Posts Tagged ‘sector’

HUMAN RESOURCE PRACTICES AT PRESENT IN BOTH ORGANISED AND UNORGANISED SECTOR IN INDIA

ABSTRACT

Corporate focus on the implicit and explicit costs of human resources has never been Greater and outsourcing employee benefits administration can create greater efficiency while decreasing costs. This paper attempts to study the HR outsourcing phenomenon with respect to the organized and unorganized sector and also how companies in India are reacting to the HR outsourcing phenomenon. This study throws light on the demographics involved in both sectors. The profiles of employees in both sectors with regards to gender, age, education, experience and work they do have been classified in this study.

 HUMAN RESOURCE PRACTICES AT PRESENT IN BOTH ORGANISED AND UNORGANISED SECTOR IN INDIA

 INTRODUCTION

 Today, every organization is aiming at achieving productivity by enhancing return on investments and achieving the economies of scale. In this context, it makes sense to focus only on the organization’s core competencies and outsource non-critical business activities. Therefore, routine administrative work, although important, can be outsourced to third party vendors. We shall also look at outsourcing outfits like India Life Hewitt, Ma Foi and study their roles in the entire HR Outsourcing scenario. With more and more companies looking to rationalize employees on their payroll, Human Resource outsourcing is slowly becoming the new buzz in India. Companies to whom organizations outsource their Human Resources function possess the knowledge and resources to expertly perform part or all of a clients’ human resources function, allowing the client to streamline their internal processes and concentrate on generating profit in their core business.

 HR outsourcing in India

 Estimates show that the latent size of HR outsourcing in India is about $2 billion with a current market of $27 million and it is growing at a rate of about 50 per cent. HR outsourcing in India has not seen the required momentum and is limited to a trickle effect, with companies outsourcing a few selected low-end HR processes. Companies who haven’t joined the HR outsourcing bandwagon are either unfamiliar with the process and procedures of HR outsourcing, or are unaware of the players operating in the area or are unaware of the probable value obtained from doing so. Today, every organization is aiming at achieving productivity by enhancing return on investments and achieving the economies of scale. Therefore, routine administrative work, although important, can be outsourced to third party vendors.  The projections for mentioned outsourcing HR activities are mentioned below:

Pay Roll Services

761

Benefits administration

536

Education and Training

558

Recruiting and Staffing

348

Personnel administration

167

Other HR Functions

192

Total

2560

 HR Outsourcing market is increasing worldwide ($51 billion) representing approximately 39 percent of the total business process outsourcing revenue. HR Outsourcing also helps the HR professional to play an important role in corporate downsizing efforts and facilitates access to new ideas and approaches outside the organization

 Factors to implement a successful outsourcing decision

  It is important to layout your outsourcing goals clearly before making an

outsourcing decision

  Organisations must look into the short as well as long term objectives   Organisations should consider who will control outsourcing decision and why  It is necessary to find out how well the company’s culture will support an outsourcing decision   It has to be decided that it is better for your operation to be centralized or decentralized before outsourcing

 Guidelines to Outsource – Non-core HR Activities

If an organization decides to outsource its non-core HR activities, it must not only be guided by the cost factor alone, but also look for a cultural fit, and a commitment to quality. One must look into the range of services, which a vendor is going to offer, and what are its expertise, experience in offering such services, resources, and flexibility of its contracts . Depending upon the type of function an organization has to outsource, it can select a professional employer organization or hybrid outsourcing firm.

 Guidelines to Outsource – Core HR Activities

 If the organization wants to focus solely on core business or there is a lack of HR capability, then PEO is the right decision, which may help in recruitment and selection, can keep the employees’ record, and administer the benefit program and payroll. If organization doesn’t feel comfortable handling all of HR responsibilities or it doesn’t require a full range of services, then it may opt for outsourcing selected functions.

 Factors to be considered before signing a contract

 v      Understanding company goals and objectives

v      A strategic vision and plan

v      Selecting the right vendor

v      Ongoing management of the relationships

v      A properly structured contract

v      Open communication with affected individual or groups

v      Senior executive support and involvement

v      Careful attention to personnel issues

v      Near term financial justification

 Three models of outsourcing

 v      Outsourcing of the complete HR function- more prevalent among foreign companies that have established operations in India.

 v      Outsourced expertise – where staff expertise is provided as an outsourced service rather than processing services, observed particularly among small and medium sized companies that find difficulty retaining skilled, senior HR staff.

 v      The outsourcing of HR processing, including payroll (inclusive of timesheets processing, salary, pay slips, issuance of checks, deduction, computation etc) and benefits processing.

