HR outsourcing growing



By Kate Southam

Outsourcing human resources might have started as a cost cutting measure in the GFC but it is now an accepted business strategy across the Asia Pacific according to Australian firm Talent2.

A survey of 576 senior decision makers in Australia, Singapore, China and Hong Kong found more than 80 per cent were considering outsourcing with 87 per cent of those in Australia already outsourcing one or more HR functions.

The survey results, carried out by Galaxy Research, form the basis of Talent2’s new and ongoing APAC Market Pulse Study. The inaugural survey looked at HRO for pay roll, recruitment, staff retention, internal training and leadership development as well as the issues facing HR executives.   

Talent2 CEO John Rawlinson says the trend to outsource HR represents a major shift in the way organisations operate. A shift Talent2 plans to capitalise on by deepening its offering as an “end-to-end” HR business solutions provider.

Mr Rawlinson pointed to a report by analyst and advisory firm Nelson Hall in June that showed confidence in using HR outsourcing (HRO) had grown by 10 per cent compared to the previous month.

“[The Nelson Hall June Index] clearly shows that outsourcing is now being considered as a strategic solution, rather than a cost-cutting tactic in response to the GFC,” he said.

Mr Rawlinson claims Talent2 is the only company in the market providing end-to-end HR services and says the company is positioning itself for major growth across the region. He said an end-to-end service was particularly attractive to multinationals in the region looking to deliver a consistent service to staff wherever they are. Talent2 hosts data in Australia and China, another attractive feature to regional clients.

Mr Rawlinson explained that many organisations were cautious about using any service where data would be hosted in the US because it was not deemed private. The USA Patriot Act introduced after 9/11 enables US officials to view any information hosted in the US.

Security and confidentiality issues were cited as an obstacle for considering outsourcing by 44 per cent of the HR executives surveyed in China.

Mr Rawlinson said another issue facing China were university graduates who are not job ready. Young people with the right skills in China are moving jobs as quickly as every six months collecting salary increases of up to 30 per cent.

This was creating a market for services ranging from training to on boarding and career development.

“People still want to work in organisations they believe are interested in developing them,” Mr Rawlinson said.  

He said there were still gaps between what organisations needed from HR and what they were able to deliver. He added that outsourcing HR functions provided HR executives with the opportunity to spend more time on strategic work that delivered better outcomes to the bottom line.

“HRO helps HR get a seat at the strategic table in their business,” he said.

Other findings from the Galaxy research include:

When asked what role HRO currently plays in their organisation, 71 per cent of respondents nominated search and recruitment, 41 per cent learning and development and 37 per cent HR consulting.

Barriers to HRO indentified by the survey group included that external providers lacked knowledge about their business (63 per cent), cost (49 percent) and service inconsistency (46 per cent).  Of those executives surveyed in China 44 per cent cited security and confidentiality as concerns.

When asked to nominate their HR challenges, 67 per cent of respondents from Australia were dealing with skills shortages. Looking at those in organisations with more than 250 employees as a sub set, 77 per cent of executives identified skills shortages as an immediate challenge.

Despite this only 17 per cent were using HRO to tackle skills shortages but this is expected to be a growth area. Strategies currently being used to alleviate skill shortages include upgrading the skills of existing staff (63 per cent), use of hire contract/temporary staff (55 per cent), importing staff, (34 per cent), having existing staff work longer hours (28 per cent).

Staying in Australia, 71 per cent of executives outsource all or part of search and recruitment, 41 per cent learning & development, and 37 per cent HR consulting.