QUESTION
Module 4. Outsourcing
In your assessment of outsourcing each team should take stock of the HR functions which Can be outsourced. This section of the paper should provide a clear picture of the costs and savings associated with outsourcing.
a. Overview of HR functions which could be outsourced. Take into consideration all HR areas such as recruitment, benefits, payroll, compliance, workers compensation,exit processes, legal, tax, expatriation
b. Benefit of outsourcing said functions
c. Costs/Savings associated with outsourcing
d. Best practices from 3-5 organizations
e. Key action Items and recommendations for H20 for outsourcing
SOLUTION
Module 4. Outsourcing
a. Outsourcing of HR Functions
Now a day, outsourcing is prevailed in the industry. Many businesses toady utilizes outsourcing to get their work done more efficiently with lower costs. Organizations started outsourcing for specific technical functions. But now outsourcing has spread to all functions of the organization, be it HR, Finance, Operations or Marketing.
When it comes to HR, smaller organizations tend to outsource all of their HR functions because they might not afford financially to maintain a separate HR department. On the other hand, some large organizations do not outsource all HR functions but theyoutsource some of the specific HR functions to gain financial benefits and to maximize efficiency and effectiveness. Some of such HR functions are recruitment process, background check, compliance, taxation,and exit process.
b. Benefits from Outsourcing of HR functions
Outsourcing of HR functions provide the following benefits:
1.Enhanced effectiveness: HR solution providers specialize in HR functions and therefore have best personnel for the job. Organizations can improve their effectiveness by outsourcing HR functions to these companies, as these companies focus solely on HR functions. With HR outsourcing, organizations get access to HR expertise not available internally. It also increases efficiency and the response time. Besides, outsourcing helps companies to manage demand volatility of HR work and personnel. It also helps be improving organization image to be associated with industry wise best HR solution providers.
2.Financial Gains: Outsourcing provides with lower cost options for HR functions to the organizations. Organizations need not to have a separate department for providing HR services to employees. Besides, outsourcing helps reducing costs in case of fluctuating employee strength and a complex HR service requirement. Organizations can invest elsewhere the money saved from outsourcing.
3. Employee satisfaction: Quick response and effective services provided by HR solution providers help organizations to serve their employees in a better way. Besides HR solution providers use innovative ideas and technical specialists to boost employee satisfaction and to reduce attrition. Organizations are able to maintain a smaller internal HR team that focuses mainly on strategic planning for better employee relations.
c. Costs/ Savings associated with outsourcing HR Functions
Costs: Organizations use outsourcing of HR functions mainly as a mean to reduce costs and increase savings. But there are various direct and indirect costs associated with outsourcing. Outsourcing decision impacts internal HR personnel and demoralize them. Besides in-depth evaluation is needed before finalizing outsourcing for any HR function. There is also a cost associated with information flow management between the organization and HR solution provider. Finally, there is a loss of control over the functionality that may not be desirable in some cases.
Savings: There are various costs involved in maintaining an internal HR department. There are direct costs involved such as HR staff remuneration and indirect costs involved such as purchase and maintenance of HR system, recruitment and training costs, office space, management cost for managing the HR department. Organizations can utilize outsourcing of HR function as a mean to decrease costs and save money. HR solution providers are typically engaged with more than one client at a time. Therefore these costs are split among many clients, making it feasible for these companies to provide HR solutions at a lower cost. Besides, outsourcing of HR functions can increase effectiveness and efficiency due to specialized knowledge and innovative ideas of HR solution providers, making it even more beneficial for organizations from financial perspective. Another way in which outsourcing can help organizations to reduce costs and save money is by providing flexibility with respect to employee strength. If any organization has fluctuating employee strength, outsourcing can help reduce costs because otherwise such an organization would need to maintain a HR department that can handle maximum possible employee strength.
According to SHRM’sHuman Resource Outsourcing Survey, nearly half of the organizations (participating in the survey) reported cost reduction as a direct result of outsourcing HR functions. Only 28% HR professionals reported that their organization had incurred higher costs after outsourcing. (2008)
d. Best practices:
Apple (USA): Apple Computer Inc is leading American organization that designs, develops and markets consumer electronics, personal computers and software. It employs around 50,000 employees on full time basis. Apple does not use outsourcing and has kept a HR department which looks after recruitment, payroll and exit processes. Apple’s strategy is in line with many other technology-oriented organizations that have kept HR functions to themselves.
