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outsourcing on hr profession in India

Submitted By
Roll No :- 29/39
MBA 3rd Year HR
Under the Supervision of
Dr. Mrs. N. Sri Vidya





hereby declare that







PROFESSION IN INDIA is my own work and have been carried out under the
guidance of Dr. Mrs. N. Sri Vidya. All care has been taken to keep this report
error free and I sincerely regret for any unintended discrepancies that might have
crept into this report. I shall be highly obliged if errors (if any) be brought to my


Shalini Das


Roll No: - 29/39


Institute of Business Management


I, Dr. Mrs. N. Sri Vidya hereby certify that Shalini Das, Student of Masters of
Business Administration at Institute of Business Management, Jadavpur
University has completed Dissertation Report on THE IMPINGEMENT OF
Human resource outsourcing on HR profession in India, under my guidance.


Dr. Mrs. Sri Vidya


Professor, IBM

The dissertation was done in partial fulfillment of the requirements for the degree
of MBA.
The three things which go on to make a successful endeavor are dedication, hard
work and correct guidance. Able and timely guidance not only helps in making an
effort fruitful, but also transforms the whole process of learning into an learning
and enjoyable experience.
I would like to express my profuse thanks to my project guide Dr. MRS. N. SRI
VIDYA presently Professor of IBM, who has rendered expert guidance and
assistance in the successful completion of my dissertation and also to the
Executives from the HR Fraternity who invested their precious time in filling
the questionnaire for this study and making my project worthwhile.
At the end, it is a pleasant task to express my thanks to all those who contributed in
many ways to the success of this study and made it an unforgettable experience for
me. Thank you everyone.

The expectations and availability of business process outsourcing (BPO) have
advanced based on demand, experiences, technology and markets; and is here to
stay. Human Resource outsourcing (HRO), as a subset of BPO, is included in this
evolution and is now a common way for businesses to achieve a competitive
In todays uncertain business climate, executives and organizations need to be
financially stronger, more adaptable, and more efficient to respond to shifting
market conditions. In other words, they need to maximize cash flow, maximize
Here we have focused the study on finding out how outsourcing can help us
achieve these goals and what is the likely future of HR outsourcing.
This research project explains the types of functions outsourced the methods to
select those functions, examples of successes or failures in HRO, businesses
involved in large scale HRO contracts, and the impact on the current HR

Chapter 1. Executive Summary

Chapter 2. Introduction
Chapter 3. Literature Review

Review of the literature


Theoretical aspect of HR Outsourcing


HR Outsourcing trends in India

Chapter 4. Research Methodology


Objective of the research


Scope/ Utility of the research




Research Design


Research Process


Limitations of the study

Chapter 5. Data Analysis

Chapter 6. Suggestions & Conclusion
Chapter 7. Bibliography
Chapter 8. Annexure- Questionnaire
Chapter 9. Glossary


Executive Summary
This research is aimed at analyzing the current state of the HR outsourcing market in
India and the trends that are prevalent in the same. Today, in this era of globalization
there is high degree of competition in all areas. One very important trend in the recent
times has been the growth of human resource outsourcing. Rapidly changing market
dynamics and global competitive pressures have caused organizations to spend more time
focusing on their core business. Organizations are fast realizing that they can't be all
things to all people. So companies now, be it a software company, a service provider or a
manufacturing firm, decide what they are good at and outsource everything else, i.e.,
focus on their core competency, and let someone else do the rest in a more efficient and
cost-effective manner.
As a result, human resources outsourcing is becoming increasingly prevalent. The
number of companies outsourcing HR activities continues to rise, and the scope of
outsourced HR activities continues to expand. HR outsourcing can happen in HR
functions, like payroll administration (producing checks, handling taxes, dealing with
sick-time and vacations), employee benefits (Health, Medical, Life insurance, Cafeteria,
etc), human resource management (hiring and firing, background interviews, exit
interviews and wage reviews), risk management, etc. Outsourcing has become a common
response to manage people and technology resources strategically, enhance services, and
manage costs more effectively.
Outsourcing non-core activities allows HR professionals to move away from routine
administration to a more strategic role. The organization can focus on higher value-added
activities while the outsourcing provider takes care of the day-to-day administration.
Critical internal resources, such as technology and talent, can be devoted to company's
core business. Outsourcing reduces the need for large capital expenditures in non-core
functions. Thus, outsourcing becomes a strategy for reducing the capital intensity of the
business. This strategy has gained popularity as companies aim to become more nimble
and gain the speed and flexibility necessary to compete in today's business environment.
A growing number of executives understand the benefits it can bring in terms of not only
cost savings, but also heightened strategic focus. Many recognize outsourcing

relationships as long-term partnerships created to further the strategic goals of the

Companies to whom organizations outsource their Human Resources function possess the
knowledge and resources to expertly perform part or all of a clients' human resources
function, allowing the client to streamline their internal processes and concentrate on
generating profit in their core business. But still in India, people are not very clear about
what exactly is manpower outsourcing all about, and issues like quality and trust needs to
be addressed properly. Experts say the basic reasons hampering the growth of HR
outsourcing in India are confidentiality and cost factors. Moreover, the fear of losing
jobs, losing control over confidential data, ethics and quality of outsourcing vendors,
security breaches and overall confidence in the vendors deters many organizations. The
biggest problem - and this is why the HR outsourcing industry in India is on the back foot
- is the government and the industry's failure to tackle issues like data security and data
privacy. This is where Indian HR outsourcing companies face a major handicap.
However, the future seems to be very promising. Estimates show that the latent size of
HR outsourcing in India is about $ 2 billion with a current market of $ 27 million and it is
growing at an alarming rate of about 50 per cent. India has immense potential as more
than 80% of fortune 1,000 companies are discussing HR outsourcing as a way to cut costs
and increase productivity.

As part of our research, we gathered information from a number of companies about HR

outsourcing and the reasons for which they outsource or dont outsource. Also, we tried
to find out about the preferred models for outsourcing and perceived advantages and



HR outsourcing is a process of outsourcing involving particular tasks like recruitment,
making payroll, training and development to a third party who have expertise in these
respective fields."

What is Human Resource Outsourcing?

HR outsourcing involves hiring an external, specialist HR Company to provide support for

workloads associated with employing and managing people. Recent research from the Chartered
Institute of Personnel and Development (CIPD) has found that over half of businesses outsource
at least part of their HR activities.

