Saturday, February 28, 2015

Human Resource Outsourcing

Although human resource outsourcing has been around as long as work specialization has existed, it is only recently that companies began employing the human resource outsourcing model to carry out narrow functions, such as payroll, billing and data entry. As these processes could be done more efficiently and more cost-effectively by other companies with specialized tools and facilities and specially trained personnel.

India is unlikely to be toppled as the main destination for outsourcing, with 80% of global offshoring now located in the subcontinent. But South Africa is fast emerging as a rival to India's dominance, thanks to closer cultural links with the west, a more reliable telecoms infrastructure and relatively low labour costs.

In the recent times, human resource outsourcing has received a lot of negative feedback. This is because, it is felt that outsourcing are taking away jobs from the Americans and passing it on to foreigners. Although this is not true as most companies outsource without taking jobs away from Americans. I can say so because outsourcing is commonly practiced so that a company can concentrate on what it does best, while letting experts take care of needed business tasks not related to this company’s primary purpose.

For instance, a company that produces an electrical item needs technically qualified people round the clock and not a lawyer. Ofcourse, they do need a lawyer for legal advice and other legal matters but this can be obtained from a legal firm as and when legal matters arise. So it is more practical that their legal needs are outsourced to a legal firm. This however, cannot be applied to their technical staff.

Likewise, one area where companies have realized that the Human Resources (HR) can be a profit center and have recognized the value of human resource outsourcing.

Take for instance, payroll processing. In most large firms, the payroll is generally outsourced to a company who maintains a database of all the company’s employees. The parent company provides all the necessary info., such as social security numbers, deductions, days attended, bonuses and other relevant information. All the firm does is to forward this information to the outsourced company, a week before the payroll is processed

The information would consist of new or terminated employees, hours worked; overtime, vacation or sick leave-periods consumed and other relevant information and the outsourcing company produces the checks for each employee of the outsourced firm. It also takes care of the tax deposits for the company and sends any other deductions from payroll to the proper recipients and also provides the company with various types of reporting.

Another human resources function that is often outsourced is hiring of new staff. A company has the option to hire a head-hunter or a recruiting company and provides them with each candidate’s basic requirements

The recruiting / headhunting company will then take it to the next level by selecting and interviewing the new employee. Ofcourse, there are cases in which the recruitment company would take care of the entire process, culminating with the selection of the new employee. Although this is not common for executive positions, it is often used for temporary and staff positions

Alternately they can offer access to expertise. Organizations that outsource gain access to know-how they probably do not possess, thereby getting access to a core network of experienced people However, there are also certain misconceptions in human resource outsourcing that it wins in every situation, which is not true.

One of the core reasons companies opt for outsourcing is that it cuts costs thereby increasing their profits. However, outsourcing will provide cost savings only for large and big organizations where a lot of inefficiency has crept in. To put it in a different perspective, suppose a company has over hundreds of people in the human resource department, where the gross expenditure per month is $100 million. Supposing the company can save about 5%, if it opted for human resource outsourcing, it would save approximately a sum of $5 million. On the other hand a company with only 10 people in HR is not going to make a much of a difference – hence the large company theory!

So, outsourcing a non-core function like the human resource functions to a high quality provider, gives enhanced levels of service at a lower cost thereby helping businesses to compete in today's highly competitive marketplace.

In conclusion, it can be safely said that outsourcing allows freeing of internal resources and allowing executives to be more strategic. Instead of entering data, crunching numbers and pushing paper, company executives can focus on profitability and core/ non-administrative functions. In other words, offloading the administrative work maximizes the organization's resources.

So, HR leaders must know how to thread their way through the ins and outs of outsourcingbefore their organizations can build an effective HR solution. The problem is becoming more complex, and CEOs are realizing that a good strategy is the key to successful human resource outsourcing. They have taken a more enlightened approach and giving more importance to outsourcing management

Not only can human resource outsourcing be a great experience for both the employer and freelancer, a company can be more profitable and efficient by letting other companies take some of the load.

You should try it!

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