What is Human Resource Outsourcing and Offshoring?

Outsourcing and Offshoring for the Human Resource Function

Offshoring relates to moving a business process by a company from one country to another. Examples of such business processes include human resources, manufacturing or accounting.Outsourcing, on the other hand, relates to the movement of internal business processes to an external company within the same country. As such, a company moving a business unit to a different company in another country would be both outsourcing and offshoring. 

What is Human Resource Outsourcing?

Human resource HR outsourcing is a human resources solution that allows a company to obtain the services of a third party company to deal with its human resource HR functions. Human resource HR related activities can be outsourced to service providers located in offshore destinations such as Philippines, Romania, India and Latin America. In a downward economic environment, outsourcing used as a human resources solution may actually be boosted, as companies look for ways to cut operating budgets while still not comprising on the output.

Types of Human Resource Outsourcing 
  • BPO (business process outsourcing)
  • PEO provider (professional employer organization services provider)
  • RPO (Recruitment Process Outsourcing) 

Services Typically Offered Within the Human Resource HR Value Chain:

  • Recruiting
     
  • Payroll Outsourcing
     
  • Management of Employee Stock Option Programs and other Employee benefits outsourcing
     
  • Remuneration and Compensation Management
     
  • Performance Management
     
  • Relocation
  • Data Management 
 General Profile of Human Resource Outsourcing Companies

  • Differences between human resource HR outsourcing companies are usually based on scale of projects, scope, geographic coverage and technology competence

  • Leading human resource HR outsourcing companies have strengths in global reach, brand and capability, strong business know-how and subject matter such as payroll outsourcing and employee benefits outsourcing
     
  • Leading human resource HR outsourcing companies tend to look to India and Philippines as the leading locations for offshore delivery of human resource HR outsourcing HRO services, with Eastern Europe and Latin America not far behind in popularity
Challenges Faced by Human Resource Outsourcing Companies

  • Scoping: Human resource HR outsourcing companies need to determine the appropriate scope to achieve scale and deliver service models and frameworks, be it for payroll outsourcing or employee benefits outsourcing

  • Recruitment and retention of talent: Human resource HR outsourcing companies need to grapple with the result of increasing wages in HRO hotspots.

  • Speed of transition: Human resource HR outsourcing companies need to adjust to short timeframes and provide the appropriate corporate support whilst not crossing cultural boundaries
     

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