A Study on Trends in HR Outsourcing in Indian Context

Submitted to: Dr Sujata

By : Taru Taneja D-8 Disha Bhagat D-28


Contents 1 Scope Of The Project 2 Introduction 3 Literature Review 4 Objectives Of The Project 5 Methodology 6 Data Collection 7 Analysis 8 Recommendation And Conclusion 9 Limitation


Scope Of The Project
This project 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 organization. ethics and quality of outsourcing the government and the industry's failure to tackle issues like data security and data privacy. Preparation of report 5. This is where Indian HR outsourcing companies face a major handicap.000 companies are discussing HR outsourcing as a way to cut costs and increase productivity. Collecting data 3. Recommendations and conclusion 4 . allowing the client to streamline their internal processes and concentrate on generating profit in their core business. the future seems to be very promising. Analyzing data 4. 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. Research Process adopted was as follows: 1. Experts say the basic reasons hampering the growth of HR outsourcing in India are confidentiality and cost factors. However. we tried to find out about the preferred models for outsourcing and perceived advantages and disadvantages. As part of our project. people are not very clear about what exactly is manpower outsourcing all about. India has immense potential as more than 80% of fortune 1. and issues like quality and trust needs to be addressed properly.Companies to whom organizations outsource their Human Resources function posses the knowledge and resources to expertly perform part or all of a clients' human resources function. the fear of losing jobs.and this is why the HR outsourcing industry in India is on the back foot . we gathered information from a number of companies about HR outsourcing and the reasons for which they outsource or don’t outsource.Moreover. Also. losing control over confidential data. But still in India. Defining the objective of the research and reviewing literature available on it (Secondary Research) 2. security breaches and overall confidence in the vendors deters many organizations. The biggest problem .

Some of the companies included in the project were: Aditya Birla Group Birla Sunlife Kotak Life Insurance Aviva Dalmia Cements 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 inhouse HR functions.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. 5 . They will get to know about the perceived advantages and disadvantages of HR outsourcing and also the important considerations to be kept in mind.

It challenges management to build a more flexible organization centred on the core competencies of the the US such as ACS.or peripheral . In essence. outsourcing is an accepted management tool for restructuring and refocusing the way an organization does business. pioneered by firms specialising primarily in IT outsourcing .although not exclusively .thus reducing people The outsourcing of HR processes emerged in the late 1990s.activities are outsourced and gives results like• Services are improved • Overheads are reduced • Many processes are automated . The management of IT systems has been the major element of the outsourcing the sense of core competencies that drive competitive advantage.Introduction In a nutshell. the organization is making a decision to send certain parts of the business out to a provider whose "core competency" is that part of the business.BPO has been applied to many transactional processes that can be easily defined or 'scaled' and transferred to third party ownership with deeper expertise than themselves.but also combines them with the ownership and management of processes on behalf of management by an outside vendor. This spawned the business process re-engineering (BPR) industry in the 1990s. In making the determination that a business has more to gain by having certain "noncore"aspects of the business outsourced to a third-party service provider. in accordance with terms stipulated in a service level agreement (SLA). Many transactional HR processes are outsourced and are increasingly associated with 6 .HR outsourcing (HRO) is the application of different business models and techniques to new forms of activities or processes and radically redesigning them to create outputs of value for end users such as customers or employees. EDS and Accenture. for a specified period of time and at a negotiated fee. Any non-core . Business process outsourcing (BPO) is based on the principles of reengineering. HRO can be traced back to the definitive work of Michael Hammer and Jim Champy in Re-engineering the Corporation. the organization transfers responsibility for one or more activities or functions that would normally be performed in-house to a qualified vendor. An ongoing debate concerns which business processes are 'core' to organisations .

