Top 5 Benefits of HR Outsourcing

The HR Outsourcing market has its problems like every other market right now. On the supply side, there are too many providers, with some running ‘loss-making’ HRO contracts over 7-10 years. On the demand side, a larger range of organisations urgently require HR solutions that allow them to provide better and more cost effective HR solutions. The HRO market is still maturing, 2009 will be interesting with large contracts signed and further HR provider consolidation. Why is there increasing demand from organisations to outsource their non-strategic, transactional HR processes? The benefits of HR Outsourcing include:-

1. To reduce the cost of HR, and to better manage the cost of HR. Many organisations have achieved savings greater than 20% by standardising HR processes, utilising self-service tools and outsourcing. The extent of savings depends on willingness to standardise and transformation of the “retained” HR function. When the HR cost base is more tightly controlled and better managed then decisions can be made about the relative allocation of resources. In sectors with mergers, acquisitions and rapid changes in employee numbers a goal is to provide more variable costs linked to employee numbers which can push clients towards using more specialist 3rd parties.

2. To avoid major investments required in HR technology. That multi-million dollar SAP/Oracle upgrade is much harder to justify in this economic environment. Some HRO providers can provide their own HR platform and offer the latest upgrades and services that your organisation probably can’t.

3. To realign HR to focus on delivering HR Strategy and support its core business. A typical goal of HR Transformation is to increase the proportion of HR cost allocated to strategic HR and reduce the proportion allocated to HR Administration. With non-strategic HR processes outsourced, HR is better able to respond more quickly and more effectively to organisational changes.

4. To improve the quality of HR Services delivered to employees and managers – using service management techniques, self-service tools or best-of-breed suppliers. To achieve this requires excellent change management skills with policy harmonisation, standardisation and changing HR customer interactions. This is difficult work, however the advantage of a legally binding contract and go-live date really can focus the mind.

5. Controlling the legal risks and improving compliance will be more rigorous when there are external contracts with providers – this will become increasingly important in an era of increased regulation. See also HR Outsourcing – The Challenge of Picking Winners and Will HR Outsourcing Ride the Third Wave?

 

Share this post
(click on the flashing icon)

5 Responses to “Top 5 Benefits of HR Outsourcing”

  1. Links 02/13/2009 Says:

    […] Glass Bead Consulting & HR Transformer Blog » Blog Archive » Top 5 Benefits of HR Outsourcing […]

  2. HRM Today - Blog Archive » How to Lead Change by Example – 5 Tips for HR Professionals Says:

    […] take it to you. Be proactive and do the research into how outsourcing could benefit your department (see article Top 5 Benefits of HR Outsourcing)and bring about positive change, as well as cost-savings. Show that you have been actively looking […]

  3. How to Lead Change by Example – 5 Tips for HR Professionals | Psychometric Tests & Human Resource Management Says:

    […] take it to you. Be proactive and do the research into how outsourcing could benefit your department (see article Top 5 Benefits of HR Outsourcing)and bring about positive change, as well as cost-savings. Show that you have been actively looking […]

  4. HRM Today- Blog Archive » HR Survey Highlights Skills Gap in HR Says:

    […] cases. End-to-end HR Outsouricng contracts are being signed (see recent IBM Unilever deal) , and buyers do see the benefits of HR Outsourcing, however buyers are even more careful in this environment. With major economic change there is […]

  5. HR Outsourcing – the Challenge of Picking Winners | HRM Today Says:

    […] investment, re-aligning HR towards delivering more strategy and improving HR services. (see Top 5 Benefits of HR Outsourcing). Choosing a vendor that matches your requirements and will work with your culture is difficult […]

Leave a Reply

You must be logged in to post a comment.

Consulting Tools and Resources
Get in Touch with Glass Bead Consulting
About The BLog


Featured in Alltop