Human resources are the most critical assets of any organization as the organization's success lies in their hands. But in order to ensure that its employees remain satisfied, the company has to have a specialized human resources department that most of times proves to be a costly affair. That is why most companies today; decide to outsource their human resources management functions to offshore destinations.
Human Resources responsibilities include payroll, benefits, hiring, firing, and keeping up to date with state and federal tax laws. Any mix-up concerning these issues can cause major legal problems for the business, as well as major employee dissatisfaction.
Today, HR outsourcing goes beyond just handling payroll and benefits. Deciding which HR functions to offload and which firm to outsource to can be quite a challenge.
What is HR outsourcing?
HR outsourcing is a process in which a company uses the services of a third party to take care of its HR functions. A company may outsource a few or all of its HR related activities to a single or combination of service provides located in offshore destinations like India, China, Philippines, etc.
In this sense the HR outsourcing service providing firms or HR outsourcing company can be divided into four categories depending on the services they offer as, PEOs (professional employer organization), BPOs (business process organization), ASPs (application service providers), or E-services. In these categories the PEOs are the ones that assume full responsibility of a company's HR functions where as others such a BPOs, ASPs and E-services provide web based HR solutions like database maintenance, HR data warehousing, maintaining records, developing and maintaining HR software's etc.
HR outsourcing services generally fall into four categories: PEOs, BPOs, ASPs, or e-services. The terms are used loosely, so a big tip is to know exactly what the outsourcing firm you are investigating offers, especially when it comes to employee liability.
PEOs
A Professional Employer Organization (PEO) assumes full responsibility of your company's human resources administration. It becomes a co-employer of your company's workers by taking full legal responsibility of your employees, including having the final say in hiring, firing, and the amount of money employees make. The PEO and business owner become partners, essentially, with the PEO handling all the HR aspects and the business handling all other aspects of the company.
BPOs
Business Process Outsourcing is a broad term referring to outsourcing in all fields, not just HR. A BPO differentiates itself by either putting in new technology or applying existing technology in a new way to improve a process.
Specifically in HR, a BPO would make sure a company's HR system is supported by the latest technologies, such as self-access and HR data warehousing.
ASPs
Application Service Providers host software on the Web and rent it to users—some ASPs host HR software. Some are well-known packaged applications (People Soft) while others are customized HR software developed by the vendor. These software programs can manage payroll, benefits, and more.
E-services
E-services are those HR services that are Web-based. Both BPOs and ASPs are often referred to as e-services.
Advantages of HR Outsourcing:
HR outsourcing including personal outsourcing case studies have indicated that managing human resources involves specialized activities such as training, payroll administration, employee database management, employee retention, employee benefits and a lot more that many companies either don't have the proper resources or time to manage on their own. By outsourcing their HR functions companies can save huge amounts of money and be free of complications that are otherwise involved in maintaining an internal HR department. By doing so, companies can concentrate on their core competencies saving their valuable time and resources.
To sum it up, human resources outsourcing that includes HR recruiting outsourcing helps cut costs, helps concentrate on core business and most importantly helps in ensuring employee satisfaction.
A big reason businesses turn to HR services is that they don't have the time, or expertise, to deal with this. And if you choose to go with a PEO, you can pass the legal responsibility of your employees onto them.
You may also save money. You can usually count on a reduced benefits rate when outsourcing to HR services. Because they buy so often from vendors, they usually get a discounted rate that they pass on to you.
If you opt for an online service (ASP/e-service), you don't have to purchase software, install it, and worry about configuring it. An ASP business model is hosting software, so you don't have to bother with additional software or installation.
Disadvantages
So what are some key things you'll have to give up if you favor outsourcing to hiring a full-time, in-house HR department?
There are some definite drawbacks to not having an HR manager in-house. An in-house HR person handles perks that you can't necessarily count on an outsourcing service to carry out--like looking into group offerings, building employee incentive programs, even taking care of recognition for employees' birthdays. And employees may want someone in-house--an impartial co-worker they can trust and see daily--to turn to if they have a work-related problem or dispute with another co-worker.