HR outsourcing has a huge potential for employment also. Experts believe that in present times HR outsourcing is undergoing a transition phase. It's set to become a $ 51 billion market worldwide in 2005. to name a few. EXULT and MAFOI are some of the prominent HR outsourcing services providers in India and the clients include giants of manufacturing. Payroll and benefits is widely outsourced with organizations benefiting from economies of scale and powerful Enterprise Resource Planning (ERP) solutions. India is barely skimming the surface of the HR outsourcing market potential.000 companies are discussing HR outsourcing as a way to cut costs and increase productivity. it would still be sometime before we see increased levels of HR activities being outsourced to India as lack of domain knowledge and quality are some of the critical issues. software and service industries like GE Capital.electronic delivery . Ford Motors.or 'e-HR'. Hyundai Motors. representing 39 per cent of the total business process outsourcing revenue. Competition among HRO providers has dramatically reduced prices. Other advantages for clients include: • cost reductions • service improvements • upgrading technology • being better able to respond to business change.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. Nasscom numbers are a million software jobs by 2005. Enron. but many more needs to be added to that list. India has immense potential as more than 80% of fortune 1. The Indian government is still grappling with drafting a data protection law designed to quell growing privacy concerns from their offshore clients. HRO would be about a 25 per cent of that. the future seems to be very promising. Much day-to-day HR administration can now be transferred to third party providers. Indian life Hewitt (ILH). The biggest problem . Right now. This is where Indian HR outsourcing companies face a major handicap.However. Satyam Group. Haldia Petrochemicals and HSBC. 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. 7 . Infosys. FIDELITY.

HR outsourcing was thought of as hiring a vendor to provide a service. HR outsourcing can include: 1. 2. as well as the transition of HR management and staff.With the new focus on outsourcing. 3. 8 .Discrete services In this instance. benefits.Types Of HR Outsourcing In the past. there is more of an opportunity to partner with the vendor to provide the service on a longer term basis rather than just a one-time vendor contract. HRIS.flexible spending accounts or employee background checks. payroll. one element of a business process or a single set of high-volume repetitive functions is outsourced to a third-party administrator. compensation and communications.Total HR outsourcing Total HR outsourcing represents the transfer of the majority of HR services to a third party. to include recruitment. the outsourcing of either health and welfare benefits administration or defined retirement plan and 401(k) plan administration to a third party administrator would be an example of multi-process or blended services outsourcing. However. along with strategic planning related to people management and other key HR functions at the discretion of management. HR executive management would normally remain in place within the organization.Multi-process services The complete outsourcing of one or more functional human resource processes would be an example of multi-process outsourcing (also called blended services). As such. Examples of discrete services include the annual open enrolment process.

The difference is that when functions are partially outsourced. the organization co-manages the function with the vendor. More than one-half of HR professionals indicated that their organizations partially outsourced an HR function. indicated that HR outsourcing was likely to increase in the next five years. the vendor takes full responsibility. and only a few planned to outsource HR functions in the next three years. However. when they are completely outsourced.However. large-staff-sized operations. about two-thirds of HR professionals predicted that their level of outsourcing would remain the same over the next five years. compared with small organizations. such as organizational strategy development and execution. the majority of HR professionals indicated that outsourcing allowed HR professionals the chance to concentrate their efforts on core business functions. pension benefits and payroll were examples of functions most commonly cited as partially outsourced. HR functions were usually partially outsourced or completely outsourced. When asked about the benefits of outsourcing. nearly three-quarters of HR professionals agreed that the role of HR professionals became more strategic with the outsourcing of certain.Literature Review Global Scenario SHRM Human Resource Outsourcing Survey Report The 2004 survey report revealed that HR outsourcing was a practice used by almost six out of 10 organizations. Outsourcing seemed to be favored to a greater extent in large-staff-sized organizations: almost twice as many HR professionals from these organizations. Correspondingly. HR functions. The top three functions that were outsourced completely were background checks. Administration of health care benefits. and nearly one-third expected their organizations to increase their level of HR outsourcing. one-third of organizations did not outsource any HR functions. employee assistance programs and administration of flexible spending accounts. 9 . compared with medium organizations. were twice as likely to indicate that their reason for outsourcing was an attempt to free up the time of their HR staff to focus more on organizational strategy. Some of the most frequently named drivers for outsourcing were reducing operating costs and controlling legal risk by improving compliance. When asked about the future of outsourcing.specifically transactional.

