Where offshoring HR operations comes into its own

BANGALORE, IND: Increasingly, large enterprises are outsourcing their HR functions to third parties who offer ‘single window' solutions, usually via the shared service center model. Since much routine HR work can be done with limited face-to face contact, offshoring is the logical next step in this trend. Indeed, many organizations are now moving HR administrative functions either offshore (typically to India or the Philippines) or near-shore (for instance to Poland or the Czech Republic). Most major business process outsourcing providers are following this route.

"If handled right, this can save money, boost performance, aid the standardization of HR processes globally and free on-shore personnel to concentrate on the more strategic aspects of their work", said Sushil Tayal, LogicaCMG’s director, HR, global service delivery, India.

The most commonly offshored HR services are payroll administration, employee benefits administration including shares and stock options, pension and retirement plans, relocation services, global recruitment support, employee database maintenance, training support and legal and compliance.

The reasons for outsourcing HR functions offshore

• Reduced costs Savings from low operating- cost locations and economies of scale (eg, lower  telecommunications and technology overheads)
• Sharper business focus Domestic HR personnel can be freed up to concentrate on core strategic work
• Better service Demanding service level agreements bring better services and more effective monitoring
• Round-the-clock operations Time differences are no obstacle – providers can operate 24 hours a day, or complete tasks while the client country sleeps
• Specialist expertise Many offshore outsourcing providers have become subject matter experts. They can help standardize processes worldwide, eliminate duplication and create world class HR service centers
• Bigger basket of services Offshore providers can supply a range of services that organizations would struggle to deliver internally or through domestic partners.

The challenges to overcome

Offshore outsourcing also brings with it challenges. The problems most often cited are lack of detailed planning and inadequate progress monitoring.

Getting these things right first time is crucial: there should be absolute clarity about what is to be achieved and how performance is to be measured. To avoid misunderstanding, processes should also be mapped in detail well in advance. Because large-scale HR offshoring brings the best return on investment, it’s also important that the entire client organization is unified behind any offshoring project. To this end, management should be closely involved from the start. They are the people who can bring in large numbers of HR functions into the new set-up and, by investing their time, ensure thorough transfer of knowledge. Similarly, in-house HR departments should be involved from the planning stages through to implementation, to make sure that the processes decided on fit into their culture and way of working.But LogicaCMG knows that these challenges can be overcome, and the vast majority of organizations that use HR offshore outsourcing are pleased with the results they see. Most HR professionals believe that offshore outsourcing is helping HR move from being an operational services provider to a true strategic partner. And that transformation should continue as organizations look to expand the range of HR services that are handled offshore.