Human Resource Function Outsourcing

 

Introduction

Outsourcing has become growing in popularity as a result of companies' continuous efforts to save expenses, concentrate on strategic issues, and improve employee services, especially in the field of human resource (HR) outsourcing (Chiang, 2011). Despite their historical reputation as administrative units that performed administrative work, HR departments are becoming more strategically oriented in order to assist organizations compete and survive a variety of problems (Brarun & Alewell, 2011).

Theoretical Perspectives and HR Outsourcing

Relational exchange theory and transaction cost theory offer insights into organizational motivation for outsourcing in the literature on HR outsourcing. According to transaction cost theory, there are financial expenses associated with transactions involving two or more business enterprises (Williamson, 1975,1985).

Why consider HR Outsourcing?

First, let's examine some of the most typical HR issues that organization encounter:

  • Persistent issues with compliance
  • Challenges pertaining to recruitment and retention, such as the inability to locate suitable candidates for specific position

  • Issues with employee behaviors
  •  Declining productivity of the workforce

HR functions that can be outsourced

                                                  Figure 1/Employee lifecycle

HR tasks are available for outsourcing of the employment lifecycle involves four stages:

Recruitment: A major component of HR operations is the hiring and selection of staff members. An outsourced HR firm can assist businesses in locating qualified applicants with the necessary skills for the roles they need to fill.

Engagement: Outsourced HR businesses are capable of handling employee training, benefits, and pay according to performance, among other things

Retention: There's always a chance that someone on your team will leave. HR's job is to keep a watchful eye on employee engagement, recognize retention issues, and take action to hold onto your best employees. Maintaining a close watch on employee engagement will lower your staff turnover rate.

Exit: For the purpose of ensuring the transfer goes smoothly and prevent bad behaviors.


Figure 2/HR Outsourcing risk and return

Return of HR outsourcing

Cost Savings: reduction in labor costs and elimination of recruitment and training expenses.

Expertise and Specialization: access to a team of HR professionals and keeping up with evolving HR trends and regulations.

Focus on core business activities; enhanced productivity and efficiency and better allocation of resources.

Scalability: easily adapt to changes in workforce size and flexibility in meeting specific HR needs.

Risk of HR outsourcing

Limited Control: reduced oversight of HR functions and Concerns about data security and confidentiality.

Quality and Communication Issues; challenges in maintaining HR culture and values and Language and cultural barriers with offshore providers.

Hidden Costs: unforeseen expenses in contracts and Potential legal and compliance issues

Dependency on Service Providers: risks of service interruptions and difficulty in changing providers or bringing HR functions back in-house.

Key Considerations for HR Outsourcing

  1. Identifying HR Functions Suitable for Outsourcing
  2. Selecting the Right Outsourcing Partner
  3. Developing a Comprehensive Service-Level Agreement (SLA)
  4. Establishing Effective Communication Channels
  5. Continuous Monitoring and Evaluation

Conclusion

In brief, it is critical to understand that service quality moderates the impact of partnership quality on the effectiveness of HR outsourcing. Businesses should understand that their relationship with service providers—which consider important factors like trust, business understanding, commitment, communication, and top management support—is crucial to the business.

 References

Claire, H., n.d. Harrision. [Online]
Available at: https://hhr.com.au/how-does-hr-outsourcing-work/
[Accessed 24 March 2024].

Hasliza , A. h., Elaine , E. & T , R., 2014. Researchgate. [Online]
Available at: https://www.researchgate.net/publication/275594213_Human_Resource_Outsourcing_Success_Leveraging_on_Partnership_and_Service_Quality
[Accessed 24 March 2024].

Kayla , B., 2023. Helios HR. [Online]
Available at: https://www.helioshr.com/blog/30-ways-hr-outsourcing-can-help-your-company-succeed
[Accessed 24 March 2024].

Robynn, F., 2023. Blackbear. [Online]
Available at: https://blackbear.global/blog/hr-outsourcing-advantages-and-disadvantages/
[Accessed 24 March 2024].

Williamson, 1975,1985. [Online].

 



Comments

  1. Dhanushka PathiranaMarch 25, 2024 at 10:35 AM

    Well explained.. Good job..

    ReplyDelete
  2. Carolin RichwayMarch 25, 2024 at 11:22 AM

    Outsourcing HR functions can be a game-changer for businesses, streamlining operations and freeing up valuable resources. It's all about finding the right balance between in-house expertise and external support to drive efficiency and focus on strategic goals.Appreciate the valuable information.

    ReplyDelete
  3. Fathima ShazraMarch 26, 2024 at 8:09 AM

    Well explained.. Good job..

    ReplyDelete
  4. Dulanji Supekshala GnanarathneMarch 27, 2024 at 2:46 AM

    This comprehensive article provides valuable insights into the world of HR outsourcing, offering a thorough exploration of its theoretical perspectives, benefits, risks, and key considerations. It effectively highlights the importance of understanding the nuances of outsourcing relationships, emphasizing factors like trust, communication, and service quality. Overall, it serves as a valuable resource for businesses seeking to navigate the complexities of HR outsourcing effectively.

    ReplyDelete
    Replies
    1. KUMARA WELEGEMarch 27, 2024 at 11:02 AM

      Thank you very much for your look through whole article

      Delete
  5. Dilshard Hameed March 28, 2024 at 7:36 AM

    Employee retention part captured nicely

    ReplyDelete
  6. Chathuranga BasnayakeMarch 28, 2024 at 7:43 AM

    Really impressed about the contents and creativity. job well done

    ReplyDelete
  7. AnonymousMarch 28, 2024 at 12:00 PM

    Human Resource Function Outsourcing involves the delegation of HR tasks, such as payroll, recruitment, training, and benefits administration, to external service providers, allowing organizations to focus on core business activities while leveraging specialized expertise and potentially reducing costs.