adding: "Here people are also not very clear about what exactly is manpower outsourcing all about. payroll processing. training and development to a third party who have expertise in these respective fields." Mahajan says. call centres and database management. fixed assets administration. says. network. though on a very low key yet in the latter.And the trend seems to have hit not just big multinational companies but the public sector and government undertakings as well. "HR outsourcing in India has not seen the required momentum and is limited to a trickle effect.A recent survey 'Outsourcing in the Asia-Pacific'. receivable and logistics management. or are unaware of the players operating in the area. the Indian companies do not seem to be enamoured by the opportunity till now and are not adopting HR outsourcing practices in a big way. putting the country in the middle of outsourcing boom. makingpayroll.manpower outsourcing is slowly becoming the new buzz in India too. say though foreign companies are outsourcing jobs to India.”Explaining about the concept of HR outsourcing.Experts. benchmark studies and statutory compliance. hardware maintenance. telemarketing. with companies outsourcing a few selected low-end HR processes."Even though across the globe companies are realising that headcount is directly related to the revenue and are outsourcing most of their transaction and administrationrelated work. confirms the situation. a global HR outsourcing and consulting firm. Kris Lakshmikanth. the general opinion among the Indian companies is that it is still economical to manage all their HR process internally. founder CEO & managing director of The Head Hunter. conducted by Hewitt Associates. the most common processes outsourced are related to training." Mahajan adds.""HR outsourcing can happen in areas such as payroll.Present Scenario In India With more and more companies looking to rationalise employees on their payroll. executive director. In India. Talent Hunt Pvt Ltd. employee benefits administration." says Anil Mahajan."It is a process of outsourcing involving particular tasks like recruitment. 10 . a leading HR firm in New Delhi. surveys. a recruiting firm in Bangalore. The survey showed that many companies in the region are either unfamiliar with the process and procedures of HR outsourcing. however.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 a rate of about 50 per cent.

Experts also believe that in present times HR outsourcing is undergoing a transitionphase. it makes sense to focus only on the organisation's core competencies and outsource non-critical business activities. ethics and quality of outsourcingvendors. Quality at times forms another roadblock. This gives the customer the feeling that they are not getting best value for their money." Experts say the basic reasons hampering the growth of HR outsourcing in India are confidentiality and cost factors.But. Philippines. Therefore. where it is moving from a corporate domain to public sector undertakings and the government sector. can be outsourced to third party vendors. But in order to ensure that its employees remain satisfied. it would still be sometime before we see increased levels of HR activitiesbeing outsourced. which they will receive from the vendor. In this context. Also currently there are no standard benchmarks available so pricing varies a lot from vendor to vendor for similar services. security breaches and overall confidence in the vendors deters many organisations. According to Mahajan. HR Outsourcing Human resources are the most critical assets of any organization as the organization's success lies in their hands. as the Hewitt survey puts it ‘with economic slump showing signs of improvement." they say. the company has to have a specialized human resources department that most of times proves to be a costly affaire. losing control over confidential data. However. decide to outsource their human resources management functions to offshore destinations. Lakshmikanth says. China. every organisation is aiming at achieving productivity by enhancing return on investments and achieving the economies of scale. A company may outsource a few or all of its HR related activities to a single or combination of service provides located in offshore destinations like India. What is HR Outsourcing? HR outsourcing is a process in which a company uses the services of a third party to take care of its HR functions. "There has also been a transition on its user acceptance. many HR outsourcing vendors are optimistic that things will look up inthe near future. routine administrative work."Today. Besides the fear of losing jobs. That is why most companies today. although important.Elaborating about the benefits of manpower outsourcing. 11 . “most companies are not sure about the end result.” he adds.

The basic services offered by HR outsourcing firms may include: • • • • Overseeing organizational structure and staffing requirements Recruiting. Advantages of HR Outsourcing HR outsourcing including personal outsourcing case studies have indicated that managing human resources involves specialized activities such as training. you can either outsource all your HR tasks or contract for services a la carte. PEOs (professional employer organization). or e-services. ASPs (application service providers). Depending on the size of your business and how much control you want to maintain over HR functions. offering a wide variety of services. and development Tracking department objectives. while others are specialists. helps concentrate on core business and most importantly helps in ensuring employee satisfaction. BPOs (business process organization). employee benefits and a lot more that many companies either don't have the proper resources or time to manage on their own. and strategies Employee and manager training 12 . goals. Whatever your company's human resources requirements. training. human resources outsourcing that includes hr recruiting outsourcing helps cut costs. ASPs and e services provide web based hr solutions like database maintenance. employee retention. HR data warehousing. Some HR outsourcing firms are generalists. To sum it up. In these categories the PEOs are the ones that assume full responsibility of a company's hr functions where as others such a BPOs. payroll administration. there's an HR outsourcing firm out there to meet those needs. focusing on specific areas such as payroll or recruiting. By doing so. employee database management. companies can concentrate on their core competencies saving their valuable time and resources.In this sense the HR outsourcing service providing firms or hr outsourcing company can be divided into four categories depending on the services they offer as. maintaining records. By outsourcing their HR functions companies can save huge amounts of money and be free of complications that are otherwise involved in maintaining an internal HR department. developing and maintaining hr software's etc.