Outsourcing has infiltrated the world of human resource management in a major way. Over time
the number of organizations skilled in performing specific human resource activities has grown
to the point where there is now a general provider or a specialist provider organization that can
perform almost any human resource management task or activity. This article aims to identify
some of the key elements necessary for successful outsourcing. For outsourcing of human
resource management activities to be truly effective, companies must understand what can be
outsourced as well as what cannot be outsourced. This article presents a hierarchy that identifies
the kinds of activities that lend themselves to outsourcing and then it identifies the characteristics
that preclude certain functions from being outsourced. Successful outsourcing of human resource
activities also demands that organizations know and understand the advantages and
disadvantages of outsourcing. Another prerequisite for successful outsourcing is to understand
what actions are necessary to create a successful ongoing relationship between the company
doing the outsourcing and the subcontractor or outsourcing firm.
HR services are among the key elements in the enlarging outsourcing game. Recognizing the fact
that senior management needs to get out of mundane day-to-day processing work and focus
instead on strategic planning, core competencies, customer satisfaction and decision making, a

number of large companies, across globe have begun opting for outsourcing of their HR services.
Some of the functions most commonly handed over to outside providers include payroll, benefits
administration, background checks, drug testing, recruiting and training. Even small companies
that might not get noticed much in big studies of outsourcing trends, turn to outside services to
help with such chores. There are a number of issues related to HR Outsourcing.
Some of these issues include:
The future purpose and contribution of HR because of possibilities of functions being
transformed, or partially outsourced, through HRO deals.
The strategic and management complexities of HRO deals.
Deciding what is "core" and "non-core" in HR.

The difficulty that HR has in assuming more strategic or value-adding roles after implementing
The position of off shoring, including job losses and redeployment.

The challenges of trying to manage HR process affect on a global scale and across different
cultures. Some organizations believe the HR function is an integral business success factor, but
others view HR as over-resourced, inefficient and thus vulnerable to the cost reduction
possibilities of HRO.


The most common HR functions that are outsourced include:


Background checks

Employee assistance programs (EAP)

Flexible spending account (FSA) administration

Consolidated Omnibus Budget Reconciliation Act (COBRA) administration

Healthcare benefits administration

Pension benefits administration

Temporary staffing

Retirement benefits administration

Software services

Recruiting, staffing, and search

Employee relocation

Training and development


HRIS/Web-based services

Reference checks


HR outsourcing Services could fall into one of four categories:

o PEO - A Professional Employer Organization (PEO) takes legal responsibility for
employees. The PEO and business owner are partners, with the PEO handling HR aspects
and the business handling all other aspects.
o BPO - BPO refers to all fields, but specifically for HR, a BPO would ensure that a company
has access to latest technologies.
o ASP - Application Service Providers (ASPs) host HR software, on the web and rent it to
o E-services - E-services are those HR services that are web-based.



Cost of
Desire for Best
Practice Support
Desire/Push to move to
Strategic Planning

Use of HR

Need to remain
flexible, Risk

Talent Shortage



Org. Changes



3.1. Review of the literature

There are number of reasons, at both the strategic and operational level, why firms want to
outsource HR activities.
This review discusses

The factors which influence organizational decisions to outsource HR

The rise of HR outsourcing

Benefits and pitfalls of HR outsourcing

Presents case study evidence of both successful and failed HRO. Evidence examining the
impact of outsourcing on employee attitudes and behaviors, and how these behaviors can
affect the success or failure of the outsourcing decision will also be addressed.

Trend of Outsourcing gained greater progress in the 1970s, as many large and diverse companies
were underperforming at that point of time. This trend gained rapid growth in the early 1980s as
the global recession was on its inception stage. In 1980s, there was a great change of direction in
business approach and organizations have started thinking of outsourcing, but the main focus
was on fewer activities. The activities that frequently outsourced are Cleaning, IT, catering and
security. Adler (2003); Cook, (1999); Galanaki and Papalexandris, (2005); Lilly et al., (2005) has
explained that the HR activities have been increasingly outsourced, and HR outsourcing is the
fastest-growing segment over the past ten years.
Companies make the decision to outsource for a variety of reasons; cost reduction tends to be
one of the primary reasons for outsourcing. However, many researchers argue that the cost
reduction should not be the only factor considered while making the decision to outsource. For
example, a study by Beaman (2004) shows the real payoff from HR outsourcing is not in
reduced costs, but in improved quality. Belcourt, (2006); Lever, (1997); Scott-Jackson et al.,
(2005) have explain that the Other drivers of HR outsourcing are gaining specialized HR
expertise, achieving flexibility, reducing risks and enhancing access to advanced
technology (cited in Klaas, B.S, 2003).


Outsourcing the information system and accounting, is most common organizational activities.
There are lots of theoretical and empirical articles, but the academic literature on HR outsourcing
is very few. The cost benefit analysis is the top and most important argument in the topic of
human resource outsourcing. Empirical data from government agencies outsourcing to
private suppliers generated savings in the range of 20-30 % in production costs. (Anderson
et al, 1986; Greer et al, 1999; Gupta et al, 1992; Kakabadse et al, 2002; Lever, 1997, and Vining
& Globerman 1999). But some researchers in their studies suggested that at the time of making
the decision of outsourcing there should be other factors excluding cost which should be
considered. The other reasons which are indicated in outsourcing by the researchers are
specialized services, vendor-customer satisfaction, employee satisfaction and competitive
advantage. Adler (2003) noted that a review by the Granter group identified six factors which are
considerable in decisions of outsourcing: dependency risk, spillover risk, trust, relative
proficiency, strategic capabilities, and flexibility. The first four of these factors are short
term factors, whereas the last two are considered more long term or strategic. However, in
literature there is no defined procedure that identifies when outsourcing is most efficient and

Once a firm has decided to outsource the particular functions, it needs to find out the best
supplier for specialized services. A single supplier of services should be preferred to multiple
suppliers for a number of reasons. Firstly, it is very easy to supervise one vendor as it will save
time of the HR staff. Secondly, a single supplier better understands the needs of client and
provides integrated solution across the company. Thirdly, it is great advantage when a number of
solutions are being bought from one supplier which enables a firm to confer upon a better

Lieven and De Corte (2008) published the first study on the commitment of Human Resource
managers to make the decision to continue an outsourcing partnership with the present supplier
of the services. They formed a model of HR manager commitment, testing affective commitment
and continuance commitment in outsourcing partnerships. This study found that affective
commitment and the continuance of the outsourcing partnership was linked to frequency of HR

Brain S. Klaas, who has written a long theoretical study on the impact of HR outsourcing, found
that organizations should be well aware of the prospective risks before selecting an HR vendor.
He explained that the small and medium enterprises in particular, are rapidly going for HR
Outsourcing. He further examined that there are the variables that can be affected by
organizations and will vary from organizations to organizations, which are administration fees,
staff time costs, HR outcomes and compensation costs. He suggested that if an organization is
planning to outsource its HR functions, should fully research these variables to see which
benefits can be obtained in contrast lowering the costs.








