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Find out: - How HR Outsourcing can benefit for your organisation with good working environment for employees, compliance with legal and labour regulations and support with business’s competitive advantage. - Advantages and disadvantages of using HR Outsourcing service. - Challenges facing HR Outsourcing in Vietnam. ----- Visit talentnet.vn to receive frequent updates on VN Labor Law or discover our prestigious HR services for Employer and Employee. Talentnet Corporation | Executive Search | HR Advisory | Mercer Survey & HR Consulting | Payroll & HR Outsourcing
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HUMAN RESOURCE OUTSOURCING
Human resource outsourcing (HRO) is where an organisation uses external resources to perform its
internal HR functions, like hiring, payroll and benefit administration, or labour outsourcing.
HRO has become increasingly common in the world nowadays, where every organisation has to cope
with a talent war and HR costs while still needing to maintain a good working environment for
employees, comply with legal and labour regulations and bolster the business’s competitive advantage.
Q: In what way can HRO help an organisation to achieve the above objectives?
A: Extrapolating from multiple studies conducted by the world’s leading HRO company, ADP and HR consulting
firms, internal HR spend 50 per cent of its time and cost on administration with no added-value, with only 15 per
cent spent on strategies, communication and planning. Outsourcing functions that have no added value will give
internal HR more time and cost to focus on their core business of talent management, HR policy, and HR
strategy, and to support the business to achieve its strategy as a business partner. This is the most critical reason
to use outsourcing, aside from others such as headcount limitations, legal compliance, accessing outside
expertise, and service quality improvements.
HR CONSULTING
CORNER
www.talentnet.vn
Q: What are the advantages and disadvantages of using HRO services?
A: Beside major advantages, HRO still have some disadvantages.
The advantages of HRO are: (i) Utilising the vendor’s expertise and well-tested processes; (ii) Focusing on core
business activities rather than supporting ones; (iii) Better risk management: transferring the risk of non-tax and
legal compliance to an outsourced vendor; (iv) Operational cost saving: outsourcing reduces the need to hire and
train in-house staff and investing in infrastructure and software, so operational costs can be minimised; and (v)
Changing the cost structure in the case of labour outsourcing: moving fixed costs to variable costs and making
variable costs more predictable.
The disadvantages of HRO include: (i) Risk of disclosure of confidential data: especially when an organisation
outsources its payroll process; (ii) Lack of customer focus: an outsourced vendor is often providing the service to
many organisations at the same time and may not focus completely on a certain organisation’s tasks; (iii) Weak
connection between HR & staff; (iv) Dependency on an outsourced vendor.
Q: What are the challenges facing HRO in Vietnam?
A: Even though HRO and labour outsourcing have been using by many foreign-invested enterprises for more
than ten years, they are still very new among local organisations and the community. Labour outsourcing has for
the first time been mentioned in Vietnam’s new Labour Code, which takes effect on May 1, 2013 and is an
important change to the outsourcing market and the HR industry. With this background, HRO in Vietnam will
certainly develop faster while having a number of challenges, of which all HRO decision makers should be aware.
HRO is still a fledgling market and as a result there are not many professional vendors for organisations to
choose from. Organisations normally decide to outsource HR based only on short-term needs or emergency
situations and not based on a long-term strategy or analysis of which HR functions should be outsourced and the
impact on an organisation’s performance. Vendor infrastructure in Vietnam needs more investment to meet the
requirements of data security, and service fees are high compared with developed countries. In addition, the strict
term for outsourcing in the new Labour Code, which stipulates the duration of labour outsourcing at a maximum of
12 months, is also a challenge to an organisation when considering using labour outsourcing for long-term
projects.
HR Consulting Corner is monthly composed in a Question & Answer format by HR consultants of Talentnet
Payroll & HR Outsourcing Services. Our purpose is to support readers & enterprises to understand more about
HR trend in Vietnam and update the new labour changes for prompt application.
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