Because an in-house HR person interacts daily with your employees, they will likely have more of an interest in your employees. For example, employees often appreciate having someone on staff who will help negotiate in their favor for certain benefits that are critical these days for employee retention (like 401(k) plans and vacation policies).
Also, in the case of using a PEO, giving up the right to hire and fire your employees may not be desirable for your particular business. Most PEOs insist that they have the final right to hire, fire, and discipline employees. While having the extra time and not having to deal with the stress of this may be appealing, you may not want this responsibility out of your hands.
And if you decide to use an e-service, the same issues you'd have with any ASP remain. When everything is stored and handled online, there are concerns about security as well as potential crashes, both of which can be detrimental to your business.
Common complaints about HR outsourcing range from payroll mix-ups to payroll not being deposited on time to denied medical claims.
Should you consider outsourcing?
If you have fewer than 100 employees, the answer is yes. At this size, you often don't have the resources for an in-house HR staff, so outsourcing is just right for you. You don't have to worry about managing all the details that are so critical to HR in your business, and most small-business owners just don't have the skills and experience to do so. Remember, HR functions must be handled correctly as close to 100 percent of the time as possible; slip-ups can cause your business major problems.
If you have at least 12 employees, consider a PEO. Most PEOs only take on businesses with at least a dozen employees. Get recommendations and references for PEOs, and consider one that is part of the NAPEO (National Association of Professional Employment Organizations). The NAPEO is committed to educating PEOs. If a PEO is a member, it's a good sign that they are committed to being the best in the field.
If you're even smaller, online services are the way to go. These services are tailored to work with all sizes of businesses, even the smallest. You don't have to give up legal responsibility just yet, and you'll be able to easily access your information online. And since the charge is usually by user, you won't be overpaying.
If you're uncertain about outsourcing everything but know you don't have the staff or experience to keep it in-house, try outsourcing only certain parts, such as payroll and benefits. You can also purchase HR software right off the shelf to support any in-house efforts.
Conclusion
The human-resources profession is in the fight of its life. A growing chorus of voices -- both inside and outside organizations -- are questioning whether HR plays a principal role in modern business. These attacks can be found in business-magazine editorials and op-ed pieces, marketing literature of business-process-outsourcing and consulting companies, and in the private conversations of business leaders. If HR professionals fail to defend against these assaults, the profession will be in jeopardy.
These attacks are different from what HR has experienced in the past. Today's resource-constrained corporations no longer have the means to support all HR activities. Global competition and a cautious business environment have forced many to make hard choices among their products, markets and operations. No unit wants to be excluded, so a conflict has erupted to determine which will survive. It's a corporate civil war that pits every unit against one another. The current attacks represent the opening shots in that struggle.
In many cases, they've begun to harm the profession's standing within organizations. A 2002 survey by the Discovery Group, a consulting firm based in Sharon, Mass., polled 425 HR professionals and found that just 48% believe their profession has the respect of company leaders. In other words, fewer than one out of two organizations are led by those who think HR has a place at the leadership table. Equally as bad, only 54% of the survey respondents believe that HR has the decision-making authority it needs to do its job.
Sadly, there's considerable evidence that many organizations are on the verge of diminishing the role of HR. During the go-go days of the 1990s, CEOs proclaimed the critical role of HR in marshalling employees for success in the global marketplace. Human capital became the mantra of the corner office -- until the economy went south. Then the grandiose pronouncements were dumped, and company after company reverted to a time-honored distain for HR and a minimalist approach to supporting it.
Ironically, the verbal investments that CEOs had made in human capital never translated into greater financial support for HR functions. According to the Bureau of National Affairs Inc., a. publisher of general business-advisory information in Washington, D.C., HR-department budgets represented less than 1% of total annual corporate operating costs between 1997 and 2000. In 2003, they were still a paltry 0.9% of the total money companies spent to operate their businesses. The perceived value of HR management at U.S. companies never really rose. It was all talk; nothing more.
Many corporations now outsource HR activities that aren't deemed a "core competency" -- critical to creating and sustaining business success. Vendors typically promise cost savings and improved customer service. It's an attractive combination: The company sheds an operation it doesn't value while saving money.