Any one of those may be able to meet your HR needs. In addition to allowing you to concentrate on your core business activities. 13 . You have the option of working with an international. A PEO becomes the employer of record. or regional provider. If you don't need the comprehensive services of a PEO. check out our Buyer's Guide on Outsource Your HR Using a PEO. and the Web are the best resources for finding an HR outsourcing provider. including: • • • Providing you with skilled professionals who are focused specifically on HR Helping you reduce and manage operating costs Improving employee relations If you need to hand off the entire HR function. the Yellow Pages. workers' compensation. and all the other areas that fall under the HR umbrella.500 employees. outsourcing provides some key benefits. These businesses view HR outsourcing as a strategic tool that relieves them of HR responsibilities and enables them to focus on what they do best. consider a professional employer organization (PEO). payroll. handling employee relations. you can contract specific projects through an HR outsourcing firm to help you: • • • • • • Implement a human resource information system (HRIS) Create or update employee handbooks and policy manuals Develop and implement a compensation program Create or review a performance appraisal system Write and update affirmative action plans Provide sexual harassment training Referrals. national. benefits. For a step-by-step guide to using and hiring a PEO.• • Benefits administration Employee orientation programs Businesses that outsource HR are typically small-to-midsize firms with between 25 and 1. while you manage the employee's everyday business responsibilities.

Four Trends That are Changing Human Resources Outsourcing Renewals are the big news in human resources outsourcing.” 14 . he reports. he says renewals were typically sole source.” In the past. want to be sure their suppliers “will be able to serve them as they move forward.” Buyers. How buyers go about renewals is about to change. Buyers are becoming “much more aggressive in going out and getting a look at what’s going on in the landscape.Many organisations are considering Human Resources Outsourcing as a method of: • • Enhancing effectiveness by focusing on what you do best Increasing flexibility to meet changing business conditions. Buyers are also hiring more third-party advisors to help them out with their renewals. the exercise itself can be extremely complex and testing. They want to know the value of the supplier’s contribution. customer satisfaction. To assist in this respect it is now common to employ a series of templates and management guides. Mohammed Haque. and share-holder value • • However. estimates about $40 billion in contracts will come up for renewal from 2010-2012. Like other forms of outsourcing it must be meticulously managed from concept to implementation.” he explains. “Buyers are no longer willing to assume their suppliers are providing value. He predicts the automatic sole-source renewal without a market check “is going the way of the dodo bird because organizations want more visibility to the bottom line. he says. Executive Managing Director for ACS Total Benefits Outsourcing. “Then the question becomes: ‘Are we with a partner that’s investing and innovative?’ Because today it’s not just about cost effectiveness. he adds. Vice President & Head of Enterprise Solutions Service practice at Genpact.” The current economy accelerated this trend. “Buyers want to know if they are getting the right value for their money.” says Rohail Khan. demand for products and services and technologies Transforming the organization Increasing product and service value.

“While India has a significant advantage in delivering BPO services. The importance of global capabilities Don Schulman. it’s conceivable that some clients will have to balance a mix of suppliers until more suppliers are able to demonstrate a broader set of compelling capabilities. according to Katrina Menzigian.” He says they are looking for “existing suppliers that can deliver in new markets for them rather than looking for new suppliers in those areas. “she explains. Several factors are driving this tighter focus. BPO Research. “It is extremely important to understand the local nuances. she says. transactional versus talent management. for example. including the desire to match up-front investment with pay-back benefits. more are considering phased approaches that focus on one defined area at a time. Vice President. processes. adds that buyers facing renewal are also now asking whether they want their work “split across multiple outsourcers” or instead “want to consolidate it all together within a partnership that enables standardization across multiple locations. and clients — one that has a flexible model that’s global in nature.” Abid Ali. agrees global capabilities will become even more important in supplier selection.” Sue Marks. “These areas may be along individual process areas such as multi-country payroll. the need to feel confident in supplier capabilities. CEO of Pinstripe. Head of BPO at Tata Consultancy Services. and the realities of a shifting supplier landscape. In the near future. says buyers with operations in 50 countries. or recruitment or along categories of HR processes. Khan points out multinational companies are now asking for global benefits administration solutions.Shifting adoption patterns: taking a more focused approach With buyers more critically evaluating the benefits they stand to achieve from HR outsourcing. He says ACS is developing technology so that these companies can “tackle the big 15 . will want to select a supplier with proven capabilities in all those regions. General Manager. customers are working with providers that have a global delivery footprint. benefits.” states Menzigian. Everest Group. Finance and Administration for IBM.