Outsourcing:Arguments for Outsourcing:

In general, organizations think about using outsourcing

for a number of apparent reasons. First, it permits them to concentrate on their core business
functions, and can focus on the area where they have expertise and are likely to do best. Second,
it allows the firms to obtain competitive advantage and gain profit from the expert service
providers who may have specialized skill in the concerned areas. Third, it also allows companies
with greater flexibility and efficiency to cater with fluctuating labor requirements with the help
of subcontractors. Firms can save the direct costs by the on time provision of the human resource
(e.g., reducing headcount and overtime working) and indirect costs (e.g., cutting administration
and backup costs, saving recruitment and training costs, saving absenteeism costs, and reduced
industrial relations problems). Fourth, outsourcing also minimizes the risk factor of uncertainty
to the vendor. And lastly, outsourcing provides opportunities to firms to choose most competitive
tender to keep the future costs down.

Arguments against Outsourcing:

HR outsourcing practice is not without

drawbacks. One of the most important issues is maintain the continuous delivery of expertise
delivery and the retention of knowledge and skill internally. Most of the organizations adopt
outsourcing to save the training costs as they assume that the specialized service providers will
deliver the key skills as per requirement. As Prahalad and Hamel (1990) point out, outsourcing
can provide a shortcut to a more competitive product, but it typically contributes little to
building the people-embodied skills that are needed to sustain product leadership (cited by
Wray, G. N. 1999). Loss of quality is also another most important factor in outsourcing,
especially for those firms which are operating in a very competitive business environment.
Employees of the firm often assess the service quality by comparing the result of the service and
expectations of the service under the proposed change.

HR Activities to Be Outsourced:

In outsourcing HR functions, the first and

foremost issue is to make decision of which HR activities should be outsourced and which
should be performed internally. While deciding about make or buy decision, firms require
considering that what would be the impact of outsourcing these activities on the firms
performance. For better outcomes, organizations may need to classify the core and noncore
activities. Finn (1999) suggests that a basic distinction can be made between HR core and
noncore activities. The core functions of the firm include top-level strategy, HR policies, and
line management responsibilities (e.g., appraisal and discipline), while the non core functions
include specialist activities (e.g., recruitment and outplacement), routine personnel
administration (e.g., payroll and pension), and professional HR advice (e.g., legal advice related
to employment regulations). Hall and Torrington (1998) found that training and management
development, recruitment and selection, outplacement, health and safety, quality
initiatives, job evaluation, and reward strategies and systems were the likely HR functions
to be outsourced, as they were considered noncore or because the organization lacked the
expertise to perform these activities internally. The literature is evident and listed some of
the activities which are outsourced completely are employee training, payroll, healthcare benefits
to employees, and pension benefits.
Regardless of this rapid progress in the outsourcing of Human Resource function, the empirical
studies by Klaas, McClendon & Gainey, (2001), Gainey & Klaas, 2003; Klaas, 2003; Klaas,
McClendon & Gainey, (1999) of Human Resource outsourcing concentrate on the issues like
the impact of organizational characteristics, the role of transaction costs, the relationship
between HR department size and outsourcing activity. However, the most important issue of
outsourcing is when to outsource the HR functions, is not covered properly. Which factors
allows firms to keep the activities in-house and which outside forces derive the firms to consider
outsourcing. Although Klaas, McClendon & Gainey (1999) addressed this issue in their study of
moderator variables in the relationship between amount of HR outsourcing and perceived
benefits from outsourcing. In a separate article by Klaas, McClendon and Gainey (2001) also
analyze the certain organizational characteristics which derive organizations to outsource HR
activities, but do not consider HR performance as a dependent variable.


There are very few empirical studies that examine the significance of performance while making
the decision about HR outsourcing. As most of the researches seem to focus and explain the
factors due to which organizations outsource, how to outsource, or the impact of outsourcing on
the organization and its employees.
In the literature, the question of when outsourcing is most suitable and under what
circumstances a company should outsource is not addressed properly or a very few work done on
this issue. A considerable gap is identified as and when and under what business scenario does a
firm should outsource which would add value to the firms outcomes, what would be the impact
on the firms performance and how HR outsourcing mediates that relationship?


Reasons for Outsourcing:

Achieving competitive advantage: Achieving competitive advantage is one of the most

important reasons for the decision of Human Resource outsourcing. In different studies, the
authors put stressed on the issue that Human Resource system can provide competitive
advantage to the firm. In the case of HR outsourcing a firm is availing more specialized services
probably from a different environment with different expertise and the knowledge proficiency
can help an organization achieving a competitive advantage over it competitors.

Minimizing cost: Minimizing costs is a second main reason of Human Resource outsourcing
has been identified in literature. The activist, (Roberts, 2001) campaigned for outsourcing as
considerably lowering the costs and risk, increasing the organizational flexibility, innovative
capabilities, and opportunities for creating value-added stakeholder returns. Obviously, many
organizations preferred to outsource due to the cutting down cost of production. Nevertheless,
these reasons are not without challenges. Some of the challenges have been listed as quality of
HR services from vendors, insufficient employee preparation towards the jobs, and lack of
proficiency to manage HR outsourcing.





Human capital

Recruiting &

Achieving Core Competency: HR mangers require to consider that all activities of

outsourcing from maximizing resources and making service improvements, is to freeing up inhouse staff to focus on more strategic staffing issues. The main issue is that Human Resource
managers can perform more strategic roles by contributing to establish the companys future
goals and plan to achieve them rather than spending time on staff payrolls or keep checks on
absence records. Technology Advancement:
The technology advancement is playing an important role in the issue of HR outsourcing. Due to
technology advancement firms need to have the latest equipments and procedures. And firms

preferred to purchase of outsourcing services, which provides them the latest and accurate
services. Most of these modern equipments and systems require specialized skills and experts to
perform the functions. So consequently organizations in such need outsource the specified

Generally, in the use of HR Outsourcing the researchers found considerable variations among
organizations. More important, these variations appears to stand little relationship to the size,
cost, or productivity of the function (Greer et al., 1999; Vernon et al., 2000), although Klaas et
al. (2001) found that idiosyncratic HR practices, firm size, and cost pressures affected both the
degree of outsourcing and the perceived benefits.
Existing literature on HR outsourcing appears to be limited in general. As its a new phenomena
which is in its inception, so that the research and practice in HR outsourcing is being in its early
stages of growth and development. Many firms preferred to outsource the discretional activities
of HR (e.g., payroll, training, health and safety, legal advice), areas in which they consider a
non-cost effective to develop and maintain internally and the lack of internal expertise.

Although some researchers remain cautious about the future growth of HR outsourcing but as per
the existing evidence, HR outsourcing has augmented significantly over the last decade. Training
and payroll listed as the most favorite areas of HR outsourcing. In addition, recruitment, taxation,
and legal compliance are most common functions which are outsourced very often. However,
employee relations, HR planning, career management, and performance appraisal are less likely
to be outsourced, as these activities are considered to be the core competencies. Even so, there
are no clear patterns of the types of HR activities that are outsourced.


