| HUMAN RESOURCE PRACTICES AT PRESENT IN | | | | more prevalent among foreign companies that have |
| BOTH ORGANISED AND UNORGANISED SECTOR | | | | established operations in India. |
| IN INDIA | | | | v Outsourced expertise – where staff |
| ABSTRACT | | | | expertise is provided as an outsourced service rather |
| Corporate focus on the implicit and explicit costs of | | | | than processing services, observed particularly among |
| human resources has never been Greater and | | | | small and medium sized companies that find difficulty |
| outsourcing employee benefits administration can | | | | retaining skilled, senior HR staff. |
| create greater efficiency while decreasing costs. This | | | | v The outsourcing of HR processing, |
| paper attempts to study the HR outsourcing | | | | including payroll (inclusive of timesheets processing, |
| phenomenon with respect to the organized and | | | | salary, pay slips, issuance of checks, deduction, |
| unorganized sector and also how companies in India | | | | computation etc) and benefits processing. |
| are reacting to the HR outsourcing phenomenon. This | | | | Areas of HR Outsourcing |
| study throws light on the demographics involved in | | | | HR outsourcing can happen in various areas such as |
| both sectors. The profiles of employees in both | | | | payroll, employee benefits administration, fixed assets |
| sectors with regards to gender, age, education, | | | | administration, network management, receivables |
| experience and work they do have been classified in | | | | management, logistics management, hardware |
| this study. | | | | maintenance, telemarketing, call centers and database |
| HUMAN RESOURCE PRACTICES AT PRESENT | | | | management. In India, the most common processes |
| IN BOTH ORGANISED AND UNORGANISED | | | | outsourced are related to |
| SECTOR IN INDIA | | | | Training, payroll processing, surveys, benchmark |
| INTRODUCTION | | | | studies, and statutory compliance. |
| Today, every organization is aiming at achieving | | | | Benefits of HR Outsourcing |
| productivity by enhancing return on investments and | | | | If tactical processes are outsourced, the company |
| achieving the economies of scale. In this context, it | | | | could re-deploy their trained HR resources to core |
| makes sense to focus only on the organization’s | | | | processes. Today, every organization is aiming at |
| core competencies and outsource non-critical business | | | | achieving productivity by enhancing return on |
| activities. Therefore, routine administrative work, | | | | investments and achieving the economies of scale. In |
| although important, can be outsourced to third party | | | | this context, it makes business sense to focus only on |
| vendors. We shall also look at outsourcing outfits like | | | | the organization’s core competencies and |
| India Life Hewitt, Ma Foi and study their roles in the | | | | outsource non-critical business activities. Therefore, |
| entire HR Outsourcing scenario. With more and more | | | | routine administrative tasks, although important, can be |
| companies looking to rationalize employees on their | | | | outsourced to third party vendors |
| payroll, Human Resource outsourcing is slowly | | | | Factors hampering the growth of HR Outsourcing |
| becoming the new buzz in India. Companies to whom | | | | The basic reasons hampering the growth of HR |
| organizations outsource their Human Resources | | | | outsourcing in India are confidentiality and cost factors. |
| function possess the knowledge and resources to | | | | Many companies outsource only a bit of their |
| expertly perform part or all of a clients' human | | | | requirements because of the above two factors. |
| resources function, allowing the client to streamline their | | | | Besides, the fear of losing jobs, losing control over |
| internal processes and concentrate on generating | | | | confidential data, ethics and quality of outsourcing |
| profit in their core business. | | | | vendors, security breaches and overall confidence in |
| HR outsourcing in India | | | | the vendor deters many organizations. |
| Estimates show that the latent size of HR | | | | Some companies can also be reluctant because |
| outsourcing in India is about $2 billion with a current | | | | they may not have an adequate grip over the |
| market of $27 million and it is growing at a rate of | | | | cost-benefit equation of outsourcing. Companies need |
| about 50 per cent. HR outsourcing in India has not | | | | to be convinced before they can outsource select HR |
| seen the required momentum and is limited to a trickle | | | | activities. Adding to this are issues like cultural mindset |
| effect, with companies outsourcing a few selected | | | | and psychological acceptance. An in-house HR person |
| low-end HR processes. Companies who haven’t | | | | handles certain situations that an outsourcing agency |
| joined the HR outsourcing bandwagon are either | | | | cannot handle well (things like building employee |
| unfamiliar with the process and procedures of HR | | | | incentive programmes, taking care of recognition for |
| outsourcing, or are unaware of the players operating in | | | | employees). At times, many employees would want |
| the area or are unaware of the probable value | | | | someone in-house to resolve their work-related |
| obtained from doing so. Today, every organization is | | | | problems or disputes. Then there are also issues in |
| aiming at achieving productivity by enhancing return on | | | | terms of pricing of outsourcing HR services. There are |
| investments and achieving the economies of scale. | | | | no standard benchmarks available so pricing varies a |
| Therefore, routine administrative work, although | | | | lot from vendor to vendor for similar services. |
| important, can be outsourced to third party vendors. | | | | Problems faced by companies outsourcing to them |
| The projections for mentioned outsourcing HR | | | | v Lapse of deadlinesv Problem solving |
| activities are mentioned below: | | | | within time limitv Systems problemsv |
| Pay Roll Services | | | | Losing control affecting certain processesv |