The Future of HR
Given the low esteem that corporate leaders have for HR, it should come as no surprise that the function is increasingly viewed as a candidate for business-process outsourcing, or BPO.
Although HR professionals can reassure themselves that this shift is beneficial because it frees them up "to be more strategic" and "to become a business partner," the reality is something else altogether. There's nothing wrong with outsourcing per se, but its use for most or all of HR's key responsibilities begs the question: Why bother with HR at all? The counter argument by outsourcing advocates -- that the HR department retains strategic oversight of its work -- is self-serving and misguided. If HR is already weakened from internal attacks and indifference, then outsourcing is more likely to be its death knell than its song of liberation. In effect, such extensive outsourcing leaves the profession with an imprecise mission -- or, more likely, without any mission whatsoever.
From India, Mumbai
1Human Resources responsibilities include payroll, benefits, hiring, firing, and keeping up to date with state and federal tax laws. Any mix-up concerning these issues can cause major legal problems for the business, as well as major employee dissatisfaction.
Today, HR outsourcing goes beyond just handling payroll and benefits. Deciding which HR functions to offload and which firm to outsource to can be quite a challenge.
What is HR outsourcing?
HR outsourcing is a process in which a company uses the services of a third party to take care of its HR functions. A company may outsource a few or all of its HR related activities to a single or combination of service provides located in offshore destinations like India, China, Philippines, etc.
In this sense the HR outsourcing service providing firms or HR outsourcing company can be divided into four categories depending on the services they offer as, PEOs (professional employer organization), BPOs (business process organization), ASPs (application service providers), or E-services. In these categories the PEOs are the ones that assume full responsibility of a company's HR functions where as others such a BPOs, ASPs and E-services provide web based HR solutions like database maintenance, HR data warehousing, maintaining records, developing and maintaining HR software's etc.
HR outsourcing services generally fall into four categories: PEOs, BPOs, ASPs, or e-services. The terms are used loosely, so a big tip is to know exactly what the outsourcing firm you are investigating offers, especially when it comes to employee liability.
PEOs
A Professional Employer Organization (PEO) assumes full responsibility of your company's human resources administration. It becomes a co-employer of your company's workers by taking full legal responsibility of your employees, including having the final say in hiring, firing, and the amount of money employees make. The PEO and business owner become partners, essentially, with the PEO handling all the HR aspects and the business handling all other aspects of the company.
BPOs
Business Process Outsourcing is a broad term referring to outsourcing in all fields, not just HR. A BPO differentiates itself by either putting in new technology or applying existing technology in a new way to improve a process.
Specifically in HR, a BPO would make sure a company's HR system is supported by the latest technologies, such as self-access and HR data warehousing.
ASPs
Application Service Providers host software on the Web and rent it to users—some ASPs host HR software. Some are well-known packaged applications (People Soft) while others are customized HR software developed by the vendor. These software programs can manage payroll, benefits, and more.
E-services
E-services are those HR services that are Web-based. Both BPOs and ASPs are often referred to as e-services.
Advantages of HR Outsourcing:
HR outsourcing including personal outsourcing case studies have indicated that managing human resources involves specialized activities such as training, payroll administration, employee database management, employee retention, employee benefits and a lot more that many companies either don't have the proper resources or time to manage on their own. By outsourcing their HR functions companies can save huge amounts of money and be free of complications that are otherwise involved in maintaining an internal HR department. By doing so, companies can concentrate on their core competencies saving their valuable time and resources.
To sum it up, human resources outsourcing that includes HR recruiting outsourcing helps cut costs, helps concentrate on core business and most importantly helps in ensuring employee satisfaction.
A big reason businesses turn to HR services is that they don't have the time, or expertise, to deal with this. And if you choose to go with a PEO, you can pass the legal responsibility of your employees onto them.
You may also save money. You can usually count on a reduced benefits rate when outsourcing to HR services. Because they buy so often from vendors, they usually get a discounted rate that they pass on to you.
