Human Resource Outsourcing(HRO)
Introduction
and Meaning of HR Outsourcing
HRO means a company using
a third party services to take care of its human resource functions. Simply the
completing organization HR works from an outside party which previously done by
internal sources.
In common, some of the main
HR functions outsourced are, recruitment and
selection, hiring, firing, Record Keeping, payroll and compensation management,
staff training, employee benefits and service, job evaluation ect.
By outsourcing HR
functions to a third party who engaged in that function for long time and
became specialist, we would be able to get excellent results leading to
significant savings in cost and effort at unbelievable speed also.
Need for HR outsourcing
Many companies
these days, partially or wholly, are slowly getting into the practice of Human
Resource outsourcing. More and more
organizations are slowly finding it challenging to observe not only the core HR
policies of the company, also ensuring that the other key areas in the HR
domain like talent acquisition, defining goals of employees and aligning them
to achieve the same, determining productivity of the employees, providing best
learning and development support, employee engagement, defining proper reward
system, handling attrition etc are maintained at professionally and
transparently. Most companies today feel the need for an expert to fill up the
vacuum in the domain.
Types of HR Outsourcing
HR outsourcing can be broadly divided in to 03 types
1. Application Service Provider (ASP)
A host of companies providing hardware and software
applications to support human resource activities in an organisation.
2. Business Process Outsourcing (BPO)
Part of HR functions are outsourced.
3. Total HR Outsourcing
The entire HR function is run by the host service provider.
Forces for driving HR outsourcing
In an organization HR function is vital and it may go
through certain critical circumstances where organization forced to HR
functions outsourcing. In situations like followings are reasons to seek HR
unit for third party support.
1. High manpower turnover places where difficult to
design HR services.
2. To overcomes the difficulties of research finding
from public domain
3. Increasing trend of HR Outsourcing and to maintain
standards in HR services
4. To suit rapid change in HR strategies
5. To meet the strategical competitor approaches
Outsourcing of HR Services
The following HR services can be outsourced
- Payroll
Outsourcing services
- Temporary
staffing
- Counseling
of employees
- Health
care benefits of staff and employees
- Screening
the background of candidates
- Managing
the performance appraisal system, and much more.
HR outsourcing has the
following benefits:
Two main reasons that organizations choose HR outsourcing services
functions to cost-effective solutions and saving of time.
An outsource expert will help the firm with compliance related
issues to workers’ compensation, health benefits, and other such mandatory
issues that deserve dedicated attention and prompt action.
This will, in turn, help the HR internal staff to concentrate
better on their jobs at hand. Also since the external agency is experienced and
is well aware of handling such issues, solutions will happen faster. All legal
issues are handled by the agency as part of human resource outsourcing
services.
These expert use their vast knowledge and experience to devise
attractive employee retention and benefit packages that are designed keeping in
mind the company’s long-term and short-term business goals.
They handle all relevant paperwork pertaining to government rules
and regulations, not only for its client but also of the employees of the
client company.
Since the HR outsourcing companies work using the latest
technology in the HR domain, the client is able to benefit from the automated
fast system without having to make any substantial investment in
infrastructure, manpower training and even maintenance related issues.
Barriers of HR Outsourcing
Common barriers with outsourcing include:
(a) Lower-than-expected service levels of HRO
(b) Loss of control in relationship may damage company image
(c) High employee turnover at the outsource provider
(d) Difficulties managing the provider, cost may go up in future
(e) Higher-than-expected, hidden and escalating costs;
(f) Employee resistance and demotivating
(g) Cultural differences
Future development of HR outsourcing
HRO having various future development Some of them
are:
Technology is one factor that has changed the HRM domain.
Eg - HRIS (Human Resource Information System),
2. Sharing and Learning Relationship
The HRO relationship should encourage a culture of
knowledge sharing and mutual learning.
External consultants can be consulted to develop
performance standards.
4. Skill development of
HR Manager Role:
HR managers today need to have multiple skills with knowledge about entire organization scope.
Conclusion
Like all the other functions in an organization, HR
function also going through major changes to abstract more strategic view,
developing competencies in line with the company long term business goals.
There has been increasing demands and suggestions for
using new methods for evaluating direct contribution of human resource
management services in a company business.
Among these changes human resource outsourcing is an
innovative solution whereby a company buys either a part or the full
requirements of its human resource services from an external vendor.
Under pressure of globalization and competition,
outsourcing of HR services is making steady roads into business process.
References
Armstrong, Michael;,
2006. A Handbook of Human Resource Managment Practice. 10th ed. London:
Kogan Page Limited.
Baldridge,
Rebecca;, 2021. Inc.com. [Online]
Available at: https://www.inc.com/hr-outsourcing/best-hr-outsourcing-for-small-business-in-2017.html
[Accessed 02 August 2021].
R Biswas,
2021. YourArticleLibrary. [Online]
Available at: https://www.yourarticlelibrary.com/human-resource-management-2/hr-outsourcing/99683
[Accessed 02 August 2021].
HR is often referred to as the "heart and soul" of a company. The HR team is familiar with employees, workplace dynamics, and what makes or breaks employee happiness. When hiring outsource, might relinquish some control.Nice article and well presented Sunith.
ReplyDeleteThanks for the comments Umesh.
DeleteInteresting and timely topic. Specially when considering the banking industry in SL outsourcing of functions including HR is emerging. This have both pros and cons to discuss. However, in my opinion the sentimental issues with regards to the matter is more concern than others. Existing employees may faced with moral disruption and badly effect on company performances.
ReplyDeleteAs you correctly mentioned Oshadha all most all the Sri Lankan banks hugely use the HR outsourcing. Non profitable high volume routine works can be easily outsourced.
DeleteOutsourcing is an effective strategy to reduce the cost of organizations in the competitive environment. It can also help improve efficiency. However, Management required to regularly evaluate the results of outsourcing to determine whether it is useful and need to review it from time to time in accordance with the ethical standards of the organization. Thankyou for sharing Sunith.
ReplyDeleteThanks for the comments Rukmali.....
DeleteAllowing a third party to take care of all the HR functions provide the advantage on cost effectiveness and allows the company to focus more on the internal procedures that provide the company a competitive advantage.
ReplyDeleteThanks for the comments Gangani........
DeleteGood job Sunith, HR is essential for an organization to manage and develop people. When you consider the processes of recruitment and selection, training, payroll management, handling issues and complaints, and many other factors, the job burden of HR will expand significantly. Mid-sized businesses may not require or need a division; instead, they may be able to outsource only the most necessary HR functions. Internally, other usual functions can continue.
ReplyDeleteOutsourcing HR Functions
1. Employee relations & compliance
2. Payroll services
3. Workers’ compensation
4. Employee benefits
5. Staffing & recruitment
6. Employee screening & background checks
7. Pre-employment skills testing
8. Sexual harassment training
You have clearly drafted with more research and theories. Thank you for sharing
Thank you for sharing Sunith.Outsourcing may positively relate to performance for firms pursuing a cost leadership strategy and negatively related to performance for firms that were not. Furthermore, outsourcing may positively relate to performance for innovative differentiators and negatively related to firms that were not pursuing innovative differentiation strategies
ReplyDeleteOutsourcing HR services helps streamline significant HR activities such as compliance, payroll and employee administration. When companies outsource HR services, they definitely get more time to focus on profits and other core business
ReplyDelete