HR outsourcing is growing steadily as more and more organisations are looking to standardise their global HR operations, access the latest technology and save money through recruitment process outsourcing, Carol Haag from PA Consulting shows.
HR outsourcing has grown massively in recent years, accounting for one fifth of all outsourcing deals in 2014, the arvato UK Quarterly Outsourcing Index shows. The index found that there was £126 million worth in HR outsourcing contracts in 2014, with the vast majority (90%) of these coming from the private sector.
The increase in Human Resource Outsourcing (HRO) is partly accounted for by the changes brought through by cloud based and software based HR, moving away from more rigid ERP platforms, which is better able to provide for the needs of clients. “The changes in HR have been ramping up extremely rapidly over the last three years. With [HR software system] Workday exploding onto the market, it has driven the HRO providers to get to grips with cloud-based solutions as a base for delivering services, and this is really cutting a swathe through the HR solutions and outsourcing market,” explains Carol Haag, outsourcing specialist and managing consultant at PA Consulting Group.
Organisations are also looking to simplify their global HR operations by entering into Recruitment Process Outsourcing (RPO) agreements with global HRO organisations. “Organisations want to be able to contract with one provider across the globe, so tapping into the different regional cultures and understanding how to attract and retain talent in different geographies is becoming increasingly important. Global firms are looking for end-to-end solutions to manage contingent workers – a growing trend to address the nonstandard employee commitment,” Haag adds.
The move to replace internal teams with RPO is seen to be the effect of maturity in service providers as well as companies looking to reduce costs and to focus their talents on more core business operations. “Organisations are alive to the fact that they can free up more of their team’s time to focus on business-critical tasks by outsourcing core services. In tandem, as the market has matured, suppliers have developed the expertise and sophisticated products and services to handle more complex activities,” explains Sally Campbell from arvato UK. “We’re now seeing evidence that UK organisations increasingly entrust more judgment-based processes, such as recruitment and talent management, to third parties.”
The index highlights that talent management is a key driver in HRO, along with the increased standardisation in employee benefits administration that comes with RPO service providers. The RPO is also able to offer more advanced technological and social media based solutions to talent acquisition and management that internal teams are not equipped or trained to deal with. According to the index, there has been a big increase in RPO within wider HR contracts, jumping from 0% of multiservice HR contracts in 2013 to 50% in 2014.
Haag does however highlight that it takes time to integrate the cultural nuances that exist between the RPO party and the vendor. Companies will need to provide some leeway and focus “initial expectations from RPO […] to bring in expertise to enhance or even replace the in-house capability and to save money. It is in its second, third and even fourth generation of contact renewal – the more embedded the RPO operation is, the higher the level of benefits achieved.”
According to Haag’s prediction, the long term RPO services will be further streamlined towards connecting candidates and organisations through more digital channels such as online services and apps. “RPO providers will make it easier and quicker to access job portals, apply and be interviewed and get onto the on-boarding process,” concludes Haag.