British Telecom (UK): British Group (formerly known as British Telecom) is a British multinational company that provides telecommunication services all around the world. It is one of the largest employers in UK, employing more than 80,000 people. BT outsourced some of HR services to e-peopleserve, which is a joint venture of BT with Accenture. This step enabled the small internal HR team to focus on strategic agenda.Due to the benefits from outsourcing, BT renewed the HR outsourcing contract with Accenture for next 10 years in 2005. According to the contract, HR services that are outsourced include customer contact, recruitment, pension administration, payroll and benefits administration, performance management administration, health and safety, and HR advisory and information services.
Green Packet (Malaysia): It is a listed company of Malaysia with capitalization of USD 140 Millions. The company develops next generation mobile broadband and networking solutions. As it had an excellent opportunity to expand due to product success, it faced the challenge of hiring the correct-fit people within a small time frame. The organization outsourced its recruitment process to KellyOCG to gain access to benefits from HR outsourcing. This step helped the company to recruit around 240 professionals within 18 months. Company also saved MYR 100,000 in first year. This is an example of securing benefits from outsourcing some of HR functions.
Infosys Technologies (India): Infosys Technologies is a leading software development firm based in India with employeestrength of more than 100,000. Infosys is awarded as best employer by many HR surveys. Infosys does not use outsourcing of HR functions. Rather it has a separate HR department that looks into recruitment, background check, training, compensation, appraisal and other HR processes. This is a classic example of how a very large organization can run efficiently without allowing outsourcing of its core functions.
e. Recommendations for outsourcing:
Most of the organizations take help of outsourcing HR functions to receive the cost benefits and to increase effectiveness. Any organization should carefully evaluate the need for outsourcing before applying it blindly as cost cutting strategy. Organizational success is not dependent on outsourcing only. This is evident from some of the examples given above. But many organizations can benefit from the outsourcing of HR functions in the following scenarios:
1. Small sizeorganization: If an organization is small and does not have capacity to own its own HR staff than outsourcing is the only solution.
2. Fluctuating headcount: If any organization has varying employees strength, then it is better to use outsourcing HR functions. Outsourcing will help in cost cutting and flexibility.
3. Outsourcingcomplex task: Sometimes organizations requirea complex HR process to be completed in a short span of time; for that scenario it is better to use HR solution providers. Outsourcing in this case helps completing the task effectively within the tight schedule.
4. Partial outsourcing: It is not always necessary to outsource all HR function. Organizations can gain benefits from outsourcing some of the HR functions that are not being efficiently performed internally. Such outsourcing will help organizations to save money and focus on other important aspects.
References:
Business Review. (n.d). BT Goup.Retrieved 2012, March 28 from http://www.btplc.com/report/business_people.shtml.
HR outsourcing.(2011). Retrieved 2012, March 28 fromhttp://www.cipd.co.uk/hr-resources/factsheets/hr-outsourcing.aspx.
Human Resource Outsourcing.(n.d). Retrieved 2012, March 28 from http://www.induction.to/outsourcing/.
Savvas, Antony. (2005, February 02). BT strikes £306m HR outsourcing deal with Accenture.ComputerWeekly.Retrieved 2012, March 28 from http://www.computerweekly.com/news/2240059754/BT-strikes-306m-HR-outsourcing-deal-with-Accenture.
Saving Money Through outsourcing HR and Payroll. (n.d). Retrieved 2012, March 28 from http://www.plushr.com/pdfs/Saving-Money-Through-HR-Outsourcing.pdf.
Talent acquisition solution achieves success for Malaysian tech giant. (2011). Retrieved 2012, March 28 fromhttp://www.hroassociation.org/content/talent-acquisition-solution-achieves-success-malaysian-tech-giant.
Victor, Justina. (2008). Human Resource Outsourcing – Is it Here to stay? SHRM Survey Brief. Retrieved 2012, March 28 from http://www.shrm.org/Research/SurveyFindings/Articles/Documents/08-0894-HROutsourcingSurveyReport.pdf
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