hr out (1)
TRANSCRIPT
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INTRODUCTION
Outsourcing is a business strategy that moves some of an organizations functions,
processes, activities and decision responsibility from within an organization to outside
providers. It is the contracting out of a business process, which an organization may have
previously performed internally or has a new need for, to an independent organization from
which the process is purchased back as a service. This is done through negotiating contract
agreements with a vendor who takes on the responsibility for the production process, people
management, quality, customer service and key asset management of the function. The
process can greatly reduce fixed overhead costs of an organization. Though the practice of
purchasing a business functioninstead of providing it internallyis common feature of any
modern economy, the term outsourcing became popular in America near the turn of the 21st
century. An outsourcing deal may also involve transfer of the employees and assets involved
to the outsourcing business partner.
Two organizations may enter into a contractual agreement involving
an exchange ofservices and payments. Outsourcing is said to help firms to perform well in
their core competencies and mitigate shortage of skill or expertise in the areas where they
want to outsource.
Outsourcing can offer greater budget flexibility and control. Outsourcing lets
organizations pay for only the services they need, when they need them. It also reduces the
need to hire and train specialized staff, brings in fresh engineering expertise, and reduces
capital and operating expenses.
If an organization lacks the skills and the expertise to tackle human resources,
consider outsourcing HR services. Most organizations today outsource HR services to India,
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because they do not have the proficiency or the expertise to deal with HR services in-house.
Moreover, organizations choose to outsource HR services in order to save on time and effort.
HR outsourcing can be mainly classified into two categories. Transaction and administration
outsourcing services and consultancy outsourcing services. HR transaction outsourcing
services include monthly requirements such as, payroll processing. HR consultancy services
are some of the other services that can be outsourced to India. Though organizations
outsource transaction management and HR consultancy services to India, many organizations
still take care of strategic and policy functions within their organization.
Organizations who wish to outsource their HR services to India can outsource HR
services in different areas such as, administration of employee benefits, payroll processing,
administration of fixed assets, management of hardware, database etc. Organizations
outsourcing to India, mostly outsource their payroll services and training / survey
requirements
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REASONS FOR OUTSOURCING
1. AN IMPORTANT COST-CUTTING MEASURE: According to Lisa Rowan, IDC's
program director for HR and talent-management services research, one of the most common
reasons companies turn to HR outsourcing is to cut costs. "When there are staff cutbacks,"
explained Rowan, "organizations tend not to want to cut back their customer-facing frontline
people so they outsource some of the staff functionsfrequently, HR is part of that."
Handing over HR functions to a third-party provider, however, doesn't necessarily mean you
have to give in-house HR veterans the boot. Rather, Rowan said that many companies opt to
"rebadge" important HR personnel essentially, transferring an employee from the client
company to the service provider to reduce headcount without sacrificing talent altogether.
Another factor to consider when using outsourcing to cut costs is maintaining realistic
expectations. "In the past, when IDC has done primary research on the topic of outsourcing,
companies' expectations have been a little unrealistic," warned Rowan. "The smaller the
organization, the more unrealistic they've been." For this reason, Rowan recommended that
companies anticipate cost savings in the range of 20 to 30 percent.
2. MAKING YOUR CORE BUSINESS A PRIMARY FOCUS: Activities such as sifting
through emails and pushing paper may be a key part of an HR professional's job description,
but they can also take away from core competencies. No wonder many companies opt to
outsource in order to help HR staff shift focus from mundane tasks to mission-critical
strategies. "If you can remove a layer of the administrative work that you have to do, the
feeling is that HR people will be able to focus more on higher value activities," said Rowan.
But before you offload an HR department's paperwork onto an outsourcer, Rowan said it's
important to ensure that you have the right mix of in-house personnel to tackle important
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functions such as recruitment and retention. "Oftentimes the folks that are left behind don't
necessarily possess the skills needed to truly be talent experts," she said.
3. HASSLE-FREE COMPLIANCE: These days, HR departments have their hands full
developing programs and policies to ensure compliance with everything from the FLSA (Fair
Labour Standards Act) to sexual harassment laws. It's all the more reason to seek the
compliance expertise of an outsourcer. The more obvious advantage, according to Rowan, is
that "if you look at some of the bigger outsourcers, they have all of the compliance elements
in place because it's incumbent upon them to do so." But there's a less obvious benefit as
well, especially if your company mistakenly violates one of today's myriad HR regulations.
