Human Resource
Outsourcing
By. Mark Joaquin A. Alcala
Human Resource Outsourcing
• Human resource outsourcing refers to a process in which the
employer transfers responsibilities and risks for HR functions to
the external provider which performs this tasks for the company.
HR outsourcing services
• Recruiting, training, and development
• Overseeing organizational structure and staffing requirements
• Tracking department objectives, goals and strategies
• Employee orientation programs
HR Outsourcing – Need
Many factors will contribute to any organization’s decision to
outsource its HR functions.
The following are some of the needs of HR Outsourcing:
i. Enabling businesses to focus on core operations
ii. Delivering cost savings – whether direct or indirect
iii. Helping to create a stable, cost-effective operating platform
HR Outsourcing – Need
iv. Transferring focus from internal processes to achievement of
business goals
v. Realizing investment in HR transformation and IT systems
vi. Ensuring compliance with legal, regulatory and best practice requirements, and
vii. Transferring risk and liability for people issues.
Accordingly, the following processes can be
adopted for outsourcing a few of the HR services
from outside:
• 1. Hiring Services:
• Recruitment and selection are the human resource services
through which knowledge carriers from outside are brought into a
company. External market gets its supply of human resources or
knowledge carriers mainly from three sources, viz., the
households, academic institutes, and industries. All those people
who look for jobs are available in different types of markets.
Prospective employees search for jobs using varieties of means
and media.
Accordingly, the following processes can be
adopted for outsourcing a few of the HR services
from outside:
• 2. Developmental Services:
• In the area of outsourcing of external developmental resources,
companies buy explicit market developed knowledge. Since there
are many other organizations who are experimenting with newer
innovations in the area of management processes, an organization
can enhance the capability of its employees by giving them
exposure to those practices of other companies. Further, there are
economy of scale in acquisition and compilation of such
information.
Accordingly, the following processes can be
adopted for outsourcing a few of the HR services
from outside:
• 3. Performance Management:
• Organizational performance evaluation involves measurement at
three levels, viz., at total organizational level, at group or at
departmental level, and at individual employee level.
Performance information or data at total organization and at
group or department level are mostly explicit knowledge intensive
and their measurements are less controversial though there can be
a few areas which are tacit and personalized knowledge intensive.
Accordingly, the following processes can be
adopted for outsourcing a few of the HR services
from outside:
• 4. Compensation and Benefit Management:
• Compensation is an important part of the human resource services
which ensures supply of adequately skilled manpower to the
company and to its various positions. Unless the compensation for
various positions are adequate to remunerate the qualification
and experience that is required for the job, it may fail to attract
the right people for those positions and it will be harder to retain
such employees for long.
Accordingly, the following processes can be
adopted for outsourcing a few of the HR services
from outside:
• 5. Reward and Incentive Management:
• Rewards and incentives are used to encourage employees to go
beyond their call of duty. A good reward system not only attracts
the right kind of employees into the organization but also
encourages them to work in such a way that organizational
capabilities are maintained. A reward that is well linked with the
achievement of objective outcome is a powerful motivating force
for employees to work hard and show the desired behaviour.
Accordingly, the following processes can be
adopted for outsourcing a few of the HR services
from outside:
• 6. Specialized Consultancy Services:
• Consultancy is a fast growing service business in many countries
including India. There are a number of reasons why this business
has been growing so fast. Firstly, many big multi-functional, multiproduct companies occasionally find a glaring mismatch between
manpower required and the manpower available both in terms of
number and quality in different departments. This happens
because organizational processes have inertia and are often
hostages to their past successes.
HR outsourcing has the following benefits:
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Access to broad skills and experiences
Remove non-operational distractions from the line
Access to industry best practice
Give Employees a stronger career path
Commercially exploit the existing skills
Improve operating performance
Improve risk management
Help maximize organization resources
According to “HR Outsourcing Trends” by the
Conference Board, the following are the most
common internal barriers to outsourcing:
• High employee turnover at the outsource provider
• Loss of control
• Cultural differences
• Difficulties managing the provider
• Inability to manage relationships with outsourcers
Potential Advantage benefits of HR outsourcing
Reduced cost
Increased efficiency
Access to improved HR IT systems
Improved management information (including human capital metrics)
Access to HR expertise not available internally
Increased flexibility and speed of response
Philosophical reasons (for example the organization is outsourcing a
number of its support functions, of which HR is just one part)
Reduced risk
To free HR resources to operate more strategically.
Disadvantages of Outsourcing HR
• Feeling A Lack of Control
• Cultural Changes
• Cost
• Frequent Turnover
• Data Insecurity