model allows the company with more versatility and saves costs. Employers pay for access to talent acquisition and payroll software in this sector. Cloud HR apps, for example.

  • Business Process Outsourcing (BPO): Under the BPO model arrangement, an employer outsources a single business task, such as a customer care call to a third party service provider. This is distinct from the SAAS model since both the service and the applications are supported by the BPO provider. For example, an American bank, such as Citi Bank, is outsourcing its customer service calls to a BPO provider in India. Many call centers in India are operating on this model and supplying cheap employees to American corporations.

  • One Source Outsourcing: In this arrangement, one approach is used by HR practitioners to satisfy all their needs. This ranges from the welcome to new hires to succession control and in-between monitoring. The entire life cycle of an employee shall be provided by a single provider. An example of this is the use of an employee's life-cycle supplier from hiring to retirement pension plans.

  • Shared Services and Shared Services Centers: where a corporate role is integrated within an organization into a professionally experienced internal agency. This can also be made open to third parties. If the resources provided by a shared services organization are integrated into a central operation, they are called shared services centers. In this case, management roles will be either internal or external. Advances in technology have expanded the use of shared service models in recent years.

  • Professional Employer Organizations (PEOs): this concept allows for an employee lease arrangement. Here, the PEO and the boss share the employee's obligations. The supervision and monitoring of the employee's jobs would be maintained by the boss and the co-responsibility of employee compensation, taxes, and payrolls would be assumed by the PEO. Since the PEO is a co-employer, it pays salaries and taxes on its own account. The PEO also receives and files taxes to the state and central government. The development of a long-term friendship with workers at the workplace is also with the PEO. On paper, it also has the power to hire, dismiss, and reassign personnel. The PEO shall be reimbursed by the employer for these duties and the employer shall also pay a monthly administration charge to the PEO. The monthly administration charge will be dependent on the number of workers hired by the employer by the PEO.

  • Application Service Providers (ASPs): this model hosts applications on the Internet and licenses it to multiple customers. For example, ASPs such as 'People Fuzzy' are used to handle accounting, employee compensation, headcount, and other HR procedures.

Uses

In addition to allowing in-house HR employees to concentrate on business initiatives, HR outsourcing will provide businesses with access to advanced HR resources, assist with regulatory enforcement, and increase turnaround times for HR functions such as payroll and benefits enrollment. There may also be technological advantages, such as the use of a SAAS supplier to help the employer enjoy the benefits of sophisticated technologies to prevent technical difficulties.

Clauses to be used in the HR Outsourcing Agreement

HR agreements include provisions in contracts that improve the capacity of the contractor to offer HR services. Most of these marriages are suitable for the long term, such as five or seven years. In the case of more complicated service arrangements, the strategy must be less restrictive with respect to the variety of facilities. However, in short-term arrangements where there is a partnership between the seller and the purchaser, agreements tend to be more specifically specified in the terms of the services and the conditions of the employer. In addition, contracts may have sufficient built-in flexibility to make modifications to the market situation, technologies, and needs of the contractor or purchaser.

  • Transfer of Staff and Equipment: HR outsourcing inevitably requires the transfer of assets and personnel. Defining these words has a huge effect on the employer and its workers, particularly as large-scale outsourcing takes place, is important for employers to take action to maintain the morale of employees, etc. The arrangement must clarify how outsourcing will affect the benefits, pensions, and wages of employees who have transferred to the employer. The drafter of the arrangement must still recognize the employer's rights whether he or she wishes to keep those workers even after the expiration of the HR outsourcing agreement. As regards equipment and other properties, the contractor shall determine the rights and responsibilities of the supplier in relation to such use, as well as the ownership and other matters relating to the movement of assets or other valued items. For example, the pension and wages of workers shall be compensated by the provider and in the event of a dispute, the employer shall not be found responsible for those payments.

  • Rights Retained: it describes the former or pre-existing Intellectual Property Rights (IPRs) exercised by the employer and the provider and that the parties will maintain the rights previously established by the employer and the provider.

  • Intellectual Property Rights now in Existence: this applies to the rights holder. This clause explains how pre-owned IPRs are used during the time of work. For eg, the Employer shall hold any intellectual property rights belonging to any content or device or service(s) used by the Employer or the Supplier during the duration of employment of the Employer by the Employer.

  • Services: This is often laid out in the Timetable of the Arrangement which is decided on the basis of the complexity of the services and procedures outsourced. The essence of the arrangement between the supplier and the employer will dictate how comprehensive and precise this provision can be. There must always be consistency in the meaning of the terminology for the parties to be able to develop a shared interpretation of the deliverables.

  • Ownership Deliverable: This section deals with the ownership of the deliverable. The customer or employer is typically the owner of the deliverable good or service.

  • No access to Third-Party IP: this provision provides that the provider does not own any IPRs from its customers or employees, even if the contractor or the customer may authorize the provider to use their IPRs.

  • Confidentiality: This would be a lengthy provision because the employer would like to maintain faith in all of its knowledge revealed to the supplier and its agents in the process of their jobs.

  • Non-Disclosure: this provision will cover what details could be revealed to third parties during work with the employer and all relevant forms of classified information.

  • Conflict of Interest: In the event that the supplier still offers HR to other contractor rivals, the employer shall have the right to cancel its relationship with the provider to terminate its agreement with the competitor on the basis of the terms negotiated by the parties.

  • Termination: Determining what comprises termination in an HR outsourcing arrangement is one of the most critical items. In general, early termination provisions can be used for the last time, except when there is a substantive violation or force majeure. Default agreements should carry out escalating conditions with a reasonable timeline to guarantee that the parties have processes for settling conflicts. There should also be an exit control provision, which will require coordination between the supplier for the transition of services to another provider and the return of all facilities, etc. to the employer used by the provider and its agents within the contract period. It must therefore be considered that there should be no interruption to the employer's service as a result of the termination of the HR outsourcing deal.

  • Compliance: This requirement is used to ensure that the company complies with all labor and job legislation, rules, and regulations of the Center and the State. It also guarantees that the provider and its agents comply with all the provisions of the arrangement enforced by the employer, that the provider has all the necessary permits, and that it has the right to carry out the activities in a competent manner, etc.

  • Inspection and Acceptance: the contractor shall have the right to audit the job or deliverables of the supplier and its agents. The employer shall approve the goods or service and make payments only after its fair gratification.

  • Insurance Policy: The provider shall carry out insurance on its agents employed for the employer and shall also pay the employer for any damages suffered by the agent or the provider in the process of their jobs.

  • Miscellaneous: Boilerplate provisions, such as dispute settlement, jurisdiction, notes, codes of law, signatures, etc., may also be included.

 

Conclusion

The rise of HR outsourcing was assumed to rise exponentially as market conditions pressurize businesses and corporations to focus on core business functions. However, in the present era of the COVID-19 pandemic, such outsourcing will be discarded in order to allow the bulk of the work related to HR does the in-house staff. Firms and businesses will be hesitant to invest more money in new employees and their suppliers when their own customers apply for bankruptcy or refuse to meet payments on schedule. However, HR-based applications such as the ASP model will definitely work as a one-time investment in HR outsourcing software or a multiple renewal model (whichever payment model is used by the ASP owner).


 

 

BY

Kosha Doshi