"What you gain with a third party," chuckled Rowan, "is somebody's throat to choke."
4. ACCESS TO CUTTING-EDGE BEST PRACTICES: For many HR departments, it's
easy to get into a rut, issuing the same forms and abiding by the same policies year after year.
The problem with this is times change, which could render your HR staff's best practices and
processes out of date.
5.EMPLOYEE SATISFACTION: Whether it's the anonymity they grant employees or the
access to survey tools they offer clients, outsourcers often boost employee satisfaction levels
by helping companies improve management practices, lift morale and raise retention rates.
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ADVANTAGES OF OUTSOURCING
An organization's human resources department is responsible for a variety of
functions. Human resource departments oversee employee payroll and tax filing as well as
employee benefit and health administration. Human resources also manage legal compliance,
maintain files and records, and oversee training and development. For many businesses, the
various functions of the HR department are too comprehensive and complex to maintain in-
house. Businesses that outsource HR functions receive several advantages that support the
company's bottom line.
RISK MANAGEMENT
Human resources outsourcing firms help businesses minimize risk. Employment and
labor laws change regularly, and it can be difficult for employers to remain up-to-date on
regulations that affect the workplace. Outsourcing firms employ HR professionals whose
purpose is to stay abreast on a variety of federal and state employment laws. HR staff helps
businesses comply with these laws to avoid costly lawsuits brought on by employees. HR
firms also maintain and audit company policies and practices to ensure the organization and
its employee's best interests remain protected.
COST SAVINGS
Outsourcing helps reduce the cost of maintaining nonrevenue-generating back-office
expenses. A fully functional human resources department requires additional office space and
highly trained and experienced HR staff. Many small businesses find it more cost-effective to
outsource HR functions rather than expand to a larger location to meet the space needs of
another department. Furthermore, outsourcing costs are variable and can be reduced when
business needs warrant.
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EFFICIENCY
Maintaining an efficient and productive workplace is critical. Outsourcing HR
functions create greater efficiency within human resources systems. Advanced human
resources technology utilized by outsourcing providers help streamline important HR
functions, such as payroll, benefit administration and compliance management. Outsourcing
helps employers and managers spend less time doing paperwork and more time dedicated to
improving the efficiency and effectiveness of the workforce.
EMPLOYEE DEVELOPMENT
Outsourcing HR functions help businesses manage employee performance and
development. Providers implement performance management plans to ensure employees
comply with company policies and procedures and successfully meet business goals.
Outsourcing firms periodically monitor employee performance and report findings to
management. This reduces the workload of managers by minimizing the amount of
administrative responsibilities they must focus on.
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BENEFITS OF OUTSOURCING HUMAN RESOURCES TO
DEVELOPING COUNTRIES
A lot of companies today are using outsourcing of human resources. This is done in
order to gain different benefits of outsourcing human resources. In most cases we are talking
about cutting costs, increasing flexibility, gaining time and making more money. We are not
going to talk about how outsourcing can generate you money. In order to learn we
recommend that you take a look at other pages from this web site. Now we want to talk about
the possibility of obtaining even more benefits of outsourcing human resources if we opt
for HR outsourcing providers located in developing countries.
Now what we have to understand when thinking about benefits of outsourcing human
resources to developing countries is the fact that there are both advantages and disadvantages
of doing this. We must not only think about benefits. The benefits are quite obvious. If we are
using providers from developing countries we will surely pay less than opting for providers
from developed countries. This is because such companies do not need to pay their staff as
much as the alternatives. In this case the fees they ask can be lower and still gain a lot of
profit. This is the one main benefit that companies look at when outsourcing human resources
to developing countries. Unfortunately the problem is that sometimes a lot of people fail to
see what is really important: experience.
We have to understand that there are circumstances in which the benefits of
outsourcing human resources to developing countries also include experience. On the other
hand, there are a lot more companies that can not properly handle all of the tasks you need.
For instance, some of them might not be able to offer you the right medical insurance plan as
they do not have connections to local authorities. Whenever you outsource to developing
countries you really have to make sure that the particular provider will choose can deliver on
quality through its experience. An alternative would be to only outsource those functions that
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the company can perform well while choosing local providers for those activities that can not
be performed properly by the provider located in developing countries. This will save you
money and increase productivity at the same time for sure. Everything boils down to building
a good HR outsourcing strategy that includes everything you want to outsource and you
personal needs on this matter. There are a lot of benefits of outsourcing human resources and
you should consider them properly as you could gain a lot of advantages from them.
