Chapter 3: HR Outsourcing and the Virtual Organization

Consistent with the increased use of outsourcing in organizations generally, employers are also increasingly using outside vendors to provide human resource services that were traditionally performed in-house. This paper reviews what is known about why firms outsource HR activities, the effects of HR outsourcing, and the different ways that outsourcing is being used in the HR area. It then reviews relevant theoretical perspectives in order to identify conditions under which firms are most likely to benefit from outsourcing. Finally, the paper offers recommendations for managing the outsourcing process in the HR area as well as for how future research might contribute to our understanding of when HR outsourcing should be used and how to manage vendor-client relationships in the HR area.