Offshoring and centralisation could save firms 80% of HR costs

Companies could save up to 80% of their HR costs by centralising the department – possibly offshore and almost certainly with fewer jobs – according to new research.

Using HR shared service centres allows massive cost savings and generates higher productivity and internal satisfaction, according to consultancy the Hackett Group. Its Book of Numbers claims that the most effective 10% of global firms have 15% less HR staff and spend 13% less on each HR employee than average companies.

The threats of HR job cuts and offshoring to China and India were raised again by the report.

Michel Janssen, Hackett research director, said: “In the next few years, companies with world-class HR organisations are likely to make greater use of offshore resources, either through captive shared service operations or outsourcers.

“Companies that get shared services right today will be in the strongest position to take advantage of this new growth area moving forward.”

Brian Siller, senior business adviser at Hackett, told Personnel Today: “A number of my clients are looking at offshoring HR to low-cost countries. I have one UK-based client that is looking at Far East and US solutions.”

In November, Hackett Group research revealed that more than 170,000 HR jobs across Europe were under threat from India and other low-cost countries. It said the continent’s top 500 companies could save €48bn (£32bn) a year by offshoring back-office functions.

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