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OUTSOURCING HR SERVICES TO INDIA
WHY OUTSOURCE HR SERVICES TO INDIA?
When you outsource HR services to India, you can save on time and effort and
concentrate on your core business. You will also be able to increase your flexibility to met
needs such as, changing and new business conditions and increasing orders for products,
services and technologies. By outsourcing a non-core process like HR services, you can
concentrate more on increasing customer satisfaction and on increasing the value of your
products / services.
Outsource HR services to India and benefit from the skills, expertise, latest
technology and professional services that India offers in the field of HR. When you outsource
HR services to India, you will find your operating performance, risk management and control
improving. By outsourcing HR services, you can also gain access to professional services.
Your outsourcing provider will be able to provide you with proficient HR services that can
bring about a change in your organization. Outsourcing HR services can also help you benefit
financially. One good reason for outsourcing HR services to India is that you can save on
costs and at the same time get access to high-quality services.
ORGANIZATIONS THAT OUTSOURCE HR SERVICES TO INDIA
Large organizations mostly outsource their HR services to India in order to
concentrate on their core processes. Such large organizations can increase the profitability of
their business by outsourcing. Large organizations also stand to gain from better HR services
for their employees. Small and mid-size organizations also outsource if they do not have
enough of HR staff to manage their HR functions. Mid-size and small organizations can also
benefit from cost-effective services when they outsource to India. Outsource HR services to
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India to enhance your productivity and return on investments and also to achieve the
economies of scale.
ADVANTAGES OF OUTSOURCING HR SERVICES TO INDIA
When you outsource HR services to India, you can see an improvement in your HR
support functions. Outsourcing HR services can help you bring out more effective and
efficient processes within your organization. Payroll functions can be completed on time
accurately and your outsourcing partner can come up with ingenious ways of improving HR
functions in your organization.
Outsourcing HR services to India can help you achieve your targets. Your business
can become more productive with the help of effective business and HR strategies. You can
also on save time, effort and manpower. You can concentrate more on your business and can
be relieved from taking care of your HR work in-house. With strategic HR strategies, training
programs and development programs, you can retain your employees.
Outsourcing HR Services to India can help your organization gain a competitive edge!
PROBLEMS OF OUTSOURCING HR SERVICES TO INDIA
There are a lot of call centers in India and many Indians are educated to speak in an
American accent to talk with their clients in the United States. The call center itself belongs
to IT companies in the United States but it is placed in India and Indian workers there are
educated to have an American accent and playing a role of customer service as company
members. This is because it is cheaper to employ Indians than employ Americans. Indian
employees are well educated and they usually have IT and programming skills but they have
struggled with getting job though they graduated from good school. So this sounds very nice
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because this creates a job in developing country. But this causes a lot of problems. You can
find problems both in India and the United States.
First, problems in India are about their identity and career. Customers call the
company and expect that they are going to talk with an American worker. So first thing to do
for their job is learning American accent, speed of talking and expressions. Also they need to
learn American culture to pretend to be American workers. They check local weather and
news in the States on the internet and talk with customers there as if they were also there.
They are forced to keep themselves surrounded by American culture and to make themselves
think they are not Indians but Americans. So they kill their own identities to get money. This
is not good but they need to do that because otherwise they cant get money. IT companies
take advantage of it because they know India have a lot of young people who have
knowledge of IT are having hard time to find a job and they can hire them for very cheap. If
they work for 7 hours a day, they need to be Americans for one-thirds of a day. It might make
them confused.
Second, these Indian workers are doing the same thing every day. Its just pretending
and talking and it doesnt require any professional skills. This keeps them from a professional
and good job even though they graduated from good schools. And you must not forget that
there are problems in the United States, too. Because they started outsourcing, a lot of
Americans have lost their jobs and opportunity to get a job in their country. The last two
problems about career in both countries bring inequality to our society. Japan also has this
problem. We dont have enough job spots for Japanese today but Japanese companies build
their factory outside of Japan because it is cheaper. Some people say we are creating job in
developing countries but we must not forget this also creates inequality.
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HISTORY OF OUTSOURCING IN AMERICA
Many perceive offshore outsourcing as a scheming and malevolent business strategy
that has deprived most American workers of jobs that should be theirs. However, a closer
look at the history of outsourcing takes readers back in time, to reflect on the factors that gave
rise to what it is today.
