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The human resource outsourcing (HRO) market size is estimated to grow at a CAGR of 5.65% between 2022 and 2027. The market size is forecast to increase by USD 13.65 billion. The growth of the market depends on several factors, including the digitization of human resource outsourcing, the growing demand for neo-sourcing, and the need to improve the HR value chain. Human resource outsourcing is the process of subcontracting human resource functions to an external supplier. The market size is calculated based on the revenue generated from services, including multi-process human resource outsourcing (MPHRO), recruitment process outsourcing (RPO), benefits administration outsourcing (BAO), payroll outsourcing (PO), and learning services outsourcing (LSO).
This human resource outsourcing market report extensively covers market segmentation by end-user (large enterprises and SMEs), service (PO, BAO, MPHRO, RPO, and LSO), and geography (North America, Europe, APAC, South America, and Middle East and Africa). It also includes an in-depth analysis of drivers, trends, and challenges. Furthermore, the report includes historic market data from 2017 to 2021.
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The digitization of human resource outsourcing is driving market growth. Various industries such as BFSI, IT, healthcare, retail, hospitality, and manufacturing are using RPO, PO, and LSO services offered by vendors in the HR outsourcing market. Using RPO HR helps enhance operational efficiency using various tools and techniques such as advanced analytics and 360-degree feedback. Moreover, they also offer the ability to find the right talent for tasks that are carried out in real-time. Such operational improvements offer great scope for companies in the HR outsourcing market.
Moreover, the integration of advanced technologies, including IoT, cloud computing, big data, analytics, and augmented reality into industrial processes help to integrate the horizontal and vertical structures of organizations. Due to such features, it also results in cost reductions such as per-person access costs, improving overall productivity. Hence such factors will propel the market growth during the forecast period.
The rise in the adoption of recruitment analytics is a key trend in the market. Massive volumes of data with a wide variety are compelling various organizations to outsource their HR functions, showing a positive sign for the human resource outsourcing (HRO) market. If analytical tools and solutions are used, they can generate valuable insights regarding recruitment which can help ensure the recruitment of top talent. Moreover, such tools by companies in the HRO market also help to generate insights rapidly, which is increasingly important considering the prevalent velocity of data.
Hence, several firms are using statistical and scientific methods such as big data for deriving insights. Proactive recruitment and the wide-ranging use of big data and social media are gaining momentum in the human resource outsourcing industry. Moreover, this can be extremely valuable while engaging in active recruitment for executive profiles. Additionally, innovations are also seen in both the interviewing and testing parts of the recruitment process, which will boost market growth during the forecast period.
The increased dependence on outsourcing agencies is challenging market growth. Various companies are shifting towards outsourcing agencies for all their HR functions, showing promise for the HR outsourcing market. This has the limitations of lack of alignment with existing business standards and missions and the possibility of unnecessary demands. This can result in actions that cause a high level of dissatisfaction among employees. This will deteriorate the growth of the HRO market in focus during the forecast period.
Moreover, service-level agreements (SLAs) may not cover all the management decisions, resulting in potential conflicts between client organizations and third-party service providers. Despite the wide scope of the human resource outsourcing (HRO) market, few outsourcing companies that are profit-motivated might attempt to provide low-quality services in an effort to reduce expenses. This can result in a negative impact on the client's end goals. Moreover, this method also results in a loss of control of sensitive information, and due to high dependency companies might not be able to work independently. Such factors hinder the growth of the market in focus during the forecast period.
The market share growth by the large enterprises segment will be significant during the forecast period. Large enterprises comprise more than 5000 employees. Moreover, they constantly seek opportunities for collaboration and hire industry leaders. Additionally, they ensure that they hire individuals from diverse organizations with operational footprints in the Americas, Europe, and Asia.
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The large enterprises segment showed a gradual increase in the market share of USD 30.50 billion in 2017 and continued to grow by 2021. These act as a vibrant pathway for human resource outsourcing to drive innovation into the enterprise which allows more companies to participate in the human resource outsourcing provided by these large organizations. This will further increase the popularity of this segment in the human resource outsourcing market and accelerate segment growth during the forecast period.
The PO segment dominated the global human outsourcing market in 2021. This is primarily due to better control and visibility of payroll operations with the use of analytics, compliance with regulations, and cost-effectiveness. Moreover, multi-country payroll services will expand further during the forecast period primarily because of the enhanced process efficiency to support increased productivity, link of payroll suppliers, the perceptibility of the global workforce, and analytics. Moreover, investments into the improvement of integration abilities and middleware products will result in ease of control regarding compliance and risk, as well as provide a seamless payroll system. Such factors are expected to propel the growth of this segment during the forecast period.
