HR Outsourcing - An Industry Paradigm

HR outsourcing is the outsourcing of peripheral but necessary administrative tasks such as payroll, benefits, education/training, recruiting personnel, and administration, to realize economies of scale and achieve standardization of services.

The number of companies outsourcing HR activities continues to rise, and the scope of outsourced HR activities continues to expand. HR outsourcing can happen in HR functions, like payroll administration (producing checks, handling taxes, dealing with sick-time and vacations), employee benefits (Health, Medical, Life insurance, Cafeteria etc), recruitments (sourcing, screening, selection, verification, induction), human resource management (hiring and firing, skill development, trainings, exit interviews and wage reviews), risk management etc. Outsourcing has become a common response to manage people and technology resources strategically, enhance services and manage costs more effectively.

Outsourcing noncore activities allows HR professionals to move away from routine administration to a more strategic role. The organization can focus on higher value-added activities while the outsourcing provider takes care of the day-to-day administration. Thus, outsourcing becomes a strategy for reducing the capital intensity of the business. Many recognize outsourcing relationships as long-term partnerships created to further the strategic goals of the organization.

The HR outsourcing business opportunity is large and India is likely to garner a larger and larger piece of this pie in the future. India, with its intrinsic advantages such as low cost, ready pool of English speaking manpower and geographic positioning, is emerging as a viable destination for HR outsourcing companies to set up their businesses.

Estimates show that the latent size of HR outsourcing in India is about $ 2 billion with a current market of $ 27 million and it is growing at an alarming rate of about 50 per cent. India has immense potential as more than 80% of fortune 1,000 companies are discussing HR outsourcing as a way to cut costs and increase productivity.