The history of outsourcing by its concept alone is said to date as far back as the 1800s
in America's history. Accordingly, the manufacture of clipper ship sails was done in
Scotland, since sails had to be fashioned according to exact specifications. The sail's
effectiveness was essential for long voyages. In citing this particular piece of trivia, it denotes
that even long ago outsourcing was a concept resorted to, out of a demand for expertise.
In order to appreciate the information about the surrounding circumstances that make up the
history of outsourcing, the facts will be presented according to significant timelines.
1970
Around the 1970s, the concept of outsourcing was revived. This era saw the
beginnings of computer technologies, in development of which presented a likely tool for
outsourcing the processing of company payrolls. During that time, this did not require
offshore expertise since there were several companies who could provide such services in
states or cities where advancements in computerization were taking place..
On the other side of the globe, however, the communist Chinese government opened the
country's doors to global trade. The Chinese people are known for their shrewd business
sense; hence they immediately saw how their country could benefit from harnessing the
rising concept of job outsourcing. Millions of Chinese citizens found work, as thousands of
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factories mushroomed through different Chinese regions. In fact, this country earned for itself
the monikerthe worlds number one factory.
1980
As technology kept on advancing, the 1970s through the 1980s saw several
manufacturing companies sending off their raw materials to other countries, not because of
expertise but mainly because of economic benefits. Since direct labor costs represented a
large portion of manufacturing overhead, harnessing the labor force of third world developing
countries presented a better option.
Soon enough, before the 1980s ended, the trend in outsourcing transcended from
payroll, to HR functions, to manufacturing, and eventually to Information Technology (IT).
Eastman Kodak was the first company to pay heed to an IT outsourcing firms advisement.
Still, IT outsourcing in its early stage was said to have presented more headaches.
1990s to 2000
Advancing technologies saw the creation of self-service dashboards, which eliminated
the occurrence of errors and discrepancies. As the 20th century neared to a close, the Y2K
scare about the collapse of major computer systems gave rise to the need for technologies that
could update computer systems in just a flash. In fact, the Y2K scare was considered as
phenomenal in its effect, because it also brought the advent of the Internet.
Hence, the beginnings of the 21st century saw the boom in technological developments which
brought the history of outsourcing to greater heights. Unfortunately, not enough American
students were into the technological education scene at a time that technology was booming.
In fact, the highest jobs in demand were for IT specialists, but only a few American
candidates were considered as highly qualified. Candidates had to meet technological
advancements that were becoming more and more complicated.
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Education as the Top Driving Factor that Led to Outsourcing
2001
Only 5% of American students graduated with engineering degrees while 46% percentwere Chinese.
60% of those who graduated with PhD degrees in Electrical Engineering were of foreignorigins.
2002
An estimated 590,000 foreign students were enrolled in US colleges and universities and20% of these numbers were Indian and Chinese students. The proportion of their
American counterpart was placed only at 5%.
The number of high school seniors for 2002 who took the ACT college entrance examwho intended to pursue degrees in engineering dwindled from 9% posted in 1992, to 6%
during this year.
2003
The proportion of high school students who pursued engineering degrees dropped to only2%. This was said to be due to the increasing number of American students who could
not meet the math and science prerequisites, based on the standards of global demand for
high technology.
Education seemed to be the foremost driving factor that led American firms to rely on thetechnological talents and skills of foreign service providers. To date, however, the lack
oftechnological skills and talents in the American sector has abated, as awareness about
the demand for high technological concepts became evident.
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OTHER DRIVING FACTORS THAT CONTRIBUTED TO THE HISTORY OF
OUTSOURCING IN AMERICA
BROADBAND
The year 2003 was declared as the beginnings of the Broadband Age as
sophistication in telecommunications continued. This allowed the business sector to explore
the possibilities for outsourcing other types of jobs.
INTERNET
High speed Internet was being highly utilized in almost every part of the globe. The
Internet made it possible for outsourcing parties to share documents in real time, which
eliminated some of the risks associated with outsourcing jobs. The Asia-Pacific region is said
to be the leading DSL user.
DATA STORAGE
The development of data storage not only drove the costs of paper usage but likewise
enhanced the possibilities of outsourcing more jobs with less of the known risks. The history
of outsourcing saw the development of floppy disks, magnetic tapes, punch cards, disks, CDs,
flash drives, and cloud computing storage. In fact, this development in high-tech data storage
has driven down the costs of manpower via outsourcing even further.
