Debora M

Human Resource Outsourcing (HRO) is a sustainable and competitive method to manage costs and allow a company’s core resources to focus on strategic initiatives rather than managing transactional activities in HR operations. This has enabled HR professionals in being more strategic people managers by outsourcing some of the administrative and operational tasks. Comprehensive Human Resource Outsourcing is achieved by offloading multiple processes and technologies such as benefits and payroll.
The Human Resource Outsourcing process comprises of the following steps:

1. Need gap analysis in the existing HR process
2. Market survey for existing Human Resource outsourcing partners
3. Understanding the capabilities of the prospective partners and matching them with the needs of the organisations
4. Analysing the financial advantages of the outsourcing activity
5. Partnering with the external partner for the Human Resource Outsourcing process

Outsourcing human resources or some of its processes to an external provider is a major business decision as, while it may be cost-effective, it introduces new elements of risk, including:

• Loss of control
• Impact on the employer/employee relationship
• Loss of flexibility
• Failure to deliver cost benefits
• Legal or regulatory requirements
• Industrial relations issues

The operation of any HR outsourcing arrangement should be governed by a service level agreement. This will define the required standards of performance by both parties and any penalties for non-compliance. A service level agreement is a crucial document and must be negotiated with great care to mitigate the above risks.
People management plays a crucial role in delivering organisational performance. In today’s modern, knowledge economy this is more true than ever before. The decision to outsource human resources is therefore not to be taken lightly.