New Research Finds Step up in Adoption of HR Outsourcing in Australia

hr outsourcing

By Martin Conboy, President – Australian BPO Association

The broad adoption of HR outsourcing across Asia Pacific has emerged as the main finding of regional research conducted by Talent2 (ASX:TWO), a HR BPO organisation. The’Talent2 APAC Market Pulse Study’, was commissioned by Talent2 and conducted by Galaxy Research to understand the current state of the HR industry across selected Asia Pacific markets.

576 senior HR and C-suite executives from Australia, China, Singapore and Hong Kong participated in an online survey to share their views of the challenges in the HR industry and their current business practices.

The Study found that across Australia, Hong Kong, China and Singapore the majority of HR executives (80-90%) are now considering HR outsourcing as a solution to key challenges cited, including search and recruitment (64%) and employee retention (50%).

One of the many choices for human resources departments is the HRO model (Human Resources Outsourcing). With HRO, you’re relieving your company from the responsibility of administering and handling human resources functions and issues.

In order for a HR department to function properly, the personnel within the department must work with the employees of other departments to ensure a smoothly run HR department. With HRO this is accomplished in a variety of ways, including: a rapid response to requests and the implementation of necessary transactions through a variety of media mediums (web chatting, telephone support, and online). Smaller organisations cannot always afford the luxury of having a fully operating HR department. However, through HRO these enterprises can operate their HR in a manner similar to larger companies. This can be described as BPaaS (Business Process as a Service), which is a definition that has emerged recently. It is a catch all term that is increasingly being used to refer to a range of cloud enabled innovations and strategies within the broad outsourcing, BPO and shared services marketplace.

There are many advantages in having a well-managed human resources department within a company. By outsourcing your human resources department you’re partnering with an HRO that provides you with access to an assortment of products and services that leverage human resources best practices in handling your company’s payroll, benefits, tax and compliance.

Essentially, BpaaS refers to a situation where BPO and outsourcing service-provider personnel perform activities on behalf of a client to deliver a business service using a software application. Operating under a specific or unique cloud environment, the range and type of BPaaS being utilised will match the range of BPO Services being offered, including contact centres, human resources, payroll, finance and accounting, marketing and so on.

Anecdotal evidence form the survey suggested that companies in Australia and across Asia are dividing their work forces and clustering them around available skills and linking them by cloud based technologies, so instead of moving people to where the work is, they are moving the work to where the people and the skills are!

Commenting on this findings Melanie Fitzpatrick, Global Marketing Director, said: “The fact that the overwhelming majority of HR executives are outsourcing HR functions (or are considering doing so) represents a massive shift in the industry – even compared to five years ago. Nelson Hall’s June HR Outsourcing Index backs this up with the industry reporting a 10% increase in confidence in the HRO sector over the last quarter. It clearly shows that outsourcing is now being considered as a strategic solution, rather than a cost-cutting tactic in response to the GFC.”

Study Findings – Australia

Consistent with APAC findings, Australia is seeing strong utilization of outsourcing as a solution to many HR challenges, with 87% outsourcing one or more HR functions and 95% seeing clear benefits of outsourcing. Almost one in five (17%) are turning to outsourcing as a means of addressing skill shortage problems.

Despite our oft-cited ‘two-gear’ economy and the lingering effects of the GFC, training remains a priority for many HR executives, with 48% looking to increase investment in learning and development over the next 12 months. Few (2%) expect to cut investment in learning and development.

Summaries of key findings for Australia are as follows:

Outsourcing:

  • In the case of search and recruitment, 71% of HR executives outsource all or part of this function. Employee learning and development (41%) and HR consulting (37%) are other functions likely to involve an element of outsourcing.
  • The specialised knowledge of the outsourcing company (67%) is the most commonly cited benefit of outsourcing. Another key benefit of outsourcing was that it enables businesses to free up resources and play to their strengths by focusing on their core competencies (58%).
  • Outsourcing also offers stability to many businesses, with 45% finding it to be a benefit in relation to coping with peaks and troughs in business activity.
  • Some drawbacks are associated with outsourcing, with the main one being that external providers lack detailed knowledge about the business (63%).
  • Cost (49%) and a lack of consistency from outsourcing companies (46%) are also considered drawbacks by some HR executives
  • As many as 53% of HR executives would consider starting to outsource or increasing their commitment to outsource some HR functions in the next 12 months. Search and recruitment (33%) is the function most likely to be considered for outsourcing, followed by employee learning and development (15%) and payroll (12%).
  • For many (33%) outsourcing has either been an improvement on the old systems or exceeded expectations. A further 56% acknowledge, however, that service delivery has been inconsistent.

Ms. Fitzpatrick continues: “The Study clearly demonstrates that Australian companies are continuing to consider outsourcing as a compelling solution to many of the HR challenges cited – skills shortages, recruitment and employee development and many more – and they are also interested in thinking about new ways of running their HR and their business. “

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