Future trend of HRO:

Factors to Consider when Outsourcing:

Some authors suggest that there are certain factors which organizations should consider before
deciding to outsource, including activities that involve disproportionate time management,
activities that are not associated with other work activities, and activities that require a high skill
of expertise (Heywood, 2001).These factors very much reflect the reasons outlined above for the
increase in outsourcing as a HR strategy.

Specifically, organizations have to consider factors such as cost, the management required, and
interaction issues. Organizations should be considering which HR activities are suitable for
outsourcing. Specifically, organizations should ask two fundamental questions:
(1) What will be the impact of outsourcing the HR activities on the organization? (2) How will it
impact on the activities and employees that are not outsourced?


Mullers model outlines a way of determining which activities to outsource based on the view of
core competency and management requirements.
This figure suggests that the higher the core competency and management requirement, the less
likely the activity will be suitable for outsourcing. Other factors however also need to be
considered when making an outsourcing decision.
Kim and Won (2007) suggest that organizations should examine their characteristics, including
size, budget, environment and culture when making outsourcing decisions. As organizational
cultures, climates and structures differ, so too will the type of outsourcing used in the

Outsourcing Decision Making

The general outsourcing model developed by Arnold (2000) illustrates thatthere are four
components which need to be reviewed when making outsourcing decisions: outsourcing subject,
outsourcing object, outsourcingpartner, and outsourcing design.



Conceptual Model






Customer complaint issues

Client firm customers complaints are elevated

by move to outsource provider.

Security issues

Sending individual & corporate accounting

records to foreign countries may open the firm
to substantial security & confidentiality risk.

Employee issues

Outsource providers may fail to listen to their

own employees.

Client- provider relationship issues

Not building relationships, taking a passive

role managing the outsourcing project, & poor
understanding of outsourcing benefits & costs,
advantages & disadvantages.

Cost issues

Cutting the costs on the outsource provider

results in the provider reducing service to the

Government issues

Changes in laws & regulations can reduce cost

advantages of outsourcing.

Structural issues

Experiments and different types of outsourcing

may fail n longer terms.







Design of





& Contract

- Business

Environment - Project
- Transactional
- Work process
- Risk analysis

- Work Process

- Service levels

- Resourcing

- Vendor-Company

- Accountability

- Work Process

& performance


Measures for
Both Vendors



Analysis &

& Company

- Performance GAP
Resolution process


The methodology of HR outsourcing involves the following steps: -

o Situation analysis It includes business environment analysis, analysis of the work process
which is to be outsourced and risk analysis.

o Solution design

o Design of performance measures & contract It includes preparation of the HR outsourcing

contract. The expected service levels are defined and accountability & performance measures
for both the vendor and the company are set.

o Solution delivery

o Solution performance management It includes the management of the vendor-company








& Management



Project Management
Performance Management

Work Process




Project Dedicated Expertise

Hr tools

Delivery Process Support


3.3. Human Resource Outsourcing trends in India

HRO is an evolving industry in India. With more and more companies looking to rationalize
employees on their payroll, manpower outsourcing is slowly becoming the new buzz in India.
And the trend seems to have hit not just big multinational companies but the public sector and
government undertakings as well, though on a very low key yet in the latter. It has turned out,
furthermore, that HR departments especially rely significantly on outsourcing, even though they
might not, at first, realize that only a few standard practices are, in fact, out-sourced.

Why Outsource HR Services to India?

When you outsource HR services to India, you can save on time and effort and concentrate on
your core business. You will also be able to increase your flexibility to met needs such as,
changing and new business conditions and increasing orders for products, services and
technologies. By outsourcing a non-core process like HR services, you can concentrate more on
increasing customer satisfaction and on increasing the value of your products / services.
Outsource HR services to India and benefit from the skills, expertise, latest technology and
professional services that India offers in the field of HR. When you outsource HR services to
India, you will find your operating performance, risk management and control improving. By
outsourcing HR services, you can also gain access to professional services. Your outsourcing
provider will be able to provide you with proficient HR services that can bring about a change in
your organization. Outsourcing HR services can also help you benefit financially. One good
reason for outsourcing HR services to India is that you can save on costs and at the same time get
access to high-quality services.


Organizations that Outsource HR Services to India

Large organizations mostly outsource their HR services to India in order to concentrate on their
core processes. Such large organizations can increase the profitability of their business by
outsourcing. Large organizations also stand to gain from better HR services for their employees.
Small and mid-size organizations also outsource if they do not have enough of HR staff to
manage their HR functions. Mid-size and small organizations can also benefit from costeffective services when they outsource to India. Outsource HR services to India to enhance your
productivity and return on investments and also to achieve the economies of scale.

Advantages of outsourcing HR services to India

When you outsource HR services to India, you can see an improvement in your HR support
functions. Outsourcing HR services can help you bring out more effective and efficient processes
within your organization. Payroll functions can be completed on time accurately and your
outsourcing partner can come up with ingenious ways of improving HR functions in your
Outsourcing HR services to India can help you achieve your targets. Your business can become
more productive with the help of effective business and HR strategies. You can also on save
time, effort and manpower. You can concentrate more on your business and can be relieved from
taking care of your HR work in-house. With strategic HR strategies, training programs and
development programs, you can retain your employees.
Outsourcing HR Services to India can help your organization gain a competitive edge!



The general opinion among Indian companies is that it is economical to manage all their HR
processes internally. Consequently, there is not much emphasis on outsourcing. Typically, very
small companies (which do not have the competency to staff a full-fledged HR department) and
very large companies (who wish to outsource all routine HR processes so that they can
concentrate on core issues), are the ones that use HR outsourcing in a significant way. Besides,
many multinational companies are fast adopting these practices.

Sateesh R Kurugod, head of marketing and alliances, Crossdomain Solutions says that now
CXOs realise that HR teams typically spends over 80 percent of its time in managing tactical
and transaction oriented HR operations. If these tactical processes are outsourced, the company
could re-deploy their trained HR resources to core processes, he adds. Pramode Sadarjoshi, the
director and head of Human Resources of Cognizant Technologies says, Today, every
organization is aiming at achieving productivity by enhancing return on investments and
achieving the economies of scale. In this context, it makes business sense to focus only on the
organizations core competencies and outsource non-critical business activities. Therefore,
routine administrative tasks, although important, can be outsourced to third party vendors.

