Respondents to a recent survey state that they are far less willing to outsource the more strategic components of their human resource functions. According to a Watson Wyatt Worldwide survey, nearly two-thirds (65%) of the 135 companies surveyed characterize their HR function as mostly or completely insourced. Twenty-nine percent say they have an approach that is equally mixed between insourcing and outsourcing, and only 7% say they are mostly outsourced.
"Most companies have decided to take a selective approach to HR outsourcing as they look for an optimal mix of internal and external processes and technologies," says Michael Cornetto, senior HR delivery consultant at Watson Wyatt, a global human resources consulting firm. "Despite much speculation otherwise, there is no headlong rush toward the total outsourcing of all HR services. Many companies that investigate full HR outsourcing alternatives choose to refine their existing delivery model rather than outsource everything."
Looking at specific HR activities, results show that a large majority of companies outsource transactional HR activities such as 401(k) administration (84%) and at least some aspects of their pension administration (71%). Health and welfare administration is the next most likely area to be outsourced, but only 44% of respondents reported doing so.
"Over the next few years we will likely see increases in the outsourcing of transactional administration, such as retirement and payroll activities, but the vast majority of companies are planning to keep the more strategic components of their HR activities in-house," says Cathy Tripp, practice leader for health & welfare benefits administration at Watson Wyatt.