HR spend is part of the selling.unknown chunk of spending they’re not aware of. In the past. “Buyers want to extend the definition of HR outsourcing” to include these things. is showing up.” They are things like wellness. They will be forced to focus on solving these kinds of problems.” Khan continues. which is a direct hit to their bottom line. “Organizations are understanding the value of a wellness program. In this economy. absence management. For example. employers will not be able to give employees as many benefits as they historically have offered. All have advantages for HR buyers. Khan posits these types of buyer challenges “will force providers to focus on innovation and investment to expand the notion of benefits administration to the natural adjacencies. and administrative (SG&A) expenses. HR organizations viewed employee retirement and health/welfare selection decisions as separate transactions. In addition.” 16 . the current economic situation is forcing CEOs to have laser vision on their costs. We can help them understand their overall global spend.” the ACS executive continues. general. a more efficient off-boarding process can ensure an organization doesn’t pay people longer than it should. They can understand where absenteeism. voluntary benefits. He says both buyers and suppliers are trying to figure out how this will impact HR decisions going forward. Changes in benefits administration A fourth trend is the integration of what Khan calls “the natural adjacencies of benefits administration. “Finding ways to help employees derive benefits will absolutely be part of the HRO requirement.” Process convergence Process convergence is another trend.” Khan points out. he says. and onand off-boarding. Today he says progressive HR managers are asking how they can make health and welfare decisions converge. And enterprises can minimize their healthcare costs with a wellness program to change behavior. “There weren’t a lot of connect points.

” She says. In sum.” One thing is sure: “Providers can no longer milk their 15-year-old platforms. “In the past. recruitment.” Adds Khan. HR leaders will have to help their buyer organizations “garner the capability to drive the right 17 . people outsourced the process or the platform. and workflow administration. and development as long as the supplier has developed the core HR services like payroll. for their survival.” Marks believes “the only way to adjust is to leverage technology to improve your efficiency and make your workload manageable.” In her opinion. “so there are no more excuses.” Haque says buyers want to outsource the complete HRO services package. Marks says “the economic turbulence is a tremendous opportunity for HR leaders to come back in a new.” she says. and more impactful way.The new preference for platforms Marks points out early HRO buyers outsourced “bits and pieces” of the process. Now they want to outsource them together and have the supplier charge them on a per-employee per-year basis. going forward.” Khan predicts this convergence will force providers “to be clearer and more explicit about their investment strategies and how they translate innovation into real capabilities that help buyers solve problems.” She says the demand is greater than ever before and the technology has evolved.” Instead. they will have to “constantly reinvent their offer because that’s what buyers will demand. time and attendance. HR leaders need to step up and support their teams with “technology that addresses their need to manage the swelling pipeline of passive and active candidates and deliver the best possible candidates to those companies who are relying on them now. “They can accelerate change in shared services initiatives and not just transform but revolutionize the organization when combined with HRO and RPO. more than ever.” Cloud-based services and SaaS applications can evolve the way suppliers design traditional HR services.” suppliers not willing to invest will lose market share “because there are too many suppliers that will invest. more focused. Now.” He says this is both “a dramatic change and challenge. learning. “buyers are looking for the complete end-to-end solution where the supplier can provide the process services as well as the platform. “It’s not going to be good enough just to be an administrator and a manager of transactions. which includes talent management.

