As a location for the payroll department, it would be harder to find a more glamorous setting than Mauritius. Sitting in the Indian Ocean, with its endless beaches of white sand and pale blue seas, Mauritius has long been known as an upmarket holiday destination. But it’s also where the staff handling payroll for the Alzheimer’s Society are based since the charity offshored this function through outsourcing consultancy Ceridian.

“People tend to think of Mauritius as a holiday island so we have to explain the business advantages it offers,” explains Ceridian’s operations director Marcel Horst. “Since the sugar and textile industries have taken a bit of a battering in recent years, the government has been investing in the knowledge industry. Our workforce includes a large number of graduates.”

Ceridian employs more than 300 people in Mauritius, servicing clients including Yahoo. Costs are about a quarter of those in the UK, where Ceridian also employs people in Reading, Manchester and Glasgow.

“I don’t care where the function is located, so long as they have access to sufficient appropriate skills, and can provide me with the service I need,” says Matthew Sellen, the charity’s head of finance. Although offshoring is normally considered an option for larger organisations, it works for the Alzheimer’s Society, believes Sellen.

“We have sufficient control and communication lines are reliable — the only thing is that we never physically meet,” he says. The distance is not as important as the quality of staff, says Sellen: “It’s controlled through a central, UK-based person.”

According to management and strategy consultancy firm the Hackett Group, there are now more than 340 companies that have offshored their HR function or parts of it. Lloyds TSB is offshoring 150 HR jobs, through outsourcing group Xansa, to India. This includes the administrative work for internal job adverts and the bank’s HR call centre, which processes staff changes and provides employees’ details for their line managers.

Research published in January by the Hackett Group says offshoring HR is one of a number of ways in which companies can save money on their business processes.

“Globalisation is already a critical part of the business-process sourcing landscape in other key back-office areas, including IT and finance,” says its research director Michel Janssen. “In the next few years, companies with world-class HR organisations are also likely to make greater use of offshore resources.” The company also believes that 170,000 HR jobs in Europe could be offshored to India and other low-cost countries.

Although HR offshoring is growing and brings obvious economic advantages, of all business process activities HR operations are still more likely to be retained onshore. A recent survey by the Chartered Institute of Personal Development (CIPD) found that just 7% of companies offshore or are considering offshoring their HR operations, compared with IT support (at 24%) and customer-service call centres (22%).

“In offshoring terms, HR is still at the front end of the curve — people are still testing the water here,” says Chris Rittenmeyer, European vice-president for ExcellerateHRO, a joint venture between technology company EDS and HR consultancy Towers Perrin. Healthcare and financial services are the most likely to offshore HR, with government offices least likely to do so, because of political sensibilities.

As with all offshoring, cost is one advantage but choosing where to locate your HR operation is vital. Having to discuss their payslip with a badly briefed representative with limited training or knowledge of English in a distant call centre is likely to result in a disgruntled, disengaged workforce. According to the CIPD survey, impact on staff morale was cited by 55% of respondents as a concern about offshoring HR.

“It depends on what you are outsourcing and how you plan to deliver the services,” says Dr Anthony Hesketh, co-director of the Centre for Performance-Led HR at Lancaster University Management School. “Those processes deemed to be low risk and of low value to the company or its customers are being offshored. Those processes deemed to be higher risk and more complex, and of higher value to the organisation or its customers, are kept in-house or in a shared services centre.”

Mary Sue Rogers, an HR vice-president for IBM, says that companies with fewer than 15,000 employees would find few economic advantages in offshoring their HR operation.

The business world might be growing smaller by the day but finding a cultural fit is still important. For example, IBM’s site in Dalian, China, would host the HR operation of an Asian client, while a European client would use its office in Budapest.

There are also legal considerations, explains Sarah Seabury, project director at outsourcing consultancy TPI. “Because of European data-protection legislation, it’s a complicated business to take personal data out of Europe, and so HR operations have traditionally been ‘nearshored’ rather than ‘offshored’ to countries in eastern Europe, such as Poland, rather than going to the Far East,” she says.

This also means that different elements of the HR function are often outsourced offshore individually. “You might put payroll, workforce planning and training in different sites around the world,” explains Seabury. Not surprisingly more “qualitative” elements of HR, such as talent management and disciplinary actions, are almost never offshored.

Whatever the risks, with the increasing globalisation of business and the need to drive down costs, it is inevitable that more HR departments will no longer be in the same country as the majority of the workforce they service. As Rogers points out: “These days, with global organisations, when you talk about offshoring, you have to ask ‘offshore of whom?’ because everywhere is offshore for someone, somewhere in the organisation.”

Recruitment Solutions

Recruitment Solutions is a business-to-business team within Times Media that works with industry partners on advertising and sponsorship campaigns in the recruitment market, including online initiatives, supplements, seminars and networking events.

For more information about Recruitment Solutions, contact Tom Marler, 020 7680 6297, tom.marler@newsint.co.uk

Events for HR professionals

The Sunday Times Employer Branding Conference, June 28, 2007, The British Library, London. www.sundaytimes-employer branding.co.uk for more information and to register

Sunday Times Recruitment Outsourcing Conference, autumn 2007, central London. Information from Glen Kieran, 020 8762 9889, glen@projectleaders.org

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