HR outsourcing: threat or opportunity?

The debate on human resource (HR) outsourcing is polarised. HR outsourcing is seen as an opportunity for the HR function by some and as a threat by others. The first view suggests that HR outsourcing is an instrument creating time for HR to become a strategic partner. The second view considers HR outsourcing as a cost‐cutting instrument gradually reducing HR staff. The purpose of this study is to examine whether HR outsourcing is a manifestation of a strategic HR focus, a cost‐cutting HR focus or both.

The sample is obtained from an economy‐wide, cross‐sectional survey. The data cover 1,264 organisations with ten employees or more.

Results indicate that organisations with a strong focus on HR cost‐cutting do not outsource more than organisations with a weaker focus on HR cost‐cutting. The analyses show a positive relationship between a strong focus on strategic human resource management (HRM) and the level of HR outsourcing.

First, this study examines the breadth of HR outsourcing. Further research might consider the depth of HR outsourcing. Second, as results are based on cross‐sectional data we cannot draw causal inferences. Finally, future research might focus on the impact of HR outsourcing on the organisation of the HR function and internal HR customer satisfaction.

HR outsourcing empowers the HR department. It frees up HR professionals to focus on strategic HRM.

HR outsourcing has been heavily debated. Yet, empirical research into the impact on the HR function is extremely limited. This study helps to fill this gap.