About Governance

Although effective discovery and contracting are essential foundations to a successful partnership between a buyer and seller, disciplined governance is often what ensures a solid relationship, service and opportunities to further develop the service in the future.  The service provider will often offer the buyer their standard governance approach which can be tailored between the provider and buyer to best fit the requirements laid out in the contract and Service Level Agreement (SLA) as well as the buyer’s stakeholder community who should be interested in the health and opportunities from the service itself.  Typically, a monthly dashboard of results vs targets for Key Performance Indicators (KPIs) is utilized.  In addition, quarterly service reviews between the key people from the provider’s and the buyer’s organizations allows for discussion about and beyond the KPIs for possible improvements and innovations for both sides.  Finally, strong governance usually includes an annual review of the past service results and planning for the future.


Key Performance Indicators (KPI)/Service Level Agreement (SLA) Library

Service Level Agreements (SLAs) are essential agreements based on Key Performance Indicators (KPIs) that outline the expected levels of service, response times and issue resolution times between the HR service provider and the buying organization often led by a service champion.  In the SLA it is critical to ensure understanding of KPIs like cost per hire, time to quality hire, accuracy of payroll processing, system uptime, resolution first time % and many others which reflect the efficiency and effectiveness of processing HR tasks and having positive outcomes.  SLAs for outsourced HR services may also specify data security, confidentiality requirements, compliance with labor laws and safeguarding the buying organization’s interests and reputation.  Monitoring KPIs regularly help to determine root causes to issues that can be resolved by either party and drive continuous service improvements as well as service value enhancements and/or cost reductions.

Metrics: Setting Expectations & Root Cause Analysis

When establishing metrics expectations for outsourced HR services, it’s crucial to clearly define the key performance indicators (KPIs) that align with the organization’s goals. This might include setting expectations for metrics such as cost efficiency, time-to-fill job openings, and accuracy in payroll processing. Root cause analysis for outsourced HR services involves examining the underlying reasons for any discrepancies or performance issues revealed by the metrics. This analysis helps identify whether issues stem from the service provider, communication gaps, or external factors, allowing for targeted improvements.

By continually reviewing and refining the metrics expectations and conducting rigorous root cause analysis, organizations can ensure that their outsourced HR services meet the desired standards and make informed adjustments to enhance the effectiveness and efficiency of the HR outsourcing relationship.

Contract Tips

In outsourcing HR services, it’s essential to clearly define the scope of work in the contract. DO include a detailed list of HR functions to be outsourced, specifying the expected service levels and response times. DON’T leave room for ambiguity in the scope of work. DO establish a comprehensive SLA that outlines performance expectations, including metrics and penalties for non-compliance. DON’T overlook the importance of clear service level agreements, as they are the foundation of the outsourcing relationship. DO specify data security and confidentiality requirements, ensuring the protection of sensitive employee information. DON’T compromise on data security standards or overlook the importance of regulatory compliance. DO include a termination clause with clear exit strategies, such as data transfer protocols and transition plans, in case the outsourcing relationship needs to end. DON’T neglect the need for a well-defined exit strategy, as it can save both parties from potential disruptions during contract termination.

Partnership Delivery: Team Models

HR outsourced services delivery may be conducted on-site at a clients location, off-site at a providers location, or by using a hybrid delivery team model. The most common hybrid model often involves a combination of on-site and off-site support and may also include remote workers and/or workers at other on or offsite locations to accomodate customers. A hybrid model allows for a seamless connection between the outsourced service team and the client organization, ensuring efficient communication and collaboration of both client and vendor workers. The service team operating model typically includes HR professionals with expertise in areas like recruitment, payroll, benefits administration, and compliance. This diversified team can address a broad range of HR needs, providing specialized support when required. Efficient communication, a strong focus on client objectives, and the ability to adapt to changing HR requirements are key aspects of successful outsourced HR services delivery and service team operating models. A mix of full time, part time and/or contract workers may be utilizied to allow for efficiency and scale, enabling the team to expand and contract based on workload.

Setting the Pricing Model

Outsourced HR services pricing models can vary, with one common option being a “per-employee, per-month” fee, where the client pays a set amount for each employee receiving HR services. This model scales with the size of the workforce, making it flexible for growing organizations. Another option is a “fixed-fee” pricing model, where the client pays a predetermined monthly or annual sum for a specific set of HR services. This pricing model provides predictability in costs but may require adjustments if the client’s HR needs change significantly. Some providers offer a “tiered” pricing model, where clients can choose from different service packages with varying levels of HR support, allowing organizations to select a plan that aligns with their specific needs and budget. Others exist or may be created to best suit you specific needs and/or delivery model or service.

Business Continuity Plan (Escalation Protocols)

Outsourced HR services often include well-defined escalation protocols to address complex or urgent issues. These protocols typically begin with a primary point of contact, usually a designated account manager or HR representative, who assesses the situation and attempts to resolve it within defined service levels. If the issue cannot be resolved at this level, the escalation protocol may involve higher-tier HR specialists or management within the service provider’s organization, ensuring that more experienced professionals are involved to address the issue effectively. The ultimate goal of these protocols is to provide a structured path for resolving critical HR matters and maintaining a high level of service quality.

A focus on business continuity is a key component of your risk management program. Being prepared to respond to situations such as natural disasters, safety and security concerns, and changing business conditions quickly and effectively is critical to the health and safety of employees, the interests of shareholders and customers, and the viability of the Company.

Contract Renewal

A strong contract renewal process for outsourced HR services begins with an early evaluation phase, where both the client and service provider assess the existing contract’s performance and impact on HR operations. During negotiations, open and transparent discussions take place to address any issues or potential enhancements. This phase should consider the evolving needs of the client, service quality improvements, and any necessary adjustments to pricing and service level agreements. The renewal process concludes with a mutually agreed-upon contract extension, reflecting a comprehensive understanding of service expectations, KPIs, and other relevant terms, ensuring a continued effective and beneficial outsourcing relationship.

Disclaimer: Although the HR Buyer Resource Toolkit has been composed with the utmost care, neither author nor editor nor publisher can accept any liability for damage caused by possible errors and or incompleteness in this publication.  It is provided with the understanding that it should not replace the use of a (internal or hired) legal or accounting service where applicable and information may be changed or updated regularly to reflect the most popular opinions, as well as resources available.