If you opt for an online service (ASP/e-service), you don't have to purchase software, install it, and worry about configuring it. An ASP business model is hosting software, so you don't have to bother with additional software or installation.
Disadvantages
So what are some key things you'll have to give up if you favor outsourcing to hiring a full-time, in-house HR department?
There are some definite drawbacks to not having an HR manager in-house. An in-house HR person handles perks that you can't necessarily count on an outsourcing service to carry out--like looking into group offerings, building employee incentive programs, even taking care of recognition for employees' birthdays. And employees may want someone in-house--an impartial co-worker they can trust and see daily--to turn to if they have a work-related problem or dispute with another co-worker.
Because an in-house HR person interacts daily with your employees, they will likely have more of an interest in your employees. For example, employees often appreciate having someone on staff who will help negotiate in their favor for certain benefits that are critical these days for employee retention (like 401(k) plans and vacation policies).
Also, in the case of using a PEO, giving up the right to hire and fire your employees may not be desirable for your particular business. Most PEOs insist that they have the final right to hire, fire, and discipline employees. While having the extra time and not having to deal with the stress of this may be appealing, you may not want this responsibility out of your hands.
And if you decide to use an e-service, the same issues you'd have with any ASP remain. When everything is stored and handled online, there are concerns about security as well as potential crashes, both of which can be detrimental to your business.
Common complaints about HR outsourcing range from payroll mix-ups to payroll not being deposited on time to denied medical claims.
Should you consider outsourcing?
If you have fewer than 100 employees, the answer is yes. At this size, you often don't have the resources for an in-house HR staff, so outsourcing is just right for you. You don't have to worry about managing all the details that are so critical to HR in your business, and most small-business owners just don't have the skills and experience to do so. Remember, HR functions must be handled correctly as close to 100 percent of the time as possible; slip-ups can cause your business major problems.
If you have at least 12 employees, consider a PEO. Most PEOs only take on businesses with at least a dozen employees. Get recommendations and references for PEOs, and consider one that is part of the NAPEO (National Association of Professional Employment Organizations). The NAPEO is committed to educating PEOs. If a PEO is a member, it's a good sign that they are committed to being the best in the field.
If you're even smaller, online services are the way to go. These services are tailored to work with all sizes of businesses, even the smallest. You don't have to give up legal responsibility just yet, and you'll be able to easily access your information online. And since the charge is usually by user, you won't be overpaying.
If you're uncertain about outsourcing everything but know you don't have the staff or experience to keep it in-house, try outsourcing only certain parts, such as payroll and benefits. You can also purchase HR software right off the shelf to support any in-house efforts.
Conclusion
The human-resources profession is in the fight of its life. A growing chorus of voices -- both inside and outside organizations -- are questioning whether HR plays a principal role in modern business. These attacks can be found in business-magazine editorials and op-ed pieces, marketing literature of business-process-outsourcing and consulting companies, and in the private conversations of business leaders. If HR professionals fail to defend against these assaults, the profession will be in jeopardy.
These attacks are different from what HR has experienced in the past. Today's resource-constrained corporations no longer have the means to support all HR activities. Global competition and a cautious business environment have forced many to make hard choices among their products, markets and operations. No unit wants to be excluded, so a conflict has erupted to determine which will survive. It's a corporate civil war that pits every unit against one another. The current attacks represent the opening shots in that struggle.
In many cases, they've begun to harm the profession's standing within organizations. A 2002 survey by the Discovery Group, a consulting firm based in Sharon, Mass., polled 425 HR professionals and found that just 48% believe their profession has the respect of company leaders. In other words, fewer than one out of two organizations are led by those who think HR has a place at the leadership table. Equally as bad, only 54% of the survey respondents believe that HR has the decision-making authority it needs to do its job.
Sadly, there's considerable evidence that many organizations are on the verge of diminishing the role of HR. During the go-go days of the 1990s, CEOs proclaimed the critical role of HR in marshalling employees for success in the global marketplace. Human capital became the mantra of the corner office -- until the economy went south. Then the grandiose pronouncements were dumped, and company after company reverted to a time-honored distain for HR and a minimalist approach to supporting it.