Experts believe that in present times HR outsourcing is undergoing a transition phase. "There has
also been a transition on its user acceptance, where it is moving from a corporate domain to
public sector undertakings and the government sector. All this reflects on the growth of this

HR outsourcing comes third in the list of potentially high paybacks, after IT and the telecomm
industry. However, many companies wrap up their HR functionalities as something that happens
in the back office, and do not give enough attention to the infrastructure that essentially props up


its employees. Over the years, this has bred neglect, leading to antiquated HR management

Now, it is time for this mindset to change, because companies are suddenly waking up to the fact
that their HR policies are not in step with the times, and a major overhaul is called for to keep
pace with company acquisitions and mergers. A few companies have tried mending their HR
management system on their own, but they soon discovered that it is like opening Pandora's Box;
more you inquire into the state of HR policies, you keep unearthing more anomalies.
That's where outsourcing can step in. If you have a problem managing your HR and bringing the
existing system up to scratch, why not let a third party worry about it? What comes with HR
outsourcing is better management at a lower cost

Implications of HR outsourcing for India need to be looked at in two parts economic impact
and HR impact.

The economic impact is positive, given that India is the beneficiary of the global outsourcing
wave, at least for now. It is creating more jobs and increasing earnings for the country.

The second part of the India impact is from the HR point of view. What is quite obvious is the
fact that cost arbitrage will not be the driver for this trend within India, if ever, even if a large
organization were to outsource to a small operator.

India must be the country hiring the most in the world. In fact, HR in India would rank as the
most dynamic and turbulent in the whole world today. There are so many new jobs, so many to
hire, so many to train, and so many to retain. After many years of fighting for identity, HR in
India has come of age. HR and organization building issues are center of the plate in any Indian
CEOs agenda today. CEOs are willing to spend as much as it takes to manage their people and
people processes well. It may never get any better for HR.

With more and more companies looking to rationalize employees on their payroll, Human
Resource outsourcing is slowly becoming the buzz in India. Companies to whom organizations
outsource their human resource function possess the knowledge and resources to expertly
perform part or all of a clients human resources function, allowing the client to streamline their
internal processes and concentrate on generating profits in their core business.

Estimates show that the latent size of HR outsourcing in India is about $ 2 billion with a current
market $ 27 million and it is growing at the rate of about 50 per cent. HR outsourcing in India
has not seen the required momentum and is limited to a trickle effect, with companies
outsourcing a few selected low-end HR processes. Companies which havent joined the HR
outsourcing bandwagon are either unfamiliar with the process and procedures of HR
outsourcing, or are unaware of the players operating in the area or are unaware of the probable
value obtained from doing so.




1.1. Objectives of the Research:

The objective of project is to

1. Identify the benefits of outsourcing HR functions and understanding the process.

2. Various criteria of HR outsourcing.

3. Study why companies indulge in HR outsourcing and the merits and advantages of

4. Recent Scenario of HR Outsourcing in India.

Identify the various practices of HR Outsourcing existing in the industry. The project should
have a detailed understanding of the methods adopted by agencies to make the HR process


4.2. Scope/Utility of the Research

The research can be very useful to the HR professionals to understand the current trends in the
market with regards to outsourcing of HR services. It will give them a comparison of the firms
outsourcing HR services with those that have completely in-house HR functions. They will get to
know about the perceived advantages and disadvantages of HR outsourcing and also the
important considerations to be kept in mind.

Outsourcing Vendors can also find this research useful in understanding the needs of their
potential and existing clientele. The students can also benefit from this research as they will
become aware of the new trends in the field of HR and will be better prepared for the challenges
ahead of them when they join the industry as HR professionals.


HR outsourcing: benefits, trends and challenges is a study aimed to get familiar with the
current scenario of HR outsourcing in Indian companies and the potential future for the industry.
HR outsourcing is the next big thing to happen and is rapidly gaining momentum especially in
the US. With respect to the Indian scenario it is still at a nascent stage but is expected to grow
rapidly. India currently is facing an economic boom and almost every industry is at its best state.
Hence there is a need for the companies operating in a highly competitive and dynamic
environment to focus on their strategic aspect and core competencies. The companies can do this
by outsourcing the unimportant and non-strategic tasks.

Due to the presence of some factors in the Indian market, the HR outsourcing industry is very
small but it is expected to grow in the future. This is evident from the fact that various big
players like ICICI Bank, Wipro, and TCS are entering this arena of HR outsourcing in India.
The study is based on the following assumptions and hence the hypothesis for the study is:

Indian companies are outsourcing most of their HR processes.

HR outsourcing is expected to grow at a rapid pace in the Indian industry.

Indian companies derive lot of benefits out of HR outsourcing.

Internal customers of the company are satisfied with the decision of the company to
outsource their HR processes.

Cost is the main criteria for vendor selection for HR outsourcing by Indian companies.


Exploratory research
Exploratory research is often conducted because a problem has not been clearly defined as yet, or
its real scope is as yet unclear. It allows the researcher to familiarize him/herself with the
problem or concept to be studied, and perhaps generate hypotheses (definition of hypothesis) to
be tested.

It is the initial research, before more conclusive research is undertaken. Exploratory research
helps determine the best research design; data collection method and selection of subjects and
sometimes it even conclude that the problem does not exist.

Exploratory research can be quite informal, relying on secondary research such as reviewing
available literature and/or data, or qualitative approaches such as informal discussions with
consumers, employees, management or competitors, and more formal approaches through indepth interviews, focus groups, projective methods, case studies or pilot studies.

The results of exploratory research can provide significant insight into a given situation.
Although the results of qualitative research can give some indication as to the "why", "how" and
"when" something occurs, it cannot tell us "how often" or "how many".

Descriptive research
Descriptive research or statistical research provides data about the population or universe
being studied. But it can only describe the "who, what, when, where and how" of a situation, not
what caused it. Therefore, descriptive research is used when the objective is to provide a
systematic description that is as factual and accurate as possible. It provides the number of times

something occurs, or frequency, lends itself to statistical calculations such as determining the
average number of occurrences or central tendencies.
The two most commonly types of descriptive research designs are



Two methodologies were adopted while undertaking the research:

Secondary data collection

Large amount of secondary data is available in the forms of articles, journals, and previously
conducted researches on the similar topics. This data was collected and studied to determine
some of the broad trends prevalent in HR outsourcing across the world and the presence of HR
outsourcing industry in India. Also, the data thus gathered helped in identifying key parameters
to examine through further exploration and thus helped in defining the hypotheses for further
study as well as designing the questionnaire.

Primary data collection

Primary data was collected through the means of a sample survey. For this purpose, a
questionnaire was mailed to some of the HR managers and executives in various organizations
and their response was solicited. The data collected through this survey was then analyzed to
determine patterns and for testing the validity of the hypotheses formulated.


Sampling technique:

The sampling technique used for the survey was non-probabilistic in nature. Convenient
sampling technique was used owing to limited number of resources for carrying out the research.
Also, the respondents chosen were from varying sectors and thus provided a good estimate of the
overall picture prevalent. Target group for carrying out the survey was the HR departments of
various organizations. The study objective itself omitted the need to study small scale
organizations as they generally dont have a separate HR division as such and hence were not
considered for carrying out the survey.

