If you are using the services of an HR outsourcing service provider, or plan to use one in the coming months, it is important to understand how the sector will be shaped in the new decade and what businesses can do to leverage those changes.

The evolution of technologies like AI and machine learning are likely to produce a paradigm shift in HR outsourcing. Trends like automation, cloud computing and data analytics coupled with the fallout of the pandemic are likely to define the future.

So how will HR outsourcing evolve in the 2020s and what can you do to derive maximum mileage from the developments? Let’s take a look.

1. From Cost to Quality

Though cost savings has been the main rationale for HR outsourcing in the past, the new decade could see the focus shift to quality.

Recent years have been characterised by the raising of ethical concerns and the tightening of labour standards in many parts of the world. This has led to a decline in offshore HR outsourcing due to the inability of vendors to meet the revised requirements while nearshoring has been the gainer. These changes have reduced the cost advantage of HR outsourcing, substituting it with technical superiority and qualitative excellence resulting in better service delivery and minimal compliance issues.

Related to this is the fact that HR outsourcing is getting better equipped to handle strategic issues. Until now, companies have preferred to outsource transactional activities such as payroll, benefits administration etc. while retaining control over transformational or strategic HR functions like leadership development and succession planning. But capacity development of HR outsourcing vendors could see them play an increasingly vital role in strategic activities in the new decade as they develop expertise in these areas.

2. Shift to Cloud-Based Platforms

The advent of SaaS and cloud computing is likely to lead to major transformations in HR outsourcing by providing a more effective service delivery model. Some of the key highlights of a cloud-based model include:

• Economy
• Scalability
• Efficiency
• Enhanced security
• Elimination of the need for setting up infrastructure

As more outsourcing service providers shift to cloud, it is likely to have a direct fallout on efficiency and employee experience leading to positive employer branding. At the same time, real-time data updates can make decision-making more effective by allowing the management to respond to emerging scenarios with greater speed and accuracy.

3. Data Generation & Analytics

Technology adoption is likely to lead to data generation and commensurate demand for analytics. HR data may relate to things like skillsets, rewards, employee behaviour, employee performance, recruitment data etc. The analysis and modelling of data can provide valuable insights into HR-related issues which can be used to optimise workforce performance.

At the same time, the collection of employee data must be reinforced by adequate cyber-security measures. It is also likely to lead to demands of transparency from employees themselves regarding the kind of information being collected on them. These developments may lead to an entirely new HR outsourcing vertical focussed on data storage and analytics.

4. Evolution of Recruitment Process Outsourcing

The coming decade could see a rise in recruitment process outsourcing coupled with heavy use of technology. Companies are already using social media to source and screen candidates, while ATS is also quite popular. But the day is not far when AI will take over a major part of the recruiting process leaving humans to only deal with the critical aspects such as interviews and final negotiations. In fact, many AI-based recruitment software are already available in the market such as Mya, Fetcher, Pymetrics, MyInterview and so on.

As AI becomes more evolved, it will start playing an increasingly significant role in the recruitment of talent with the potential to do a better job than humans in certain respects due to the absence of biases. Your outsourcing partner will be best placed to provide these services to you at affordable rates by spreading the cost across their client base.

5. Growth in Benefits Administration Outsourcing

Covid-19 has put the spotlight firmly on employee benefits with special emphasis on healthcare. The thrust on benefits administration—especially healthcare programmes—is likely to witness a spurt in the coming years in light of the pandemic. Outsourcing of benefits administration brings certain undeniable advantages such as reduction in cost and complexity saving the company significant resources. The coming years will see businesses leverage outsourcing to enable their employees to access effective healthcare services while minimising the administration burden on themselves.

Improving Employee Experience

The world of business is standing at the cusp of change and HR outsourcing is vital to this transformation. The focus on HR is expected to grow sharper with the advent of the knowledge economy where business success will depend on the quality of talent at the disposal of the company. Employee experience is slated to be a crucial factor in this regard with a direct fallout on company performance. Companies that increasingly leverage the expertise of outsourcing companies to improve HR management and employee experience will be best positioned to succeed in the coming years.

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