Ironically, the verbal investments that CEOs had made in human capital never translated into greater financial support for HR functions. According to the Bureau of National Affairs Inc., a. publisher of general business-advisory information in Washington, D.C., HR-department budgets represented less than 1% of total annual corporate operating costs between 1997 and 2000. In 2003, they were still a paltry 0.9% of the total money companies spent to operate their businesses. The perceived value of HR management at U.S. companies never really rose. It was all talk; nothing more.
Many corporations now outsource HR activities that aren't deemed a "core competency" -- critical to creating and sustaining business success. Vendors typically promise cost savings and improved customer service. It's an attractive combination: The company sheds an operation it doesn't value while saving money.
The Future of HR
Given the low esteem that corporate leaders have for HR, it should come as no surprise that the function is increasingly viewed as a candidate for business-process outsourcing, or BPO.
Although HR professionals can reassure themselves that this shift is beneficial because it frees them up "to be more strategic" and "to become a business partner," the reality is something else altogether. There's nothing wrong with outsourcing per se, but its use for most or all of HR's key responsibilities begs the question: Why bother with HR at all? The counter argument by outsourcing advocates -- that the HR department retains strategic oversight of its work -- is self-serving and misguided. If HR is already weakened from internal attacks and indifference, then outsourcing is more likely to be its death knell than its song of liberation. In effect, such extensive outsourcing leaves the profession with an imprecise mission -- or, more likely, without any mission whatsoever.
From India, Mumbai
I believe that
Business Process Outsourcing is the strategic decision and that we should not be worried about it as a HR personnel... It is all about concentrating on your core competencies...
An engineering firm specialising in machinert would not be able transport its own products across the country / world to its clients as efficiently as a transport company
Thus outsoursing your requrements to other businesses is a strategic option, looking into factors as your core competencies and efficiency ratios... If somebody else can do a part of my work in more efficient way I should outsource it to him, with condition that it affects my business positively
From India, Ahmadabad
Business Process Outsourcing is the strategic decision and that we should not be worried about it as a HR personnel... It is all about concentrating on your core competencies...
An engineering firm specialising in machinert would not be able transport its own products across the country / world to its clients as efficiently as a transport company
Thus outsoursing your requrements to other businesses is a strategic option, looking into factors as your core competencies and efficiency ratios... If somebody else can do a part of my work in more efficient way I should outsource it to him, with condition that it affects my business positively
From India, Ahmadabad
Hi Sunayna
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KPO involves offshoring of knowledge intensive business processes that require specialized expertise, thus delivering high value to organizations by providing business expertise. Examples of KPO are online teaching, patent filing, legal and insurance claims processing, valuation research, investment research, media content supply and the likes.
BPO on the other hand involves a pre-defined way to handle a business process which is taught to agents or employees. BPO services normally include transaction processing, setting up a bank account, selling an insurance policy, technical support, voice and email-based support.
------------------------------------------------------------------------------------------------------
Considering the above definition, most of the MNCs having R&D centres in India would be called KPOs.. Further there are lots of insurance and legal processesing firms in India working for foriegn fims... Even they are KPOs.. To some extent, even the IT firms in India who are doing work on behalf of other companies would also be termed as KPO..
For that matter, is KPO a new concept... Maybe only the term used (*i.e. KPO is new) but since long the companies have kept their R&D centres in different countries including in India.. There has been companies such as Media content suppliers from Chennai who has provided special effects to hollywood films...
Further we have always seen the consulting firms doing KPO for their principals since many decades... so KPO succeeding BPO is out of question, as the KPO has always existed... and there is nothing to succeed...
From India, Ahmadabad
------------------------------------------------------------------------------------------------------
KPO involves offshoring of knowledge intensive business processes that require specialized expertise, thus delivering high value to organizations by providing business expertise. Examples of KPO are online teaching, patent filing, legal and insurance claims processing, valuation research, investment research, media content supply and the likes.
BPO on the other hand involves a pre-defined way to handle a business process which is taught to agents or employees. BPO services normally include transaction processing, setting up a bank account, selling an insurance policy, technical support, voice and email-based support.