SECURITY FEATURES
Whereas before, security seemed to pose considerable threats to businesses in getting
involved with virtual business transactions, the enhancement of Internet security feature
allowed almost all global businesses to participate virtually, to the point of eliminating
physical stores and offices. Employers are in fact hiring telecommuters to do office work.
These are only some of the driving factors which contributed to the history of outsourcing
and what it is now todaythe Business Process Outsourcing industry. To date, people in the
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following top five countries in the lead would also be interested to know how this particular
phenomenon came about, as it brought improvement to the lives of many in their respective
regions:
IndiaEngineering and Technical ChinaManufacturing and Technical MexicoManufacturing United StatesAnalysis and Creativity Philippines- Administrative
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HOW OUTSOURCING AFFECTS THE US ECONOMY
There has been and continues to be a lot of debate over outsourcing and while
supporters say that it is good for the US economy, detractors argue otherwise.
Proponents insist that outsourcing will save money for companies, will open up
opportunities and will lead to more Americans holding jobs at a higher level. They feel this
practice offers substantial gains to the US economy with cheaper imports and stronger
exports.
Opponents who are against outsourcing argue that hiring people from foreign
countries effects the US economy in a negative way and strips hundreds to thousands of
Americans of jobs, especially the skilled and semi-skilled workers. They argue that the loss
of competitive advantage to other countries is permanent and the American worker and
economy lose forever.
All the points seem valid in their place.It has to be agreed that outsourcing does lead
to loss of jobs in the US, especially those that have minimal qualifications. On the other
hand, the loss of jobs is not only limited to people with minimal skills, but also jobs of skilled
labor that are being outsourced to other countries.
Americans who are in poverty and willing to do minimally skilled jobs find it harder
to find jobs, and poverty does nothing for the US economy, other than reduce consumer
spending and tax revenues.
There is also data that provides evidence that jobs are lost and lost forever, especially
for those who belong to the low end of the food chain. A suitable example would be the
manufacturing job losses examined by the University of California-Santa Cruz. In their study,
they found that in a period of 20 years, in the labor intensive industries such as leather,
textiles, footwear and clothing, about one-third displaced workers could not find
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reemployment within a three-year period, and even those people who did, about half of them
experienced a substantial cutting in their wages by at least 15 percent.
Outsourcing in these areas does not leave enough jobs for the Americans. A jobless
person cannot purchase homes and cannot spend money. When people do not buy, people
that produce things do not make money too.
Another harmful effect of outsourcing is loss of income by local, state and federal
governments. There are lesser payroll tax receipts and lesser contributions to Social Security
and Medicare. Then there are the outgoing payments for unemployment benefits. Sales and
other tax revenue suffers too.
Outsourcing is nothing new. In the early 19th century, Britain imported cotton from
the United States, then spun the cotton and weaved the fabric in England and then exported
the finished textiles abroad, mostly to India, then its colony. UK kept about 80 percent of the
monetary gains from these exports, adding to its national wealth. After some time, the mill
owners came up with what a so-called smart idea that they could grow the cotton in India
and shift the textile machines there too, which will enable them to save money on wages and
shipping expenses. This felt like a great idea, but then the monetary gains being repatriated to
England was only 15 to 20 percent of the total value of the textiles in the form of profit.
Now 80 percent of the created monetary gains remained in India, which was a great
loss to the British economy that resulted in unemployment as well as social unrest.
United States also faces similar problems. By outsourcing, not only skilled labor is
lost but monetary gains too. What must be understood is that service jobs do not pay as much
as manufacturing jobs do nor do they create national wealth. On the other hand, they absorb
wealth. Manufacturing jobs have by far the greatest impact on national economy, in terms of
losing skills and the time taken to retrain such a force. Another thing is the loss of industrial
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infrastructure with the closing down of U.S. factories and then exporting of capital abroad.
This money is then not available for U.S. economic expansion.
Service jobs on the other hand do not need so much training and very little capital
investment. U.S. companies derive savings in wages and more importantly in health benefit
payments by outsourcing these jobs. Of course there is no doubt there is loss of national
wealth by sending money abroad to pay their wages and salaries.
An argument pro outsourcing can say that short-term job losses brought on by
outsourcing are mitigated in the long run by gains to American workers from consumption
growth and free trade in low-wage countries.
