HR outsourcing – it’s Pro’s and Con’s

HR outsourcing is the emerging trend of Indian market. Organisations adapt to HR outsourcing for several reasons. It increases efficiency by concentrating on important issues. It increases the flexibility of business to meet the dynamic business situations. It increases the value of customer, product, services and shares. It brings about an organization wide transformation.

HR outsourcing brings about financial advantages for a firm also. It frees up the resources by reducing the investments in assets. Furthur it generates additional capital by transffering the assets to the provider.

HR outsourcing bring about revenue driven modification in an organization too. it helps an organisation to gain market access & business opportunities via the providers network. it taps the providers capacity, process & systems and accelrates expansion. it expands the production and sales of a business at times of financial crushes. it exploits the existing skills of an organisation commercially to derive benfits from same.

HR outsourcing contributes towards cost management also. it converts fixed costs into variable costs. moreover, reduces costs through superior provider performance & its low cost structure.

It increases employee commitment and energy in non-core areas. also provides them a stronger career path.

There are several points that must be considered once you decide to implement HR outsourcing in your organisation. One must develop a vision regarding what is to be achieved by outsourcing. knowing the scope of activities that are to be outsourced is also essential. only the execution of function is outsourced not its responsibility. avoid to be driven by cost saving solely. never outsource management functions related to customers, strategy and finance. however, one must always keep in mind that outsourcing is not a solution to all the problems.

HR outsourcing has its own disadvantages for every organisation that must be considered before trying to implement the same. it modifies the support functions of an organisation thereby affecting its robustness. it requires a lot of coordination with the agency. it reduces the learning ability of an organisation. the integration capacity of an organisation is also affected. an organisation has to compromise its control over the outsourced processes. it increases the insecurity among employees that whether the staff remains within organisation or an agency is appointed. the disappearing jobs reduce the motivation & morale of the employees.

Author: KPO

2 Responses to “HR outsourcing – it’s Pro’s and Con’s”

  1. Nandan says:

    Very informative article. Such articles help create awareness about obscure stuff like HRO.

    In fact within India HR outsourcing is growing big way. Many Indian SMEs are taking help of 3rd party service providers like us ( to manage their entire HR department.

    Recently we asked MD (client we have been servicing for three years now) why do they have been with us so long? Are there any plans of creating internal HR department with fulltime on-roll professionals?

    Response was very educative to us as well.
    He said, “you guys give me expertise that would cost me bomb if I hire full time head-HR of that caliber. You give me refined processes that would take 4/5 years for me to nurture & develop. You have installed softwares which are always in sync with latest technology. You give me flexibility of ramp up and down on monthly basis, which is impossible if I have on-roll employees and finally you took all my headaches of supervising these guys and ensuring results. Tell me why would I go back once I have tested so much blood?”

    Even for Indian SME clients Outsourcing HR department is a big boon. We serve clients form sectors like Software, BPO, retail, real-estate, NGO and few so called “pop-n-mom” shops too. Most of these are firms have employee size 15(smallest of our client) to 3400 (largest of our client).

    HR outsourcing among Indian industry would also grow big way. We have equally big market within country.

    Nandan Vaidya
    Nandan . vaidya @ Pasayadan . net

  2. Richard Mello says:

    Indeed, no one in the outsourced human resources business can claim credibly that it will save huge amounts of money. Headline numbers of 40% savings are unrealistic and overlook other costs, including severance costs, supplier management costs, the cost of exiting the contract at the end and the effect of currency and wage inflation.

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