------------------------------------------------------------------------------------------------------
Considering the above definition, most of the MNCs having R&D centres in India would be called KPOs.. Further there are lots of insurance and legal processesing firms in India working for foriegn fims... Even they are KPOs.. To some extent, even the IT firms in India who are doing work on behalf of other companies would also be termed as KPO..
For that matter, is KPO a new concept... Maybe only the term used (*i.e. KPO is new) but since long the companies have kept their R&D centres in different countries including in India.. There has been companies such as Media content suppliers from Chennai who has provided special effects to hollywood films...
Further we have always seen the consulting firms doing KPO for their principals since many decades... so KPO succeeding BPO is out of question, as the KPO has always existed... and there is nothing to succeed...
From India, Ahmadabad
I believe in it partly.
Being a Non HR practitioner, my view may be myopic so please excuse me for that.
Outsourcing an activity is on a key Mantra
"Do what you do best, Outsource the rest."
As rightly pointed out in the discussion that Outsourcing is a strategic decision. This essentially involve Make or Buy decision or Cost -Benefit Analysis.
If I am incurring Rs 200 per employee per month as an expenditure for payroll management and if someone proposes Rs 150 for the same, it may seem logical to outsource the Payroll activity to increase my Profitability.
Similarly, I can decide upon outsourcing all or any HR activity depending upon their cost-benefit implications.
Let's not forget that Business is meeting customer needs Profitably. Inthis competitive scenario, I cannot increase the burden on my customer or else I will be out of business.
Actual cometitive advantage a company has is its Raw Material resources and the man power it has.
Purchase department takes care to squeeze as much as possible from suppliers while HR department is there to squeeze as much as possible from the people so that the organisation makes profit.
Actually HR department is so busy in administrative work that it is left with very little time to squeeze profitablity out of people.
So, I believe while the administrative work of HR may be outsourced but I donot thing any company can outsource the Strategic HR role.
From India, New Delhi
Being a Non HR practitioner, my view may be myopic so please excuse me for that.
Outsourcing an activity is on a key Mantra
"Do what you do best, Outsource the rest."
As rightly pointed out in the discussion that Outsourcing is a strategic decision. This essentially involve Make or Buy decision or Cost -Benefit Analysis.
If I am incurring Rs 200 per employee per month as an expenditure for payroll management and if someone proposes Rs 150 for the same, it may seem logical to outsource the Payroll activity to increase my Profitability.
Similarly, I can decide upon outsourcing all or any HR activity depending upon their cost-benefit implications.
Let's not forget that Business is meeting customer needs Profitably. Inthis competitive scenario, I cannot increase the burden on my customer or else I will be out of business.
Actual cometitive advantage a company has is its Raw Material resources and the man power it has.
Purchase department takes care to squeeze as much as possible from suppliers while HR department is there to squeeze as much as possible from the people so that the organisation makes profit.
Actually HR department is so busy in administrative work that it is left with very little time to squeeze profitablity out of people.
So, I believe while the administrative work of HR may be outsourced but I donot thing any company can outsource the Strategic HR role.
From India, New Delhi
Hi ,
Yes I also agree that HR outsourcing will be a very good option for the companies who want to concentrate on their core HR functions than to slog with administrative work.
Now I am working on this "As a Payroll service Provider" but Iam not able to decide on the price that I can quote to my clients.
By surfing I came to know that it is minimum of 4% of the emplpyees salary. But on calculating the amount sounds exhorbitant. If I quote that rate I will not be able to get clients.
Can anyone tell me reasonable quote price
regards
Veenasudharsan
From India, Madras
Yes I also agree that HR outsourcing will be a very good option for the companies who want to concentrate on their core HR functions than to slog with administrative work.
Now I am working on this "As a Payroll service Provider" but Iam not able to decide on the price that I can quote to my clients.
By surfing I came to know that it is minimum of 4% of the emplpyees salary. But on calculating the amount sounds exhorbitant. If I quote that rate I will not be able to get clients.
Can anyone tell me reasonable quote price
regards
Veenasudharsan
From India, Madras
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