No resource can be converted into any utility unless the human resource is there and satisfied too. Human beings are important as a resource because without them nothing can put into motion.

However, as an activity or functional management area it can not be treated as core area. In this competitive world every business wants to concentrate only on those activities which are considered core and where it has core competence. While performing core business the activities which are administrative or support processes are being outsourced.

Human resource activities are outsourced to have many benefits which are not possible if we have them in-house. First reason to human resource outsourcing just like any other activity outsourcing is the cost reduction. What is not core for the aggregate firm is the core function for the other firm. This other firm can certainly provide such services at a lower cost to the aggregate firm. Second reason of HR Outsourcing is to acquire such services or expertise which is not available in-house and it is also economically not viable to generate them in-house.

If a firm wants to have some legal opinion on the termination of an employee, it is not advisable to have a permanent legal cell within the organization. The best option is to have it from out-house, as and when the need arises. Third reason of HR Outsourcing similar to the second one is that if there is rush of work at a particular point of time in a year, the best option is to have employees on lease from any professional employer organization, rather than getting involved into the whole process of personnel management.

Of the HR activities most popularly outsourced include recruitment, selection, training, placement (particularly the business schools in India opt for it), payroll management, occupational health and fitness, employee welfare (which include the whole gamut of activities relating to employee satisfaction outside the work station like canteen facility, spots center), childcare, legal services, employee leasing, etc.

Off course, HR outsourcing is very popular world over. However, as no two individuals are the same, similarly no two firms can be the same. The aggregate firm may at times find difference in execution by the other firm. The basic assumptions may differ, so also the organization culture and the climate. If the outsourcing relates to the processes which are mechanical in nature like pay roll accounting, it is okay, but where one comes into the contact with the employees the difference might be felt. And if HR outsourcing is to be procured from offshore, the cultural sensitivity becomes very important.