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What is Back Office Outsourcing?

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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 27 October 2016
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Back office outsourcing is becoming a common choice for many businesses. In this process some or all back office responsibilities such as managing payroll, administering health savings accounts, creating billing, running human resources, and/or filling a number of information technology and data entry jobs, are handed over to a third party, instead of being handled in house by employees. This can often result in savings for a company that might pay a little less for the service than it would cost to retain employees in both salary and things like health insurance contributions. Amount saved tends to depend on what is charged and where business gets outsourced; business sent to less expensive foreign countries can be cheaper but isn’t always the preference.

There are a number of companies that specialize in providing back office outsourcing services to employers. They may perform one or more of the jobs listed above and some specialize in areas like payroll or information technology. As with hiring employees, companies have to think hard about the worth of each back office outsourcing service, and determine based on feel, reputation, price, and other factors which ones are likely to do the best job. A considerable amount of trust must exist because the company is handing over control, and thus part of its reputation, to another entity. Making sure that jobs will be performed to the company’s standard and continue to reflect the reputation the company has established are vital.

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Much can be said about the financial advantages of this form of outsourcing. Diminishing or eliminating departments can save money, and not just in employee pay. Such choices, depending on their scope could allow companies to operate out of smaller facilities. They may save money in things like electricity and heat, hiring people to supervise back office employees, and there could be other savings. For instance, hiring a payroll service means possibly not printing checks, a cost that adds up when there are a lot of checks to print.

Certainly, there are downfalls and criticisms of this practice too. Back office outsourcing may eliminate higher paying jobs, while companies that offer it could step in and give lower paying jobs to people. Certain fields like information technology are usually sent to a different country, which leaves a number of skilled workers that can no longer find work in their own country. While many people concede the necessity of outsourcing some work, it has led to a less welcoming job market in a number of parts of the world.

Another issue in criticism of back office outsourcing relates to the convenience or inconvenience certain forms of outsourcing poses for the average employee. Employees may have to interact with a variety of non-company agencies over matters like health insurance, health savings accounts and paychecks. Sometimes companies have to keep representatives still employed in skeleton crew back offices so that the employee has assistance in dealing with the companies that are handling various aspects of employment. Creating these jobs is actually considered wise because a hallmark of successful outsourcing is that the main company scrutinizes services offered, making certain that they maintain the quality best representative of the company’s values.

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anon164020
Post 1

You say that, but there are, of course, options to outsource within your own country, making life simpler and using a company that works closely with your own, becoming almost like a department within your business also helps. Not all outsourcing is done with poorly paid, third world-based employees and can work really well. That's my experience here in the UK anyway.

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