A 2005 study by US HR industry consultants Everest Research Institute suggested that the areas most frequently included in an HR outsourcing deal are payroll (87 percent), employee data management and information systems (83 percent), benefits (81 percent) and regulatory compliance (67 percent), followed by compensation, resourcing, performance management and training/development. HR strategy is the least likely to be included (at 21 percent).
Perhaps the only areas of HR that are generally not appropriate for outsourcing are HR strategy, business alignment (including business partner teams), workforce engagement and specialist or sensitive areas (including management of grievances, discipline and conflict/harassment cases). However, the leading outsourcers do offer advisory services in these areas.
HR outsourcing is increasingly a multi-process activity: our experience is that approximately two-thirds of new HR outsourcing deals involve multiple processes, with the remaining third focusing on discrete or stand-alone processes (such as payroll, benefits and learning). A 2005 report from Nelson Hall estimates that multi-process HR outsourcing is growing at 33 percent CAGR (compound annual growth rate), against seven percent for single processes.
HR outsourcing deals
Multiple processes are included within HR outsourcing deals for two main reasons. First, there are economies of scale to be had from the outsourcing of multiple administrative activities (agents can work across processes, and drive up first touch resolution rates). Second, there are numerous interdependencies between HR processes – such as the administration of learning and performance management – so it makes sense that these are managed jointly.
The trend toward outsourcing is most prevalent among larger organizations (with more than 15,000 workers) that have both the demand and resources to provide a full range of employee benefits and services. Smaller organizations, which typically offer fewer HR benefits and services, have correspondingly fewer activities to outsource. As a result, smaller organizations attract HR outsourcing deals that work out at a higher cost per employee, and have shorter contract terms. But the economics are changing, and the benefits of HR outsourcing are trickling down through the mid-size sector towards the SMEs.
The HR outsourcing industry is not changing much at the moment. The only differences that appear from time to time stand in technology used. This translates in speed of processing, which gains you more time. Unfortunately for companies that can not use it and do not have an in house good human resources department, as time passes a lot of problems can appear if we do not include HR administration.
For instance, did you know that sexual harassment can cause you to lose so much money that it can lead to bankruptcy? This can be avoided if you include proper sexual harassment training in your company. Also, if you lose too much time to deliver checks to your employees they will find it as a good reason to look for another job. You always want to make sure that you keep everything under control when dealing with human resources. The HR outsourcing industry is this strong because it can aid you to keep this control at all times.
If you hire a good provider you can basically say good bye to all problems that can appear. Also, if some problems still appear it is the responsibility of the provider and not yours. You are basically shifting responsibilities and gaining time and money. There is no reason why the HR outsourcing industry would not continue to be strong in the years to come as long as such benefits exist.
Reasons to Outsource to Foreign Countries
There are now many reasons for the US and European companies to outsource.
The 1st reason to outsource:
Businesses often outsource when they get a new task, for which they don’t have enough time. An executive understands that the task can be done in-house by the workers, however the employees are so much overloaded with their work, that they simply never get enough time to accomplish the task. Some may ask: why don’t they hire a person to do the job from the neighborhood? The answer is usually the following: the job is too small to hire a person to do it permanently, however it requires certain expertise and special education. And most professionals in the US, for example, who have expertise and education prefer to work full-time.
The 2nd reason to outsource:
The second and probably the most popular reason to outsource has its roots in the fact that many small-scale and large-scale firms do not have enough resources to do the job locally. It is well-known, that outsourcing to foreign countries almost always implies reducing the costs for the job of the employee, as most outsourcing companies are based
in the countries with low economies.
|The 3rd reason to outsource:
Sometimes a business
has to develop a new unique project and naturally wants to launch it before any other competitors. The development can be performed locally but it does take time to find all the necessary resources, and mainly human resources. At the same time, numerous outsourcing centers offer ready-made development teams or can make up a team according to the specific needs of your development project. This can be performed at practically no time, as many outsourcing centers specialize in providing “ready-made” dedicated development teams in practically no time.
The 4th reason to outsource:
Businesses often delegate their back-office operations, as well as many front-office tasks, to companies overseas, when they want to focus on mission-critical issues of the company. The routine work is of course important, however it is not critical to the prosperity of the business and does not directly affect the overall success of the business. Besides, the daily back-office tasks often require a great amount of time, which leaves practically no time for the things that “really matter”.
The 5th reason to outsource:
With the speedy development of new technologies, there often appears a need for a unique specialist, who is not so readily available in the local area, and sometimes even in the country. In such situations the employer has to seek a specialist outside the borders of the country. There are actually many more factors and reasons to outsource work to foreign countries. The most frequent reasons have been listed here, however the list is not full and will most probably be growing.