Data Collection:

A questionnaire was developed and administered via email to the respondents. The questionnaire
was accompanied by an introductory letter stating the purpose of the research and promising
confidentiality. Responses were then collected and analyzed to arrive at certain conclusions.


4.5. Research Process

Research Process adopted was as follows:
1. Defining the objective of the research
2. Reviewing literature available on it (Secondary Research)
3. Research Design: Developing Research Plan and implementing it
- designing questionnaire
- deciding on the sample size
- taking interviews
4. Collecting data
5. Analyzing data
6. Preparation of report
7. Interpreting and reporting the findings

Some of the companies included in the survey were:

ABASAR Travel Agency
YES Bank
Kautilya Group
Jal Power Corporation Limited
George Telegraph Group
Food Corporation of India

4.6. Limitations of the study:

Sample size -- the number of the units of analysis you use in your study is dictated by the
type of research problem you are investigating. Note that, if your sample size is too small,
it will be difficult to find significant relationships from the data, as statistical tests
normally require a larger sample size to ensure a representative distribution of the
population and to be considered representative of groups of people to whom results will
be generalized or transferred.

Lack of available and/or reliable data -- it is a significant obstacle in finding a trend

and a meaningful relationship.

Time of the project- We have limited time period for completion the project.




Analysis of the Questionnaire data:

No of Respondents- 45

Q1. Is your organization Government/public sector or Private sector?

Type of Organisation



Out of 100 respondents 80% are working in Private Sector and 20% working in the
Government/Public Sector.
So the research is basically concentrated to private sector as private sector companies have
higher impingement of HRO in their respective organizations.


Q2. Total No. of employees in your organization?







Below 100



Above 1000

No. of employees

Basically, Out of 100 respondents, 60.67% are from large scale industry and around 27% from
medium scale industry and 5% respondents are from small scale industry.
Large scale industry people are the target group for analyzing the impact of HRO.

Q3.Does your organization outsource HR functions?

Outsourcing HR functions



53% people support to outsource HR functions and 47% people still believe on their own HR
functions and policies and hesitate to outsource it.
Marginal increase above been shown on accepting HR outsourcing in the research.

Q3A. Are you a HR service provider or outsourcer?


Service Provider



Out of 100 respondents 43% are the HR outsourcing service providers & the rest (57%) are the
HR service outsourcer.
This shows that the demand of HR outsourcers is more than the service providers. Outsourcing
basically involves Payroll administration, Employee benefits, Human resource management, risk


Q4.If yes, how many people are outsourced by the organization to do HR functions?

No. of people outsourced



Below 100





above 1000

Out of 100 respondents majority 87.50% people outsourced less than 100 people are outsourced
by the organization to do HR functions and else outsourced 100-500 people.
So organizations mainly outsourced smaller number of people to do their HR functions.

Manpower cost for outsourcing is not much.

People do not feel to outsource too much people to do their HR activity.


Q5.In which areas do you require support HR outsourcing?





Sickness/Absent Mang


Disciplinary/Grievance Procedure
Employee Evaluation


Health & Safety training


HR Training







Except payroll every HR services require support of HR Outsourcing.

Out of 100 respondants 53.33% feel they require support in recruitment and 26.67% require in
HR training. So basically recruitment & selection and HR training require major HRO support.





1.Cost reduction


2.Effect on
HR Activity
of HRO




5.Effect on the


6. Change







Influence of outsourcing HR in reduction

in employee expenditure
Effectiveness of cost reduction in
production cost





Importance of outsourcing in prevention

of the hiring of new employees


Influence of outsourcing in prevention of

training of new employees
Development of outsourcing practices in
the Org.
Development of the outsourcing HR
functions in other Org.
Impact of outsourcing in Org.
Effect of outsourcing to the competitive
Quantity of application of outsourcing in
Impression of outsourcing in the
Existing state of the art of outsourcing
Important level of expertise in
Outsourced company
Efficiency of the outsourcing in
answering the needs
Major changes in the Org. since
outsourcing began























Group1. Cost Reduction

Employee Expenditure

Production Cost


7% 7%





Very Poor

Group 1: Cost Reduction on two aspects.

a) Employee Expenditure.
b) Production Cost.

60% people felt that outsourcing results in cost reduction in employee expenditure where
53% felt outsourcing reduces production cost.

7% people felt outsourcing dont able to reduce cost neither in employee expenditure nor
in production cost.

Minor people less than 50% unable to find any impact in cost reduction by outsourcing.


Group2. Reduction of HR Activities

Prevention of hiring new employees

Prevention of training of new employees







Very Poor

Group 2: Reduction of HR activities.

Majority of people (67%) neither agree nor disagree that outsourcing prevents of hiring
new employees. And 33% keep neutral on prevention of training of new employees.

It is viewed that majority (60%) people dont agree that outsourcing helps to prevent
training of new employees.

So as a result people still dont have a positive feeling on cost reduction by HRO and
need to develop this cost reduction policy.


Group3. Development of HRO

Development in Your Org

Development in other Org




7% 7%




Very Poor

Group 3: Overall development of Human Resource Outsourcing.

67% out of 100 are of the view that organization developed by HRO. So overall HRO
acts as a catalyst on development of the organization.

In terms of other organizations development we recognized majority people (60%) dont

make any opinion.

So as a result organization overall development have been noticed by HRO.


Group4. Performance Analysis

Org Performance

Competitive Advantage

53% 53%

Application in Org Performance








Very Poor

Group 4: Performance Analysis of the organization by adopting Human Resource


60% out of 100 (on that 7% are extremely agreed) are in view that organizations
performance is increased by HRO.

53% out of 100 are in view that overall organizations competitive advantage of the

But in terms of application of HRO in their respective organization 53% dont recognize
any notable issue.

Organization performance and competitive advantage have been increased by the help of
HRO but application of HRO in their respective organizations still need to be enhanced.


Group 5. Effect on the Organization

Efficiency in Org Needs

Level of expertise

Very Poor






Impression in the Co.



Existing state





Group 5: HRO effect on the organization.

Majority of people (53%) supports the fact that efficiency of the outsourcing in
answering the needs of the organization is good.

The level of expertise in the outsourced company- 47% think supports and 33% didnt
feel any impact 7% really impressed by the level of expertise.
So as majority of the respondents supports that (47% + 7%), we can easily say that level
of expertise was increased by HRO.

Majority (53%) feels the existing state of the art of outsourcing as compared to the
identified organization is neither good nor bad and out of 100, 40 respondents really
noticed poor impact about it.
So organizations really need to focus on the existing state.

53% out of 100 respondents are in the view of good impression of HRO in their
respective company.


Group 6. Changes in the Organization By HRO

Very Poor








Group 6: Changes observed in the organization after adopting HRO policy.