Certain professional roles like retail, personal care, catering cannot be outsourced
because of inherent personal interactions between the consumer and the deliverer. Because
the service sector encompasses about 70 to 80 percent of the U.S. economy, outsourcing can
impact only a sliver of U.S. employment.
According to research data, more than 400,000 U.S. jobs had moved abroad and the
total is estimated to hit 3.3 million by 2015. Thats just above 200,000 jobs lost every year to
global outsourcing, a trivial problem in the context of the normal churn of the U.S. economy,
where about 7 million jobs were gained and lost in each of the previous four quarters.
Many government agencies outsource a part of their work in order to save millions of
dollars, which helps US economy and helps federal spending. The theory here is that paying
people less for work means that these companies have the ability to produce things cheaper
and will be able to transfer these savings to their consumers back in the U.S. Cheaper rates
means more consumers buying the products. One example is that of the early 90s, when the
price of personal computers dipped because the U.S. chip manufacturers outsourced this
offshore and thus reduced chip prices anywhere between 10 to 30 percent.
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DISADVANTAGES OF OUTSOURCING
The human resources department is the heart of any company. Human resources
handles many of the day-to-day complexities of the company, such as employee recruitment
and training, company growth, employee benefits, legal compliance and payroll. While
outsourcing human resources functions provides a cost-efficient alternative to staffing an
onsite department, there are some disadvantages.
POOR PERFORMANCE
Many companies outsource to limit costs; however, decreased costs often result in
decreased quality of performance by the outsourced provider. The human resources
department is responsible for the day-to-day operation of the company and any poor
performance from the outsourced provider causes an overall negative impact on the company
as a whole.
DISTANCE
Outsourcing human resources functions to an offsite location often leads to a sense of
distance between the employees and the company. When the human resources department is
not instantly accessible, employees experience delays in communication, leading the
employees to feel frustrated and unimportant to the company. This often results in reduced
morale among employees. The fact that the company is willing to outsource a department
may lead to speculation about the possibility of the outsourcing of other departments.
RECRUITMENT PROBLEMS
In some cases, outsourced employees lack the understanding of the company culture
that a regular employee has. As the human resource department recruits employees, this lack
of understanding may transfer to new employees during the recruitment process. The
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outsourced provider may also recruit employees who do not fit with the overall culture of the
company. The success of a business heavily relies on the performance of its employees, if the
employees are not the right fit; the success of the company suffers.
INFORMATION LEAKS
Outsourcing human resources functions may lead to the release of sensitive company
information. Often, for an outsourced company to provide adequate service, some sensitive
information about the companys organizational structure, product information or other inner
workings is necessary for the vendor to perform unhindered. Whether deliberate or not, when
providing an outside company with sensitive information, there is always a possibility for an
information leak.
DEPENDENCY AND LOSS OF CONTROL
After outsourcing to a provider, executives may give up too much control over the
companys human resource functions or the company may become too dependent on the
outsourced provider. Dependency and loss of control create the risk of the business not being
able to operate successfully if outsourcing is no longer an option for the company or if the
provider changes the terms of the contract.
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RECENT TRENDS IN HR OUTSOURCING
According to a recent report from Global Industry Analysts, Inc., the growth of
companies outsourcing Human Resources functions continues. Companies feel the need to
find more and more ways to slash costs as much as possible in the midst of the current
economic atmosphere. Whereas a company might have simply outsourced its payroll
administration a few years ago, more and more companies seem to be looking for ways to
maximize their dollars by outsourcing HR functions like recruitment, payroll, and benefits.
Although companies are now electing to outsource some or even all of their HR
functions to outside vendors, customization of outsourcing agreements remains a central
component of this system.
A 2011 studyby PriceWaterhouseCoopers and ADP indicates that companies that
outsource HR functions realize substantial cost savings. For example, the average company
that outsources such functions as payroll, workforce administration, time/attendance, and
benefits administration will pay approximately 18% more annually on these services than
those who use outside providers. The study also found that using a single outsourced provider
can decrease costs versus using multiple vendors or an in-house common vendoras much
as an average of 32%.
