After years of waiting and many false predictions of growth, HR outsourcing has finally become a truly accepted means of delivering HR services for many major European companies. In the last twelve months significant deals, both single process and multi-process, have been signed amongst others with Unilever, Nestle, Lloyds TSB, Centrica, IKEA, Sandvik, Repsol, BBC and Bank of Ireland. The buoyancy in the market is also illustrated by strong new entrants into the HRO vendor space in Europe, specifically Hewlett Packard and Xansa, and the continuing success of Arinso. Industry Analysts predict further expansion with an expected compound annual growth rate (CAGR) for European outsourcing business of 28% between now and 2010, with a slightly lower CAGR rate of 17% in the UK for the same period.
Critically the successful expansion of HR outsourcing in Europe and the parallel set up of near shore HR shared services by companies such as Lufthansa has exploded many of the myths behind HRO that critics of HR outsourcing have used to bolster their case over the years. Foremost among these myths were:
If we outsource then we will lose control
Effective HR outsourcing governance arrangements founded on executive-level relationships with service management organizations that manage the ‘business client’ as well as the vendor(s), working from an ‘outcome’ mindset, and coupled with service level agreements, strong change control procedures and clear performance measures mean that companies are still demonstrably in control of HR service delivery and outcomes.
Service quality will suffer because they don’t understand us and don’t have the same commitment to the organization
Rigorous service level management and continuous improvement methodologies, together with the implementation of a strong customer service ethos in the vendors’ service centres ensures that the level of commitment is just as high as within insourced arrangements. Vendor employees have shown that they are committed to deliver consistent timeliness, accuracy and service for each and all of their clients.
You can’t take employee data out of the country and be compliant with EU and local Data Protection regulations.
The migration of employee data into HRO vendors service centers like the IBM centre in Budapest and the Hewitt centre in Krakow together with the widespread use of service centres in India, Malaysia and the Philippines shows that data can be safely transferred across national boundaries and that the vendors have the technology and firewall integrity to stay consistently compliant with EU and local data protection regulations.
Works Councils will never accede to outsourcing arrangements
Practice has shown that works councils are open to HR outsourcing and will review outsourcing proposals objectively in the light of the benefits that HR outsourcing will bring to the overwhelming majority of the workforce. The introduction of employee self-service, greater transparency of data on people for decision support and increases in HR responsiveness and service quality for the total workforce outweigh the ‘disbenefits’ inherent in potential job losses and transfers within HR.
In scope HR staff will always lose out on pensions and benefits entitlements
Correct application of the European Acquired Rights Directive and TUPE (in the UK) has ensured that affected employees normally don’t lose out if they transfer across to the vendor organization, even when the transfer is from a public sector organization. Vendors and their clients have usually been sympathetic and reasonably generous in the transfer of pension entitlements and have sought to provide comparable, and in some cases improved benefits packages. Transferred employees have often found that their skills, once peripheral, are now core to their new employer and their job satisfaction and feelings of worth are increased.
Like many innovations, people have to 'see, feel and touch' the concept to understand and come to terms with HR outsourcing. Experience and practice in HR outsourcing and the willingness of major European based companies to agree long term outsourcing deals has shown that areas which people regarded as threats and issues have been managed effectively. What were considered as major barriers to HR outsourcing and indeed, pan-European shared services, have been shown to be myths without foundation and substance. The way to greater HRO market growth in Europe is well and truly open.
