HR outsourcing (HRO)

According to Delmotte and Sels (2008) HRO is commonly defined as externalizing Human Resource activities previously performed in-house to external providers.

Human Resource Outsourcing is the process of allowing one or more HR functions or activities to be conducted by an external HR service provider. There are many factors an organization should consider prior to outsourcing, and these will vary depending on the organization’s business, goals, culture, size, location, and so forth.

📌 Typical areas that can be outsourced

1. Recruitment

2. Payroll services

3. HR Auditing

4. Employee / Workplace Relations

5. HR Information Systems

6. Benchmarking activities 

7. Psychometric Testing

8. Employee Assistant Services

📌 Benefits of HRO

Below are the possible benefits of HRO.

• Cost reduction.
• Increased efficiency.
• Access to improved HR IT systems without capital investment.
• Improved people management information (including people analytics).
• Access to HR expertise that is not available internally.
• Increased flexibility and speed of response to HR problems.
• Ability to support or fit well with an overall strategy.
• Reduced risk, as it is possible to scale up and down more efficiently.
• Capacity for HR to operate more strategically.

📌 Drawbacks of HRO

Below are the potential challenges of HRO.

• Information security
• Difficult to handle cultural changes
• Lack of control

📌 To Whom May You Outsource Your HR Functions?

If you do decide to outsource some of your HR functions, the question becomes, who do you outsource them to? Different types of organizations exist where you can outsource your HR functions:

• HUMAN RESOURCES ORGANIZATIONS (HROS)
• PROFESSIONAL EMPLOYER ORGANIZATIONS (PEOS)
• ADMINISTRATIVE SERVICES ORGANIZATIONS (ASOS)
• STAFFING & RECRUITING AGENCIES

References:

Delmotte, J.  and  Sels, L.(2008)  HR  outsourcing:  Threat  or  opportunity?  Personnel  Review 37(5):543-563.

AHRI Blog (2021) HR Outsourcing. [blog entry]. Australian HR Institute. Available from https://www.ahri.com.au/resources/ahriassist/hr-strategies-and-planning/hr-outsourcing/ [Accessed 19 December 2021].

CIPD Blog (2021) HR Outsourcing. [blog entry]. Chartered Institute of Personnel and Development. Available from https://www.cipd.co.uk/knowledge/fundamentals/people/hr/outsourcing-factsheet#gref/ [Accessed 19 December 2021].

Multiplier (2021) 5 Disadvantages Of HR Outsourcing That Every Business Should Be Aware of. [blog entry]. Multiplier. Available from https://www.usemultiplier.com/blog/disadvantages-of-outsourcing-hr-functions [Accessed 19 December 2021].