In 2009,Hewitt Associates found in their own studythat a vendors depth of
knowledge mattered to many companies when it came to outsource strategy. Rather than
looking for a vendor with broad HR offerings, 82% of study respondents said they preferred a
partner with in-depth domain expertise. At the same time, 54% of respondents also said
that they would rather have one partner to manage multiple functions, rather than multiple
partners to handle distinct functions each.
http://www.prnewswire.com/news-releases/adp-total-cost-of-ownership-of-payroll-and-hr-functions-can-be-significantly-reduced-114999069.htmlhttp://www.prnewswire.com/news-releases/adp-total-cost-of-ownership-of-payroll-and-hr-functions-can-be-significantly-reduced-114999069.htmlhttp://www.hewittassociates.com/_MetaBasicCMAssetCache_/Assets/Articles/2009/Hewitt_HR_Outsourcing_Study_2009_Results.pdfhttp://www.hewittassociates.com/_MetaBasicCMAssetCache_/Assets/Articles/2009/Hewitt_HR_Outsourcing_Study_2009_Results.pdfhttp://www.hewittassociates.com/_MetaBasicCMAssetCache_/Assets/Articles/2009/Hewitt_HR_Outsourcing_Study_2009_Results.pdfhttp://www.hewittassociates.com/_MetaBasicCMAssetCache_/Assets/Articles/2009/Hewitt_HR_Outsourcing_Study_2009_Results.pdfhttp://www.prnewswire.com/news-releases/adp-total-cost-of-ownership-of-payroll-and-hr-functions-can-be-significantly-reduced-114999069.html -
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Payroll outsourcing continues to be one of the most important areas of HR
outsourcing. Analysts are predicting that by 2015 the total HR outsourcing market will attain
$162 billionprimarily as a result of payroll, itself. While the PWC/ADP study suggests that
a single outsource vendor is the best solution for most companies, the Hewitt study indicates
that many companies may still think in terms of single functions, preferring as the SF
Chronicle article points out flexibility above all. Companies continue to encounter higher
costs for performing HR work in-house. The PWC/ADP study suggests that the problem may
lie in companies emphasizing technological transformation, rather than fundamentally
shifting their processes to meet new business needs and approaches.
Outsourcing HR functions, then, offers businesses one important way to re-imagine
how they execute essential business processes. What remains to be seen is whether HR
outsourcing providers will begin to improve flexibility options in order to try to attract more
clientele. If competition increases with continued demand for outsourced services, such a
scenario could potentially occur.
While 2011 was marked by increasing economic, social and political volatility
geopolitically,HRO Todays panel of experts believes that HR outsourcing is maturing while
remaining flexible enough to adapt to a changing marketplace.
Many of the experts consulted see this is as the golden age of HR outsourcing, and Jill
Goldstein, lead forAccenture's HR Business Process Outsourcing offering, is one: "HRO
started off as a cost reduction move for some companies. It has expanded well beyond that to
become a driving force for creating business value. We expect 2012 to bring even greater
emphasis on business outcomes, as companies explore HR BPO as a way to meet business
needs and improve business performance."
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During 2011 there was a spate of acquisitions and key acquisitions to enable providers
to offer multi-country offerings to globalizing clients. Other trends included the increasing
use of analytics to generate business insights that improved performance, as well as greater
client interest in options enabled by cloud computing, such as software as a service.
When it comes to analytics, Goldstein says the focus is increasingly on discovering
insights that inform the way the business is managed. Clients will continue to demand more
from analyticsits no longer just about metrics and dashboards, she explains. Companies
increasingly understand the value and importance of having an outsourcing partner that can
provide true insights to enable improved decision making. They realize there are more
meaningful operational insights that can be gained from analytics than a set of metrics.
HR OUTSOURCING TRENDS FOR 2012
HR outsourcing is getting more cost effective, broader and more powerful. Whatever the size
of your business, having an outsourcing strategy is increasingly crucial to the long-term
stability of your organization. This article outlines HR outsourcing trends for 2012, based on
an analysis published in theInternational Journal of Innovation, Management and
Technology.
HIGH GROWTH
From 2004-2007, the market for HR outsourcing services grew at 25-30% each year. It grew
in single-digits each year of the recession, and is projected to grow at an annual compounded
rate of about 16% for the next five years. Business Process Outsourcing worldwide is
predicted to generate $133.7 billion, an 8% increase, according to Gartner, Inc.
http://www.ijimt.org/papers/118-M514.pdfhttp://www.ijimt.org/papers/118-M514.pdfhttp://www.ijimt.org/papers/118-M514.pdfhttp://www.gartner.com/http://www.gartner.com/http://www.ijimt.org/papers/118-M514.pdfhttp://www.ijimt.org/papers/118-M514.pdf -
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THE BREADTH OF HRO SERVICES IS EXPANDING
A survey by Hewitt Associates found that, of the 129 companies polled, 94% outsource at
least one HR-related process, and they expect to expand it further. Areas of interest include
telecommuting, globalization, and staff learning/development.
