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Human Resource Outsourcing


Human Resources departments are generally administrative and common to all organizations. The HR function consists of key processes like Recruitments, HR Administration, employee compensation & benefits, training & development, employee performance management, employee relations and exit management. All these activities are highly transactional and routine in nature and take away bulk of the HR time and focus. Leaving them with little bandwidth to focus on larger strategic issues. To reduce the workload administrative activities, organizations began to look at HRO’s. This is nothing but “ delegation of Human Resource process or processes to an external service provider that specializes in this service for which they are paid.”

About HRO:

Due to increased economic and corporate growth, outsourcing has become popular. It is Human Resource Outsourcing (HRO) provides various benefits to the companies to focus on their core business activities, while outsourcing some non core activities. This also enables companies to become more agile and confident while entering the new markets. Following the current economic trends many companies have become open to various forms of outsourcing which also includes HR Outsourcing.

Why HRO?

The main reasons why companies want to adopt HRO are as follows:

It reduces:

  • Transactional headache
  • Cost of delivery
  • Organisation time on non value added activities
  • Company Risk

It enhances:

  • Focus on higher leverage activities.
  • Efficiency & effectiveness of processes that support strategies
  • Scope and measurability of the process
  • Contribution to bottom line results
  • Employee retention through better service delivery

Process of HRO:

The process of HRO takes place in seven stages wherein all the required terms are covered.
The first and foremost stage is to Plan the initiatives where associated risks are identified and project team is announced. The so formed team is engaged with advisors and then trained. Second step is analysis of performance and cost involved. The third step sets the qualifying and evaluation criteria to select service providers after screening. Stage four and five covers negotiations and SLA defining where the issues are addressed, and contracts are signed.
Nest steps cover the detailed process mapping, and defining the process of migration. Mechanism for escalations and trouble shooting are put in place followed by transitions of resources. Final stage is managing of relationships. Oversight roles are performed poor performance is confronted and thus relationship is built.

Cons of HRO:

HRO is not magic. One should not do it, because everyone else is doing so but with a definitive business objective to be accomplished. The organization has to be prepared to deal with the down side of outsourcing which could be:

  • Inevitability of loss of control over the process
  • Going wrong in vendor selection
  • Chance of misplaced loyalty and the outsourced employees may not be sometimes as loyal as hired one
  • Challenges with dealing with activities not signed in the contract.

However these disadvantages can be managed if both the client and the service provider work together to resolve them.


By outsourcing, an organizations HR team can connect between recruitment sources and the performance of the recently hired employees. Trading investments and performance rankings can be connected. Provides an organization an effective basis for evaluating its programs. Demand for HRO remains strong as the initial buyers increasingly recognize benefits from outsourcing. Further, buyers and suppliers increasingly agree that standardization is necessary for HRO to fulfill its value proposition, leading to growing acceptance of a “standard” solution with some degree of configurability. As implementations become more standardized and streamlined, both buyers and sellers achieve what they require and the health of the industry grows better.

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