Future Focus: Offshore for HR?

By Jennifer Schramm Jul 1, 2004
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HR July  2004 Magazine The outsourcing trend could send some HR jobs overseas and create new specialties at home.

Offshoring—the outsourcing of jobs to foreign countries—has generated political debate, media attention and some questions among HR professionals. Of course, offshoring is only part of the picture; outsourcing does not necessarily mean sending jobs out of the United States. Nonetheless, the long-standing and growing practice of outsourcing HR functions has raised concerns that HR positions will be affected significantly by the offshoring trend.

About six of every 10 organizations report using some form of HR outsourcing, according to a recent survey by the Society for Human Resource Management (SHRM). The most commonly outsourced HR functions, according to the survey, include background checking, payroll, administration of health and pension benefits, employee assistance programs, and flexible spending accounts.

But, as survey respondents noted, reducing operating costs is a principal reason for outsourcing HR functions, so there may be movement to cut expenses even more by sending some of the more commonly outsourced HR functions to firms in other countries where labor is cheaper. Clearly, some HR functions—those that are technology-based, for example—would lend themselves more readily to offshoring than would others, such as those requiring person-toperson contact.

There is no consensus, however, on how an increase in offshoring of HR functions would affect the human resource profession or whether there would be a significant decrease in the number of HR jobs in the United States. Although nearly half of the HR professionals in the SHRM survey said they believe that outsourcing has decreased opportunities for HR professionals, around onequarter believe that the practice has actually improved job opportunities, and about 30 percent said it has not had any impact.

Such assessments could change if HR outsourcing increases and many of those outsourced jobs do not stay inside the United States. Although most HR professionals who responded to the SHRM survey said their companies have no plans to increase their HR outsourcing over the next five years, more than 30 percent said their companies do have such plans.

Worldwide, HR outsourcing is expected to grow over the next few years. It’s uncertain, however, what proportion of the outsourced jobs will be sent offshore.

One possible constraint on rapid expansion of offshoring is that some of the HR functions that are expected to see the highest growth in outsourcing are those involving high levels of customer interaction and cultural awareness—in particular, HR consulting services.

Rather than diminish job opportunities, these developments could in fact lead to greater HR specialization. And one such area of specialization would likely be in HR consulting services that help businesses manage the people aspects of offshoring.

As the use of offshoring increases in other industries, its implications for employee retention, motivation and company culture may create greater demand for specialists who can develop and manage a diverse workforce and can boost retention and morale—a demand, in short, for human resource professionals.

Jennifer Schramm is manager of the Workplace Trends and Forecasting program at SHRM.

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