PEOS ARE SCALING
Professional Employer Organizations (PEOs) have grown in average size as benefits of scale
and horizontal integration have made size a competitive advantage.
AUTOMATION OF HRO
As PEOs scale and information technology expands, PEOs are building web applications and
software to support real-time, 24/7 information. Automation increases the convenience and
lowers the costs of HRO services.
INTEGRATION OF BUSINESS PROCESS OUTSOURCING
As the number of HR services offered is expanding, PEOs are also offering additional
services not normally associated with human resources. Accounting, finance and HR are
converging within the PEO service offering, lowering costs and freeing up clients to focus yet
more on their core value.
LOWERING COSTS
Integration, automation, and greater scale of PEOs converge to make HR outsourcing
services more affordable for both small and large businesses.
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HUMAN RESOURCES OUTSOURCING (HRO) IS DISPLACING INTERNAL IT
AND ERPS
PEOs maintain their own IT infrastructure to handle payroll, record keeping and expenses, so
businesses dont have to. As information management migrates to the cloud and third-party
managed IT systems, naturally some HR functions follow suit.
MORE TYPES OF BUSINESSES ARE MIGRATING TO HR OUTSOURCING
HRO is moving into the non-profit and government sectors. At the same time that smaller
businesses are able to take advantage of HRO, larger organizations are also realizing the
advantages of HRO in addition to their in-house services.
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CONCLUSION
HR outsourcing is getting more cost effective, broader and more powerful. Whatever
the size of your business, having an outsourcing strategy is increasingly crucial to the long-
term stability of your organization.
While HR management is a basic and important responsibility for any company, it's
also true that many businesses dont possess the necessary staff, budget or desire to deal with
everyday HR tasks. Such companies usually decide to outsource some or all of their chores to
a service provider that will handle the work in exchange for payment. There are at least as
many reasons to outsource HR responsibilities as there are HR-outsourcing providers. Among
the leading motivations is the desire to save money, focus on core business tasks, improve
regulatory compliance, gain new insight, speed operations and provide new services.
U.S. investors, shareholders and American consumers derive the benefits of
outsourcing, although sometimes at the expense of American wage earners.
Another supportive argument is that outsourcing jobs to other less developed countries helps
those countries economically and helps increase trade for US products. It also gives those
countries the ability to pay back their debts to the U.S.
Experts believe that the greatest saving potential comes from outsourcing simple
assembly work or services. Since there is not much capital involved, except for training
people in other countries and payments for displaced U.S. workers, there is no other major
investment.
Outsourcing is a difficult issue to tackle and everyone, the supporters and detractors
agree on one thing that outsourcing cannot be eliminated completely. Some people feel
http://www.hrworld.com/management/http://www.hrworld.com/features/smb-need-hr-professional-061808/http://www.hrworld.com/hr-outsourcing/http://www.hrworld.com/whitepaper/top-10-service-bureau-selling-points/http://www.hrworld.com/buyers-guides/outsourcing-buyers-guide/http://www.hrworld.com/buyers-guides/outsourcing-buyers-guide/http://www.hrworld.com/whitepaper/top-10-service-bureau-selling-points/http://www.hrworld.com/hr-outsourcing/http://www.hrworld.com/features/smb-need-hr-professional-061808/http://www.hrworld.com/management/ -
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companies that outsource should be taxed for outsourcing and those that do not should be
rewarded.
Every business should at least examine the possibility of using an HR-outsourcing
service. A careful cost-benefit analysis can help a company decide which operations, if any,
should be outsourced.
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REFERENCES
FROM THE WEBSITE
www.dirjournal.com outsourcingWikipedia www.investopedia.com www.streetdirectory.com www.hrworld.com www.accenture.com vandoverviewpoints.com www.nextep.com
http://www.dirjournal.com/http://www.investopedia.com/http://www.streetdirectory.com/http://www.hrworld.com/http://www.accenture.com/http://www.nextep.com/http://www.nextep.com/http://www.accenture.com/http://www.hrworld.com/http://www.streetdirectory.com/http://www.investopedia.com/http://www.dirjournal.com/