human capital management. Hewitt Associates LLC and Ceridian Corp. Rather. corporate governance. By allowing companies to rely on external experts to manage HR functions such as payroll and benefits. Accenture.” Economic modeling. a senior research analyst at Info-Tech Research Group. and more productive. Policy enforcement. Hopefully these changes will help corporations become more profitable and employees become healthier. Cut Costs While small companies often lack the in-house expertise needed to manage HR functions effectively. from recruiting fresh talent to overseeing payroll. strategic planning. improve services and grant growing companies access to enterprise-class benefits outcomes. that’s simply not the case for large enterprises. Large enterprises also have something to gain from turning to providers such as ExcellerateHRO Corp.” believes the Pinstripe CEO.” said Jennifer Perrier-Knox. is a burdensome and time-consuming activity. increased productivity and organizational restructuring are business-critical undertakings far more likely to improve a company’s bottom line and increase employee satisfaction. HR outsourcing can cut in-house staffing costs. “HR outsourcing makes complete sense for a large organization. strategic marketing — all will become part of the new HR professionals’ tool kit. Here are some reasons why: Shift Focus Keeping tabs on a large enterprise’s HR functions. HR Outsourcing: Not Just for Small Companies Small businesses have long been singing the praises of HR outsourcing — and for good reason. But small startups aren’t the only ones benefiting from HR outsourcing arrangements. “HR will become less about administration and compliance and more about executing on strategy and capability. HRoutsourcing’s main 18 .” according to Perrier-Knox. by handing over these activities to a third-party provider. a company’s in-house HR team can shift its focus from mundane administrative tasks to “competitive differentiators. wealthier. However..

large corporations would be wise to turn to an HRO (HR outsourcer) for “deeper knowledge and expertise [of the most recent regulatory compliance issues]. However.” said PerrierKnox. Achieve Compliance These days. “HR outsourcing can reduce operating costs and eliminate the need to buy new in-house IT systems. As a result. Said Perrier-Knox.000 to millions of dollars.” warned Perrier-Knox. recreational opportunities. That’s no surprise given the enormous pressure on HR professionals to stay abreast of the latest legislative changes pertaining to benefits regulations.” According to a recent Watson Wyatt Worldwide report. “from a cost-reduction perspective. “Where large companies can really benefit from HR outsourcing is in the area of cost reduction. Granted. In fact.982. 19 . making modifications and adding new modules to an enterprise-wide HR management system can be a costly and complex endeavor. day and senior care. one of the most heavily outsourced areas of HR is regulatory compliance. many corporations are better off financially going with an HR outsourcing provider. failure to meet these regulatory requirements can result in devalued stock prices.” Seamlessly Relocate Employees So much for sitting tight. disgruntled employees and a tarnished reputation. there is going to be a lot of organizational restructuring that may require the movement of employees from location to location. and spousal employment. corporate governance and claims management. But when you factor in costs associated with the ongoing training and recruitment of in-house HR personnel. angry shareholders. Fortunately.” Simplify Your IT Environment As a company grows and changes. a study released by Everest Research Institute reveals that more than half of all HR outsourcing transactions involve regulatory and compliance services. “Given the economy the way it is. Perrier-Knox said. the average operating expense for HR functions for each full-time HR employee is $284. What’s worse.attraction for large corporations is its ability to cut costs. so too must its in-house HR systems. an HR outsourcing arrangement can cost anywhere from $200. An HR outsourcing provider can help transferred employees find the right home.

Negotiate Discounts For small businesses. vendors such as ExcellerateHRO offer services that address any cross-cultural and cost-of-living issues that may arise in each transferred employee’s new location. “One thing you cannot outsource at all is your basic HR leadership. from a strategic perspective. However. decision-making and to manage the relationship with an HRoutsourcer .” In a small company. sizable companies have the luxury of being able to negotiate factors such as volume-type discounts on group benefits packages. Big companies should always retain somebody inhouse. that point person may be the CEO. in order to oversee corporate policy. Key Points we noted: • • HRO market is still in transition Vast difference exists between the state of HRO market in India and the global scenario People not yet clear about HRO in India Public Sector hasn’t yet taken to outsourcing Cost/benefits and confidentiality are most important considerations in HRO More freelancers exist in the market than organized players Size of companies is also an important factor in HRO HRO is expected to gain momentum in the coming years • • • • • • 20 . there are limitations to consider. That’s not to suggest. Rather. Warned Perrier-Knox.What’s more. Perrier-Knox said that large corporations need to appoint a dedicated HR professional to ensure that benefits such as reduced costs and regulatory compliance are managed. however. an HR outsourcing arrangement grants immediate access to enterpriseclass benefits packages. that HR outsourcing fails to provide large corporations with any benefits-related perks. While it’s obvious you don’t have to be a mom-and-pop shop to benefit from an HR outsourcing arrangement.