| 761 | | | | Can affect brand image and quality of services |
| Benefits administration | | | | Problems faced by companies who do the |
| 536 | | | | outsourcing work |
| Education and Training | | | | v Resistance from employees who have |
| 558 | | | | handled the outsourced HR function for |
| Recruiting and Staffing | | | | many years.v Attitude |
| 348 | | | | problem |
| Personnel administration | | | | They spoke about the hidden benefits which can be |
| 167 | | | | attributed to HR Outsourcing. |
| Other HR Functions | | | | v Software upgradation benefitsv |
| 192 | | | | Liaising with government department officialsv |
| Total | | | | Legal know how – knowledge about regulatory |
| 2560 | | | | proceduresv Knowledge about Best |
| HR Outsourcing market is increasing worldwide ($51 | | | | Practices in the industry |
| billion) representing approximately 39 percent of the | | | | Profiling freelancers in the unorganized sector and |
| total business process outsourcing revenue. HR | | | | consultants in the organized sector of HR Outsourcing. |
| Outsourcing also helps the HR professional to play an | | | | Most of the freelancers had at least a decade of |
| important role in corporate downsizing efforts and | | | | work experience in the field of Human Resources. |
| facilitates access to new ideas and approaches | | | | Those with lesser number of years of work |
| outside the organization | | | | experience did not want to set out on their own yet |
| Factors to implement a successful outsourcing | | | | mainly due to lack of contacts. Most of the freelancers |
| decision | | | | said that a HR degree from a well known institution |
| - It is important to layout your outsourcing goals | | | | was one of the factors that really helped them in |
| clearly before making anoutsourcing decision | | | | getting projects from companies. |
| - Organisations must look into the short as well as | | | | Most of those from non-related |
| long term objectives | | | | HR field have made it in the field of freelancing on the |
| - Organisations should consider who will control | | | | basis of their work experience and ability to |
| outsourcing decision and why It is necessary to find | | | | network The above pie chart shows for how many |
| out how well the company’s culture will support an | | | | years those who have been interviewed have been |
| outsourcing decision | | | | freelancing. |
| - It has to be decided that it is better for your | | | | The HR Outsourcing market in India is not mature |
| operation to be centralized or decentralized before | | | | enough; one has to rely on word of mouth publicity to |
| outsourcing | | | | get contracts/training workshops. Pricing also |
| Guidelines to Outsource – Non-core HR Activities | | | | depends on whether the training is in a niche area and |
| If an organization decides to outsource its non-core HR | | | | what level of training is required. i.e. whether it’s for |
| activities, it must not only be guided by the cost factor | | | | junior, middle and senior management level. HR |
| alone, but also look for a cultural fit, and a commitment | | | | initiatives projects are priced according to factors like |
| to quality. One must look into the range of services, | | | | multi-location, how many Freelancers/consultants |
| which a vendor is going to offer, and what are its | | | | working on it etc. |
| expertise, experience in offering such services, | | | | Pricing also varies when the freelancers have done |
| resources, and flexibility of its contracts . Depending | | | | their post graduation at a well known Institution within |
| upon the type of function an organization has to | | | | the company and when a well known consulting form |
| outsource, it can select a professional employer | | | | has undertaken a project with a company. |
| organization or hybrid outsourcing firm. | | | | Conclusion |
| Guidelines to Outsource – Core HR Activities | | | | 1. Outsourcing can replace the fixed overhead costs of |
| If the organization wants to focus solely on core | | | | the traditional workforce with the variable costs of |
| business or there is a lack of HR capability, then PEO | | | | services provided by a service provider (in case HR |
| is the right decision, which may help in recruitment and | | | | processes and systems are being outsourced). The |
| selection, can keep the employees’ record, and | | | | variable costs are typically lower due to providers’ |
| administer the benefit program and payroll. If | | | | economies of scale, newer technology, better process |
| organization doesn’t feel comfortable handling all of | | | | efficiencies and enhanced service measurement |
| HR responsibilities or it doesn’t require a full range | | | | capabilities. |
| of services, then it may opt for outsourcing selected | | | | In case of freelancers or consultants, it’s their |
| functions. | | | | expertise in a particular subject matter thatis brought |
| Factors to be considered before signing a contract | | | | to the table at a cost effective price. Crucial to |
| v Understanding company goals and | | | | success in HR outsourcing is keeping this bigger picture |
| objectivesv A strategic vision and | | | | in mind. |
| planv Selecting the right vendorv | | | | How will HR outsourcing help or, possibly, hinder these |
| Ongoing management of the relationshipsv | | | | goals. Organizations must keep these questions at the |
| A properly structured contractv Open | | | | heart of their decisions about whether to outsource |
| communication with affected individual or | | | | HR, to what extent this business process will be |
| groupsv Senior executive support and | | | | outsourced and which vendor to choose. Every |
| involvementv Careful attention to personnel | | | | company’s vision for outsourcing is to use it as a |
| issuesv Near term financial justification | | | | driver for continuous improvement in service quality |
| Three models of outsourcing | | | | and for effecting sustainable, long term cost reduction. |
| v Outsourcing of the complete HR function- | | | | |