The concept of HR outsourcing services is unfamiliar to many companies on the mainland but this is changing fast.

The term "HR outsourcing" is likely to conjure up some different ideas, so let's set the record straight.

Is outsourcing when you have employees employed by someone else, in other words, when you don't employ them directly? For a number of years, China's unique regulations governing representative offices has required companies to employ their people through one of several government, or quasi—government, agencies. These agencies pay them, keep their personnel files, pay their mandatory benefits, and provide supplemental benefits arrangements, as appropriate, in exchange for fees that cover these payments and the agencies' services. This is not what is meant by HR outsourcing globally, or what we mean by HR outsourcing here.

So what is it? Simply put, HR outsourcing is the hiring of specialists to develop and maintain knowledge, processes and technology that they use to provide HR—related services for and to one's own employees. Just as you may do for your facility security or food service operation, the concept is similarly based on the premise that your company has many things to do to provide a workplace from which employees effectively deliver your products and/or services to customers. Not everything is necessarily best done in—house.

Let's take a moment to examine how people in HR departments spend their time, categorizing their activities as administrative, consultative, and strategic, to the business:

• Not surprisingly, 60—80% of HR's time is spent on administrative activities. Of course these are activities that need to be done, but they also create and perpetuate the eternal in—box of must—dos, depend increasingly on technology, and affect the employee experience and attitude about the company depending on how they are "delivered".
• The remaining HR time (largely after 5pm) is spent on consultative and strategic activities that can make the biggest difference to your business.

The diagram below puts HR outsourcing in its place. It is doing the "administrative musts" and doing them better—tasks such as payroll and benefits administration—so that your HR professionals can focus on activities that add the most value to your business.

Why Is HR Outsourcing Just Now Developing in China? What's the Prognosis?

Outsourcing of HR activities has largely been a non—issue in China because labor costs and technology needs have been low. While some companies have long—since outsourced HR—related software development by purchasing software, most still maintain and support software and do the administrative work internally. The concept of HR outsourcing services is unfamiliar to many, and there is an issue of there not being enough quality service providers.

But things are changing quickly. HR outsourcing is becoming a hot topic: labor costs are on the rise; new types of employee supplemental benefits are emerging (e.g., retention—oriented employee savings plans, supplemental retirement plans, and even flex benefits); employee self—responsibility is giving rise to HR program design that requires more interactive HR processes; technology needs, including the acceptance of employee self—service approaches, are increasing; compliance issues are becoming increasingly complex; and multinational companies are introducing their experiences from elsewhere.

The same drivers that boosted HR outsourcing elsewhere in the world are now here. We can therefore expect HR outsourcing to become a more attractive option for many companies, and the number and quality of players serving this business opportunity will increase to meet the need.