3) The data collected will help in finding parameters which are most common in terms of HR outsourcing. 21 . 2) The project aims to discern common factors promoting or inhibiting the growth of HR outsourcing industry in India.Objectives 1) The objective of this project is to formulate a picture of current trends in outsourcing in HR services prevalent in Indian firms. 4) The research tries to determine patterns while comparing organizations involved in HR outsourcing against those which are not.

Secondary data collection large amount of secondary data is available in the forms of articles. 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. journals. executives in various organizations were contacted through telephone and e. and previously conducted researches on the similar topics. For this purpose.Methodology Two methodologies were adopted while undertaking the research: 1.Primary data collection Primary data was collected through the means of a interview and corporate literature.mails and their responses were recorded The data collected was then analyzed. Following questions were asked to the employees/ respondents 22 . 2.

Which of these HRM services are outsourced by your organization? Providing Temporary staff Recruitment & selection Training & development Managing Payroll syatems Managing benefits Conducting Employee surveys Complete HR function 0 2 2 1 0 0 0 2 out of 5 companies outsource recruitment and selection 2 out of 5 outsource training and development 1 out of 5 outsource payroll systems 23 .Analysis 1)Do you outsource any of your HR services? Aditya Birla Group Birla Sunlife Kotak Life Insurance Aviva Dalmia Cements yes yes yes yes yes All the 5 companies outsource their HR services 2).

3.)Which of these factors are major reasons for outsourcing HR services? Cost savings Increased capacity Lack of internal staff / capabilities Access to better systems and technology Other factors 3 0 1 1 0 3 out of 5 companies think that cost saving are the major reasons for outsourcing HR services 1 out of 5 companies think that access to better systems and technology is the major reason for outsourcing 1 out of 5 companies think tht lack of internal staff is the major reason of outsourcing 4)Which of these are major risks associated with outsourcing HR services? Mismatch of cultures Security of Database Financial stability of chosen vendor Justification of cost-benefit calculations Other factors 0 1 2 2 0 24 .

2 out of 5 companies think that major risks associated with outsourcing HR services is Financial stability of chosen vendor 2 out of 5 companies think that major risks associated with outsourcing HR services is Justification of cost-benefit calculations 1 out of 5 companies think that major risks associated with outsourcing HR services is Security of Database 5).While outsourcing more than one HR services. which of the following approach do you utilize? Consolidating all HR services under one vendor Employing different vendors for different HR services 3 2 25 .

which of these parameters are most important parameters for vendor selection. 2 0ut of 5 companies think that while outsourcing Brand Name of Service Provider is the most important parameters for vendor selection. 2 0ut of 5 companies think that while outsourcing that range of services offered is the most important parameters for vendor selection being 26 . Cost Brand Name of Service Provider Range of Services being offered Flexible Contract Options Other factors 3 1 1 0 0 3 0ut of 5 companies think that while outsourcing cost is the most important parameters for vendor selection.3 out of 5 companies While outsourcing more than one HR services approach utilized is Consolidating all HR services under one vendor 2 out of 5 companies While outsourcing more than one HR services approach utilized is Employing different vendors for different HR services 6)While outsourcing HR services.

7)Do you think that outsourcing HR services has achieved its purpose for your organization? 4 out of 5 companies think that outsourcing outsourcing HR services has achieved its purpose for your organization 8)Which metric do you use for measuring the effectiveness of outsourcing HR services? Cost saved due to outsourcing Service level improvement Increase in employee satisfaction Other factors 2 1 2 0 27 .

2 out of 5 companies use cost saved due to outsourcing as a metric for measuring effectiveness of outsourcing HR services 2 out of 5 companies use Service level improvement as a metric for measuring effectiveness of outsourcing HR services 2 out of 5 companies use Increase in employee satisfaction as a metric for measuring effectiveness of outsourcing HR services 28 .

Recommendations 29 .

Conclusion 30 .

Limitations 1)We could not include the HRO vendors in our research to gain their perspective 2)Our respondents were from specific areas and did not cover the whole of India 3)We missed out on some sectors in our research 31 .

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