Exploring Human Resource Outsourcing Trends in Malaysia

Globally, many organisations outsource human resource functions selectively to achieve operational efficiency and transformation. Research in the Malaysian context is limited and insights on the latest HRO trends which are important to understand the HRO phenomenon in Malaysia are unavailable. The questionnaire survey was used to elicit data in this study. 145 HR managers from various sectors responded. 58 of them have partially outsourced the HR functions. Findings indicate that firms from manufacturing and services sectors were both outsourcing at about 40 percent. Large firms appeared more receptive toward HRO compared to smaller firms. Training, recruitment and payroll were the top three HR functions outsourced. More than half of the HRO decisions were made by the top management. This study found that the two main drivers of HRO were resource-based benefits and cost benefits. Among the benefits investigated were keeping up with changes, less investment in and maintenance of, software, access to best practices or new development, and converting fixed costs to variable costs. The future direction of the Malaysian HRO is likely to revolve around HR traditional functions such as training, recruitment and performance management in the next five years.