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North America is estimated to contribute 43% to the growth of the global market during the forecast period. Technavio’s analysts have elaborately explained the regional trends and drivers that shape the market during the forecast period. The North American region is expected to witness steady growth during the forecast period primarily due to companies in the region being among the most advanced globally and generating vast volumes of data regularly. Moreover, the integration of cloud-based services and social media will also provide greater potential for companies in the human resource outsourcing (HRO) market to expand their services.
However, regional vendors in the HRO market face challenges such as the US anti-outsourcing legislation. It directs the call center workforce of public sector organizations that operate in foreign countries to disclose their location to US end-consumers in the US and gives them the option to shift to a US-based call center if requested. However, providing this option requires a great degree of investment in automated call transfer technology. Such factors will hinder regional market growth during the forecast period.
The COVID-19 outbreak had a negative impact on the market due to reduced demand from end-user industries such as BFSI, energy and utilities, telecom, IT, and retail. However, large-scale vaccination drives resulted in the resumption of operations and those industries which heavily use HR services returned to outsourcing HR services. Moreover, they ensure compliance with safety protocols and due to such factors, the market growth in the region is expected to grow during the forecast period.
The Human Resource Outsourcing Market industry report includes the adoption lifecycle of the market, covering from the innovator’s stage to the laggard’s stage. It focuses on adoption rates in different regions based on penetration. Furthermore, the report also includes key purchase criteria and drivers of price sensitivity to help companies evaluate and develop their growth strategies.
Global Human Resource Outsourcing Market Customer Landscape
Companies are implementing various strategies, such as strategic alliances, partnerships, mergers and acquisitions, geographical expansion, and product/service launches, to enhance their presence in the market.
Adecco Group AG - The company offers human resource outsourcing which provides innovative solutions that enable employers to optimize their workforces and employees to take control of their careers.
Aon plc - The company offers human resource outsourcing services such as payroll, benefits administration, talent management, and retirement planning.
Automatic Data Processing Inc. - The company offers human resource outsourcing that provides payroll, time and attendance, talent, benefits and insurance, HR services, HR outsourcing, and PEO, integrations, and app marketplace.
The research report also includes detailed analyses of the competitive landscape of the market and information about 20 market companies, including:
Qualitative and quantitative analysis of companies has been conducted to help clients understand the wider business environment as well as the strengths and weaknesses of key market players. Data is qualitatively analyzed to categorize companies as pure play, category-focused, industry-focused, and diversified; it is quantitatively analyzed to categorize companies as dominant, leading, strong, tentative, and weak.
The human resource outsourcing market report forecasts market growth by revenue at global, regional & country levels and provides an analysis of the latest trends and growth opportunities from 2017 to 2027.
Human Resource Outsourcing Market Scope |
|
Report Coverage |
Details |
Page number |
176 |
Base year |
2022 |
Historic period |
2017-2021 |
Forecast period |
2023-2027 |
Growth momentum & CAGR |
Accelerate at a CAGR of 5.65% |
Market growth 2023-2027 |
USD 13.65 billion |
Market structure |
Fragmented |
YoY growth 2022-2023(%) |
4.79 |
Regional analysis |
North America, Europe, APAC, South America, and Middle East and Africa |
Performing market contribution |
North America at 43% |
Key countries |
US, China, Japan, Germany, and UK |
Competitive landscape |
Leading Companies, Market Positioning of Companies, Competitive Strategies, and Industry Risks |
Key companies profiled |
Accenture Plc, Adecco Group AG, Aon plc, Automatic Data Processing Inc., Capgemini Service SAS, Capita Plc, Ceridian HCM Inc., CGI Inc., FMR LLC, Genpact Ltd., HCL Technologies Ltd., Hewlett Packard Enterprise Co., Hexaware Technologies Ltd., Infosys Ltd., International Business Machines Corp., ManpowerGroup Inc., MHR International UK Ltd., Randstad NV, UKG Inc., and Wipro Ltd. |
Market dynamics |
Parent market analysis, Market growth inducers and obstacles, Fast-growing and slow-growing segment analysis, COVID-19 impact and recovery analysis and future consumer dynamics, and Market condition analysis for the forecast period. |
Customization purview |
If our report has not included the data that you are looking for, you can reach out to our analysts and get segments customized. |
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