40% out of 100 are of view that HR outsourcing providers have lessened the burden of
HR department & have changed the course of work being done in & through HR
department. They can now focus on Cost savings, gaining outside expertise, improved
service, Focus on core competencies, gaining outside technology. Whereas 47% felt HRO
made an fair impact in organizations change activity.


Q19. State what have been trends in use of HRO in the past 3 years?









Trend in use of Hro in the past 3 years

Be it providing HR outsourcing or service providing there has been a constant increase of

seeking HR outsourcing in the past 3 years. Trend has been so that every aspect of outsourcing
has seen a marginal increase or constant increase. Yet in some org. people still felt that the trend
in use of HRO is constant, neither increase nor decrease.


Q20. Impact on the HR Profession, do you believe that HRO has increased, had no impact
or decreased?









67% out of 100 are of the view that HRO marginal increases as an impact on HR
profession out of that 7% view increases at a reasonable measurement.

33% people keep neutral unable to notice any increase or decrease.

So ultimately we can say that as an impact on HR profession, HRO has increased.


Q20. Do you agree or disagree that the role of HR professionals can become more strategic
with the outsourcing of transactional HR functions.

HR Professionals become more strategic

with help of outsourcing
Strongly agree


Neither agree or disagree


Strongly disagree



For this question 33% of HR service seeking clients has asked their HR service providers for
outsourcing services & restructuring of their HR strategy, another 33% has wanted to keep on
going with the same strategy do not agree to become more strategic and 27% people keep




Companies ready to address the necessary transformation of their HR processes will find
that outsourcing will bring access to world-class processes, competitive advantage, and
increased shareholder value.

Technology compatibility, confidentiality and cost are other challenges that both sides
must work on.

Mutual trust is critical, as it's a long haul commitment. It is imperative that senior
management is involved right from the beginning and also drives the initiative. In
addition, a clear understanding of requirements and expectations from both sides is an
important platform in building the relationship.

Compatibility in culture and values along with an open and flexible approach go a long
way in ensuring that the outsourcing venture is a successful one.

Renewals are the big news in human resources outsourcing. The economic turbulence is
a tremendous opportunity for HR leaders to come back in a new, more focused, and more
impactful way. Economic modeling, corporate governance, strategic marketing -- all will
become part of the new HR professionals' tool kit.

Outsourcing is becoming more sophisticated. Customers are looking for business process
excellence, speed to market, improvement in quality, benchmarking to world-class
standards. CEOs are involved to ensure the long-term success of strategic off shoring
decisions. On their part, suppliers understand that they must compete globally and that
outsourcing will play a more transformational and strategic role for the client.


India can collaborate with other countries to leverage local knowledge of the business
environment and language skills while providing its domain knowledge and technological
expertise for successful outsourcing.

Global HR benefits deals will become a reality as suppliers develop the technology to
provide a centralized look.

HR processes will converge and no longer be separate event.

HR outsourcing is at a nascent stage in India.

HR outsourcing is expected to grow at a rapid pace in the Indian industry.
Indian companies derive lot of benefits out of HR outsourcing.
Internal customers of the company are satisfied with the decision of the company to
outsource their HR processes.
Cost is the not the main criteria for vendor selection for HR outsourcing by Indian


HR departments today are faced with dual roles. The first involves being a business partner
focusing on core functions that impact bottom-line objectives of the organization. Second, HR
professionals are critical in ensuring that the day-to-day needs of employees are addressed. These
two roles afford that HR professionals have the foresight to manage the organizations strategic
approaches while also handling its most immediate and relevant concerns.

As a way to juggle these responsibilities, outsourcing appears to be a viable option that

organizations are embracing. This is especially evident in large-staff sized organizations which
show a trend in utilizing outsourcing slightly more than smaller organizations.
They also report a greater likelihood of increasingly relying upon it in the future. Large
organizations, however, also reported more unfavorable outcomes due to outsourcing, such as
less face-to-face contact with employees and decreases in in-house expertise. HR professionals
from large organizations also expressed greater concern that outsourcing would lead to
reductions in HR staff size, which is corroborated by results of this survey that show these
organizations experiencing decreases in their HR department size in the past five years.

HR professionals are fully aware of the impact of outsourcing on the profession. Some embrace
it, while others do not. Their concerns center on the shifting roles of the HR professionals that
require them to be both transformational and transactional. It is likely that as an outcome of
outsourcing the preferred skills in the profession may shift. Some jobs may be redistributed such
that they require broader business skills as well as specific HR expertise. These changes,
however, are likely to be felt throughout the profession, regardless of whether an organization
outsources its HR functions or not. Depending on the organizations business goals and corporate
culture; outsourcing may not be the most
viable alternative. Yet, the role of HR
professionals will continue to alter as the
profession advances into new territory.
While most of the discussion about HR
outsourcing tends to center on the cost savings, the advantages and the disadvantages, the real
focus may need to be on preparing for the inevitable impact on the profession itself.




Human Resources Business Process Outsourcing: Transforming How HR Gets Its Work
Done By Edward E. Lawler.
HR Outsourcing: Reaping Strategic Value for Your Organization (SHRM Surveys
series) By Society for Human Resource Management (Author).
Outsourcing Human Resources Functions: How, Why, When, and When Not to Contract
for HR by Scott B. Gildner (Author), Mary F. Cook.
Aswathapa K, Human Resource & Personnel Management, New Delhi,Tata McGraw
Hill 3rd Edition.

Klaas, B.S, 2003

Adler (2003); Cook, (1999); Galanaki and Papalexandris, (2005); Lilly et al., (2005).

The empirical studies by Klaas, McClendon & Gainey, (2001), Gainey & Klaas, 2003; Klaas,
2003; Klaas, McClendon & Gainey, (1999) of Human Resource outsourcing.
Arnold 2000, Page 24.
Muller, 1996 Page 449.

(Anderson et al, 1986; Greer et al, 1999; Gupta et al, 1992; Kakabadse et al, 2002; Lever,
1997, and Vining & Globerman 1999).







Questionnaire on HR Outsourcing

Dear Sir/Madam,

I am a post graduate student of Jadavpur University, seeking your assistance in completing

project on The Impingement of HR outsourcing on human resource profession in India.
Responses from all participants will be combined, analyzed and the findings reported only in
their aggregate form.

I appreciate your participation in the survey as the quality of this study depends on your
respond to the questionnaire. Please take a couple of minutes to fill out the questionnaire.
Your answers will be kept confidential and will be used only for academic purposes.

Yours sincerely,
Shalini Das



Nature of the Organization-


Please tick the right alternative.