 Areas of HR Outsourcing

 HR outsourcing can happen in various areas such as payroll, employee benefits administration, fixed assets administration, network management, receivables management, logistics management, hardware maintenance, telemarketing, call centers and database management. In India, the most common processes outsourced are related to

Training, payroll processing, surveys, benchmark studies, and statutory compliance.

 Benefits of HR Outsourcing

 If tactical processes are outsourced, the company could re-deploy their trained HR resources to core processes. Today, every organization is aiming at achieving productivity by enhancing return on investments and achieving the economies of scale. In this context, it makes business sense to focus only on the organization’s core competencies and outsource non-critical business activities. Therefore, routine administrative tasks, although important, can be outsourced to third party vendors

 Factors hampering the growth of HR Outsourcing

 The basic reasons hampering the growth of HR outsourcing in India are confidentiality and cost factors. Many companies outsource only a bit of their requirements because of the above two factors. Besides, the fear of losing jobs, losing control over confidential data, ethics and quality of outsourcing vendors, security breaches and overall confidence in the vendor deters many organizations.

 Some companies can also be reluctant because they may not have an adequate grip over the cost-benefit equation of outsourcing. Companies need to be convinced before they can outsource select HR activities. Adding to this are issues like cultural mindset and psychological acceptance. An in-house HR person handles certain situations that an outsourcing agency cannot handle well (things like building employee incentive programmes, taking care of recognition for employees). At times, many employees would want someone in-house to resolve their work-related problems or disputes. Then there are also issues in terms of pricing of outsourcing HR services. There are no standard benchmarks available so pricing varies a lot from vendor to vendor for similar services.

 Problems faced by companies outsourcing to them

 v     Lapse of deadlines

v     Problem solving within time limit

v     Systems problems

v     Losing control affecting certain processes

v     Can affect brand image and quality of services

 Problems faced by companies who do the outsourcing work

 v     Resistance from employees who have handled the outsourced HR function for

            many years.

v     Attitude problem

 They spoke about the hidden benefits which can be attributed to HR Outsourcing.

 v      Software upgradation benefits

v      Liaising with government department officials

v      Legal know how – knowledge about regulatory procedures

v      Knowledge about Best Practices in the industry

 Profiling freelancers in the unorganized sector and consultants in the organized sector of HR Outsourcing.

 Most of the freelancers had at least a decade of work experience in the field of Human Resources. Those with lesser number of years of work experience did not want to set out on their own yet mainly due to lack of contacts. Most of the freelancers said that a HR degree from a well known institution was one of the factors that really helped them in getting projects from companies.

            Most of those from non-related HR field have made it in the field of freelancing on the basis of their work experience and ability to network  The above pie chart shows for how many years those who have been interviewed have been freelancing.

The HR Outsourcing market in India is not mature enough; one has to rely on word of mouth publicity to get contracts/training workshops.  Pricing also depends on whether the training is in a niche area and what level of training is required. i.e. whether it’s for junior, middle and senior management level.  HR initiatives projects are priced according to factors like multi-location, how many Freelancers/consultants working on it etc.

Pricing also varies when the freelancers have done their post graduation at a well known Institution within the company and when a well known consulting form has undertaken a project with a company.

Conclusion

Outsourcing can replace the fixed overhead costs of the traditional workforce with the variable costs of services provided by a service provider (in case HR processes and systems are being outsourced). The variable costs are typically lower due to providers’ economies of scale, newer technology, better process efficiencies and enhanced service measurement capabilities.

In case of freelancers or consultants, it’s their expertise in a particular subject matter thatis brought to the table at a cost effective price. Crucial to success in HR outsourcing is keeping this bigger picture in mind.

How will HR outsourcing help or, possibly, hinder these goals. Organizations must keep these questions at the heart of their decisions about whether to outsource HR, to what extent this business process will be outsourced and which vendor to choose. Every company’s vision for outsourcing is to use it as a driver for continuous improvement in service quality and for effecting sustainable, long term cost reduction.