Why 70% of Staffing Firms are Outsourcing Compliance?

There was a time when only 24% of firms were outsourcing compliance to ease their regulatory burdens. But, according to Thomas Reuters, now around 70% of staffing firms are turning to outsourcing for their compliance needs.

But, why the sudden shift?

Compliance has always been a complex yet crucial part of staffing.

For medium to enterprise-level businesses that have been in the staffing game for a while, understand how managing compliance gets more complicated every year.

In-house teams can certainly handle part of the compliance workload. But as your company grows and enters new markets, the costs of building and maintaining a large team can skyrocket. Add to that the investment in automation, and expenses can really pile up. And let’s not forget the increased scrutiny from regulators.

This is where outsourcing becomes really helpful. By outsourcing compliance, companies can meet complex regulatory requirements and let their resources’ time be invested in a company’s growth and innovation. Moreover, external expertise ensures that you stay compliant, allowing you to focus on what you do best—running and expanding your business.

How Can Outsourcing Compliance Benefit your Business?

In House Vs Outsourcing Compliance: Which is More Beneficial?

in house vs Outsourcing compliance- infographic

1. Cost

Managing compliance in-house can be quite expensive, with costs ranging from $2,500 to $3,000 per month. This includes expenses for hiring and training staff, investing in compliance software, and dedicating resources to stay updated with ever-changing regulations. However, outsourcing compliance can significantly reduce these costs to a more manageable $1,200 to $1,500 per month.

2. Risk

Data Risk – In-house compliance management poses a higher risk of data theft due to limited resources, human error, insufficient training, inadequate security protocols, insider threats, and the complexity of data protection regulations. Conversely, outsourcing ensures integrated software, centralized data storage, ISO certification, top-notch software, and strict office-based data handling protocols.
Employee Turnover – In-house compliance management faces the risk of employee turnover, necessitating repeated training. With outsourcing, this risk is mitigated as training costs and time are handled.
Audit Failure Risk – Best recruitment outsourcing companies like QX Global Group have a designated compliance team with expertise in auditing standards and patterns. Regular training and refresher courses every six months ensure preparedness. In-house teams must invest significant time and resources in training to achieve similar standards.

3. Technology

In-house compliance requires purchasing expensive third-party software, licensing fees, and monthly costs. However, outsourcing companies have their own in-house software solutions like ReCo360 and ComplyRite, providing seamless compliance management and regulatory updates without additional software costs. Also, automated dashboards eliminate infrastructure costs, charging only licensing fees.

4. Expertise and Freedom

Finding experienced compliance officers in-house can be both expensive and time-consuming. However, outsourcing your compliance work offers a different advantage. You’ll gain access to a team of experienced professionals who thoroughly understand the complexities of compliance. Additionally, a dedicated transition team will meticulously review your documents and processes, ensuring a seamless knowledge transfer and training phase. This allows your internal team to focus on core business activities.

5. Compliance Monitoring and Reporting

Leading recruitment service providers like QX Global Group have an in-house MIS team that analyzes compliance timelines weekly, conducts root cause analysis, and addresses challenges to streamline the compliance process.

When handled in-house, these tasks often fall on your existing staff, who may lack specialized expertise and resources, leading to potential delays and errors. Also, they might struggle to maintain consistent monitoring and reporting due to other competing priorities, resulting in a less efficient and effective compliance process.

6. Adaptability to Regulatory Changes

Outsourcing companies stays updated with regulatory changes, schedules refresher training, and has an in-house training team to ensure compliance with new standards.

In contrast, managing regulatory changes in-house can be challenging. It often requires significant resources to monitor updates, develop training programs, and ensure all staff are adequately trained. This can divert attention from core business activities and increase the risk of non-compliance due to potential gaps in knowledge and training.

7. Business Continuity and Redundancy

In-house compliance management struggles with unplanned employee absences and limited multitasking capabilities, often leading to overtime demands. Compliance outsourcing companies cross-trains employees for compliance and administrative tasks, ensuring business continuity. Our low attrition rate and detailed attention to work further enhance reliability.

8. Flexibility

Outsourcing compliance can provide your company with the flexibility to scale compliance programs up or down as needs change. For instance, if you suddenly lose in-house compliance team members, face new regulatory requirements, or decide to enter a new market, you may need to quickly increase your capacity.

Internal compliance teams are difficult to adjust rapidly, whether scaling up or down. Good offshore recruitment firms have teams of recruiters skilled in hiring for these specific roles, along with effective onboarding and training processes. They also have access to extensive talent pools. Moreover, winding down an outsourcing engagement is much easier and less disruptive than reducing the size of your in-house team.

9. Resourcing and costs

In-house compliance teams may be required to split their time between compliance functions and other business responsibilities, especially in times of peak demand. On top of this, the costs associated with hiring, training and retaining full time employees can add up, affecting your bottom line and employee satisfaction.

Compliance outsourcing have dedicated resources focused solely on compliance, meaning they have no issue allocating the right amount of attention to tasks, no matter how pressing. They can also effectively use economies of scale to provide services more efficiently, at a lower cost per customer for your business.

A good offshore recruitment company also understands how to find talent in cheaper labor markets without sacrificing quality. They should understand how to find talent outside your area that matches language, culture and regulatory context.

When Should You Consider Outsourcing Your Compliance?

Firstly, it’s important to understand that you don’t need to outsource every compliance function. Keep compliance in-house when:

Situations require an insider’s understanding of your unique business, such as creating procedures to prevent mistakes or inappropriate decisions.
Highly nuanced decisions should remain in-house.
Tasks benefit from intimate knowledge of your company culture and operations.

Consider outsourcing compliance when:

Tasks don’t require an insider’s view, such as training seminars and candidate screening.
You need to maintain 24/7 systems, like whistleblower hotlines.
You need expert advice and guidance immediately, such as when regulations change suddenly, and there isn’t enough time to train in-house teams.

You’re expanding geographically and need to quickly adapt to local regulatory requirements. An outsourcing partner already familiar with these issues can handle this faster. When choosing the right compliance outsourcing partner, recognize that there is no “one-size-fits-all” solution. Compliance, like customer experience and market dynamics, is ever-changing; what worked before may not work in the future.