In which areas do you require support HR outsourcing?

a) HR training
b) Health and safety training
c) Recruitment
d) Employee Evaluation
e) Disciplinary/Grievance Procedure
f) Sickness/ absent Management
g) Payroll (outsourced)
h) Other
1. Is your organization Government/public sector or Private sector
A) Govt./public B) Private
2. Total number of employees in the organization
a) Below 100 b) 100-500 c) 501-1000 d) above 1000

3. Does your organization outsource HR functions?

a) Yes b) No
3A. Are you a HR service provider or outsourcer?
a) Service Provider b) Outsourcer

4. If yes, how many people are outsourced by the organization to do HR

a) Below 100 b) 100-500 c) 501-1000 d) above 1000


5. How would you group the development of outsourcing practices in the

a) Excellent b) Good c) Average d) Poor e) Very poor

6. Rate the influence of outsourcing of HR functions in terms of reduction in

employee expenditure for example salaries to the organization
a) Excellent b) Good c) Average d) Poor e) Very poor

7. Evaluate the important influence of outsourcing in prevention of the hiring of

new employees for the organization.
a) Excellent b) Good c) Average d) Poor e) Very poor

8. Rate the significant influence of outsourcing in prevention of the training of

new employees for the organization.
a) Excellent b) Good c) Average d) Poor e) Very poor

9. Evaluate the effectiveness of cost reduction in terms of reduced production

cost in the organization.
a) Excellent b) Good c) Average d) Poor e) Very poor

10. Assess the impact of outsourcing in organizational performance.

a) Excellent b) Good c) Average d) Poor e) Very poor

11. What is the impression of outsourcing in the companies around the

a) Excellent b) Good c) Average d) Poor e) Very poor


12. Describe the effect of outsourcing to the competitive advantage to the

a) Excellent b) Good c) Average d) Poor e) Very poor

13. How is the development of the outsourcing HR functions in other

a) Excellent b) Good c) Average d) Poor e) Very poor

14. What is the existing state of the art of outsourcing as compared to the
identified organizations?
a) Excellent b) Good c) Average d) Poor e) Very poor

15. What is the quantity of application of outsourcing in terms of performance?

a) Excellent b) Good c) Average d) Poor e) Very poor

16. Rank the important level of expertise in the outsourced company.

a) Excellent b) Good c) Average d) Poor e) Very poor

17. Rank the major changes in the organization since outsourcing began.
a) Excellent b) Good c) Average d) Poor e) Very poor

18. Rank the efficiency of the outsourcing in answering the needs of the
a) Excellent b) Good c) Average d) Poor e) Very poor

19. State what have been trends in use of HRO in the past 3 years?
a) Increased b) marginal increase c) constant d) marginal decrease e) decreased

20. Impact on the HR profession, do you believe that human resource

outsourcing has increased, had no impact or decreased HR professional job
a) Increased b) marginal increase c) constant d) marginal decrease e) decreased

21. Do you agree or disagree that the role of HR professionals can become more
strategic with the outsourcing of transactional HR functions.
a) Strongly agree b) agree c) neither agree or disagree d) disagree e) strongly

Thank you




"X"-sourcing: There is an extensive list of words used in conjunction with the word
sourcing that suggests a specific approach. Strategic outsourcing, Tactical outsourcing,
HRO and HR-BPO are just a few. Each has a slightly different meaning intended by the
person using it to connote a slightly different approach to outsourcing.
360 Survey: An employee feedback program whereby an employee is rated by surveys
distributed to his or her co-workers, customers, and managers. HR departments may use
this feedback to help develop an individuals skill or they may integrate it into
performance management programs.
Accessibility: The extent to which a contractors or employers facility is readily
approachable and does not inhibit the mobility of individuals with disabilities,
particularly such areas as the personnel office, worksite and public areas.
Administrative services organization (ASO): An organization that provides
outsourced solutions to meet the administrative and HR needs of the client with the client
retaining all employment-related risks and liabilities. An example of this would be a
professional employer organization (PEO) unbundling its services and only providing
transactional processing services.
Affirmative Action Plan (AAP): A written set of specific, results-oriented
procedures to be followed. Intended to remedy the effects of past discrimination against
or underutilization of women and minorities. The effectiveness of the plan is measured by
the results it actually achieves rather than by the results intended and by the good faith
efforts undertaken.
Affirmative action: Proactive policies aimed at increasing the employment
opportunities of certain groups (typically, minority men and/or women of all racial
groups). Title 5, Section 503 of the Rehabilitation Act requires that affirmative action be
taken in employment of persons with disabilities by Federal contractors. Affirmative
action was designed to rectify past discrimination but has been controversial since its
ASP - Application Service Providers (ASPs) host HR software, on the web and rent it to
BPO - BPO refers to all fields, but specifically for HR, a BPO would ensure that a
company has access to latest technologies.

E-services - E-services are those HR services that are web-based.

E-sourcing: Internet-based outsourcing that takes advantage of the application service
provider (ASP) delivery model.
Full service Human Resource Outsourcing: Outsourcing the full employee life
cycle that includes both processes and transactions orchestrated by a single provider (also
called single sourcing). Related to Total HR outsourcing.
Governance: The oversight and management of all aspects of an outsourcing
relationship. Areas of focus include change management, communications management,
performance management, operational management, risk management, strategic
management and others.
Home sourcing: As a substitute for outsourcing customer service to offshore call
centers, more companies are turning to service providers that specialize in providing
home sourcing services, using home-based agents to answer calls.
HR Audit: A periodic measurement of human resources effectiveness, conducted by
internal staff or with the use of an HR audit system.
Market-driven sourcing: A market-driven approach to sourcing means that the
organizations sourcing decisions is in direct response to the capabilities of the
marketplace of available providers. Where the organizations internal capabilities are
superior to the marketplace of providers, the activity is performed internally; where they
are not, the activity is performed externally.
Near shoring: Restructuring a company's workforce by moving jobs to a nearby
foreign country.
Offshore outsourcing (off shoring): The outsourcing of any operation to a firm
with a principal base of operation outside the country.
Onboarding: The process of moving a new hire from applicant to employee status
ensuring that paperwork is done, benefits administration is underway, and orientation is


Outsourcing: A transfer (or delegation) to an external service provider the operation

and day-to-day management of a business process that is long-term in nature and resultsoriented.
PEO - A Professional Employer Organization (PEO) takes legal responsibility for
employees. The PEO and business owner are partners, with the PEO handling HR aspects
and the business handling all other aspects.
Service provider: A company that provides outsourcing services. Terms such as
"provider," "vendor" and "partner" are often used interchangeably.
Total HR outsourcing: Outsourcing all or most of the internal HR function to a
single, external service provider. Typically, internal HR then shifts to a role of providing
human capital strategy within the organization, while also managing the relationship with
the outsourcing firm and evaluating the services it provides.
Zero-based sourcing: When the sourcing decision for each aspect of a businesss
operation is re-justified every planning cycle from an assumed base of zero. This
approach ensures that the organization is consistently and objectively re-testing its
internal operations against the best available external solutions.


Thank You