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Outsourced HR could see a spike in investment in 2023

There has been a 41% increase in outsourcing services since pre-pandemic in 2019, and business process outsourcing, which includes outsourced HR, is one of the areas expected to see a substantial rise in investment in 2023.

Based on analysis of data from Deloitte, IBISWorld and YouGo, my SpareMyTime has forecasted UK employer spend on business process outsourcing to be £212 billion in 2023, a rise of 19% compared to 2019.

SpareMyTime founder Melissa Gauge attributes the rise in outsourcing to economic uncertainty in the UK.

Gauge said: “Inflationary pressures can prompt UK businesses to consider outsourcing as a strategic response to manage rising costs and maintain competitiveness.

“By leveraging outsourcing, businesses can gain the flexibility to adapt to changing economic conditions without financial constraints.”

Read more: The future of HR outsourcing

YouGov data showed smaller firms were much more likely outsource work to deal with finances, as 37% of small businesses selecting this compared with 12% of large businesses.

Ruth Cornish, founder and director of outsourced HR provider Amelore, said her business has seen a rise in demand for services over the past 18 months.

Speaking to HR magazine, she said: “Outsourcing HR is a game-changer for SMEs and larger organisations wanting access to experts.

“Choosing a service, rather than an HR employee, gives instant access to a range of experience and expertise. Making big cost savings and adding value immediately.

External HR professionals will challenge but also complement the business by providing professional people support."

Almost half (48%) of UK businesses are currently outsourcing work which cost an estimated total of £500 billion in 2022.

According to IBISWorld, there are 155,564 business process outsourcing services in the UK which have grown 2.5% per year on average between 2018 and 2023.

Paul Boustead, strategic workforce lead and interim group chief people officer at The Open University, said he was not surprised to see a rise in outsourcing since the pandemic.

Speaking to HR magazine, he said: "With increased flexibility and hybrid working has come the review of physical estate and this has led to us asking questions as to whether we need the traditional shared service centre is the best model or whether all or part of this can be outsourced.

"There is also the increasing challenge of staff turnover and operating costs, de-risking aspects of the organisation and outsourcing the problem of recruiting and retaining the right skills for efficient transactional service delivery is becoming more and more attractive.

"I think technology and the increasing use of digital/AI within service delivery has led to organisations thinking if they can’t compete and invest in the type of tech that users now expect, then outsourcing and requiring the provider to shoulder this cost and deliver enhanced digital services is beneficial to all."