    ReplyDelete
  8. Kusal SamarakoonMarch 28, 2024 at 12:36 PM

    Proper understanding between service privders are important. Well organised article.

    ReplyDelete
  9. Shehan PriyashanthaMarch 29, 2024 at 6:38 AM

    Well explained

    ReplyDelete
  10. Sachini HithakshikaMarch 29, 2024 at 10:26 PM

    Focusing of the key benefits of the outsourcing HR functions and and aware of the issue can be arise then and address them in positive way will positively impact for company performance.

    ReplyDelete
  11. KUMARA WELEGEMarch 30, 2024 at 1:26 AM

    Thank you for your positive assessment

    ReplyDelete
  12. Gowri PereraMarch 31, 2024 at 6:36 AM

    Companies should be aware of how vital their relationship with service providers is to their operations, as these relationships take into account critical elements such as trust, business acumen, dedication, communication, and support from upper management.

    ReplyDelete
  13. Krishanthiny KrishnarajApril 1, 2024 at 5:05 AM

    Outsourcing is a very nice concept especially for companies who think its costly to handle the recruitment process especially posting job adverts to screening resumes.

    ReplyDelete
  14. Krishanthiny KrishnarajApril 1, 2024 at 5:06 AM

    Your introduction lays out a comprehensive framework for understanding the contribution of Human Resource Management (HRM) to a country's GDP growth.

    ReplyDelete
  15. Tharuka LiyanaarachchiApril 6, 2024 at 6:04 AM

    This blog provides a comprehensive overview of HR outsourcing, outlining its theoretical perspectives, potential benefits, and associated risks. Overall, it serves as a useful guide for organizations considering HR outsourcing, emphasizing the importance of selecting the right outsourcing partner and establishing effective communication channels for successful implementation.

    ReplyDelete
  16. Imalka EkanayakeApril 6, 2024 at 9:27 PM

    This article indicate good communication with HR outsourcing partners is vital. It affects service quality and business effectiveness. Well explained. 👍🏼

    ReplyDelete
  17. Sakvithi SenadeeraApril 12, 2024 at 9:30 PM

    Outsourcing HR functions offers cost-efficiency, expertise access, and flexibility, but poses risks like data security and loss of control. Strategic vendor selection, clear communication, and performance monitoring are key to maximizing benefits while mitigating potential drawbacks.

    ReplyDelete
  18. KUMARA WELEGEApril 14, 2024 at 2:02 AM

    Thank you for your feedback.

    ReplyDelete
  19. Laura PhilipApril 14, 2024 at 6:15 AM

    Service quality has a substantial impact on the efficacy of HR outsourcing, with trust, understanding, dedication, communication, and top management support playing critical roles in business partnerships..Nicely explained.

    ReplyDelete
  20. Duke PrithivirajApril 14, 2024 at 9:01 PM

    Human Resources function outsourcing wel explained

    ReplyDelete
  21. Duke PrithivirajApril 14, 2024 at 11:01 PM

    Clearly explained the topic

    ReplyDelete
  22. Tharushi ElikewelaApril 16, 2024 at 10:25 AM

    Clear explanation on Human resource function outsourcing involves delegating HR tasks to external providers, enabling focus on core business activities while benefiting from specialized expertise.

    ReplyDelete

Post a Comment

Popular posts from this blog

Current context developments and Challenges in Human Resource Management

Image
Introduction In the post-pandemic world, significant changes are taking place in the workplace. In order to properly support their employees and organization, companies are changing their basic infrastructure (policies, procedures, training, and technology) and reacting as needed—often at breakneck speed. To study the emerging trends in HRM               Figure 1 /Key HR developments                                                                             (SelectHub software,2024 )   1.Setting the hybrid work model for collaboration A flexible work paradigm takes into account the varied needs of the workforce. Consequently, in the future, the trend toward remote and hybrid work arrangements will only pick up steam. One benefit of hybrid and remote work...
Read more

Knowledge Management

Image
  Introduction The objective of knowledge management is to preserve and disseminate the experience, knowledge, and skill that an organization has acquired on its procedures, methods, and activities. It perceives knowledge as a vital resource. As Ulrich, (1998) pointed out, ‘Knowledge has become a direct competitive advantage for companies selling ideas and relationships The concept of knowledge What people comprehend about objects, theories, concepts, ideas, procedures, practices, and "the way we do things around here" is referred to as knowledge. It can be characterized as "know-how" or, in more specialized cases, "expertise." Blackler, (1995) noted that ‘Knowledge is multifaceted and complex, being both situated and abstract, implicit and explicit, distributed and individual, physical and mental, developing and static, verbal and encoded.’ Explicit and tacit knowledge The role of explicit knowledge relates to a series of changing technological ...
Read more

The role of HR in corporate social responsibility

Image
  Introduction Corporate social responsibility (CSR) activities have become growing in importance in today's changing business landscape. These programs seek to incorporate ethical behavior, community involvement, and environmental principles into business operations. HR specialists are essential to the development and execution of CSR initiatives in businesses. HR departments can promote positive social impact and improve the general well-being of their workforce by integrating employee wellness and engagement with company social responsibility (CSR).               Figure  1 /Sustainability development with CSR Understanding corporate social responsibility (CSR) A company's attempts to conduct business in an ethical and sustainable manner are included in its corporate social responsibility. It entails accepting accountability for the effects the business has on a range of stakeholders, such as the environment, consumers, communities, and...
Read more