www.talentnet.vn

4th Floor, Star Building, 33 Mac Dinh Chi Street, District 1, Ho Chi Minh City, Vietnam Tel: (84-8) 291 188 - Fax: (84-8) 291 4088 - Email: contact@talentnet.vn International Centre, Unit 06, 5th floor, 17 Ngo Quyen Street, Hanoi, Vietnam Tel: ( 84 4) 936 7618 - Fax: ( 84 4) 936 7619 - E-mail: contact-hn@talentnet.vn

4th Floor, Star Building, 33 Mac Dinh Chi Street, District 1, Ho Chi Minh City, Vietnam Tel: (84-8) 6 291 4188 - Fax: (84-8) 6 291 4088 - Email: contact@talentnet.vn International Centre, Unit 06, 5th floor, 17 Ngo Quyen Street, Hanoi, Vietnam Tel: ( 84 4) 3 936 7618 - Fax: ( 84 4) 3 936 7619 - E-mail: contact-hn@talentnet.vn

CHALLENGES OF HR OUTSOURCING IN VIETNAM

Presented by: Huong Nguyen

Date: 18th March, 2011

PagePage 2

CONTENT

1. What is outsourcing?

2. Why HR outsourcing?

3. Advantages and Disadvantages of HR outsourcing.

4. Challenges of HR outsourcing in VN

5. Important notes for an successful HR outsourcing project

6. How to choose a good HR outsourcing vendor ?

7. Case study of HR outsourcing in VN

8. Q&A

PagePage 3

WHAT IS OUTSOURCING?

1. Definition:

Out: external, source: resource. Outsourcing means contracting out of a business function - commonly one previously performed in-house - to an external provider.

2. There are 3 levels of outsourcing:

a. Tactical outsourcing• Lack of talent, resource• Reduce headcount (restructuring)

PagePage 4

WHAT IS OUTSOURCING?

Benefit of tactical outsourcing:• Generate immediate cost savings• Eliminate the need for future investment• Relieve the burden of staffing

Typical services: staffing outsourcing service

b. Strategic outsourcing• Outsource all of the functions, responsibility of one area • Relationship between the organization and outsourcing

vendor is switch from buyer & supplier to business partner.

PagePage 5

WHAT IS OUTSOURCING?

Benefits of strategic outsourcing:• Reduce in-house administration• Focus on strategic issues• Benefit from external expertise and well-tested processes

Typical services: IT outsourcing, payroll outsourcing, legal outsourcing, hiring, training & development…outsourcing.

c. Tranformational outsourcing• Innovation that outside specialists bring to the business• Centered on creating value vs on cutting costs• Powerful tool/forces for change, partner in the battle for market and mind share.

PagePage 6

Benefits of transformational outsourcing:• Gain confidence and experience from strategic partner• Build on best practice• Move further, faster

Typical services: Longer term collaborative partnership, growth and productivity strategies..

WHAT IS OUTSOURCING?

PagePage 7

Source: Armstrong& Associates, Inc.

Typical services: 3PL

PagePage 8

Source: Armstrong& Associates, Inc.

Trends in 3PL

PagePage 9

WHY HR OUTSOURCING ?

PagePage 10

WHY HR OUTSOURCING ?

* 85 % of the time on Administration and Management with no Added Value

* 15% of the time on HR strategies, communication, planning.

According to Hewitt’s HR outsourcing Trend and Insights 2009 survey, top reasons for outsourcing HR services:

1. Opportunity for cost savings 78%

2. Access to outside expertise 78%

3. Improve service quality 74%

4. Realign resources/focus

on strategic HR properties 72%

5. Relief from regulatory/

administrative burden 70%

PagePage 11

ADVANTAGES VS DISADVANTAGES

ADVANTAGES

1. Access to pool of talent, sustainable sources of skill

2. Efficiency, focus on core business, core resources

3. Cost saving, no investment for infrastructure, software…

4. Cost restructure: move fixed cost to variable cost and make variable cost more predictable

5. Risk management: transfer risk of non tax and legal compliance to outsourced vendor

6. Back up plan

PagePage 12

DISADVANTAGES

1. More expenses if not choosing a good outsourced vendor

2. Sensitive information may leak to competitors

3. Less control of the processes

4. Weak connection with staff/end users

5. Dependency on outsourced vendor

ADVANTAGES VS DISADVANTAGES

PagePage 13

1. HR outsourcing is new concept with Vietnamese Government and community

2. HR outsourcing industry is still immature market

3. Organization do not have too many options in selecting a professional HR outsourcing vendor to meet their needs

4. Pool of skillful resources are limited

5. Outsourcing costs are high compared with labour cost and very high compared with ones in developed countries

6. IT Infra-structure, data integrity, data security should be invested in large scale

7. Integrated solutions should be developed

CHALLENGES OF HR OUTSOURCING IN VN

PagePage 14

IMPORTANT NOTES FOR SUCCESSFUL HR OUTSOURCING PROJECT

Source: The black book of Outsourcing: How to manage the changes, challenges, opportunities _ Douglas Brown & Scott Wilson

PagePage 15

IMPORTANT NOTES FOR SUCCESSFUL HR OUTSOURCING PROJECT

1. Service Level Agreement (SLA): clear, detail and there are some valuable points need to focus:

Timeline to deliver the services: an fixed schedule should be discussed and agreed in advance between the organization and vendor

What kind of reports/output to be delivered: a check list of reports, outputs should be discussed and followed on monthly/quartery/yearly basic

Responsibilities of organization and vendor: this should be mentioned as detailed as possible as many unclear services will be extra charged to your organization

Decisions to be made by organization, vendor: this is very important in HR outsourcing as it much link with your staff ‘ feeling and your HR cost

PagePage 16

IMPORTANT NOTES FOR SUCCESSFUL HR OUTSOURCING PROJECT

2. Planning transition

Keep end users informed about the goals and progress of the arrangement

Get end users involved: input in outsourcing plans, how the changes affect them..

Buy-in end users and sign-off on outsourced activities Educate end users about new method of the process Take care with high sensitivity if it involves transition of

employee from organization to HR outsourcing vendor.

PagePage 17

IMPORTANT NOTES FOR SUCCESSFUL HR OUTSOURCING PROJECT

3. Management commitment and support :

• Management commitment and support are essential as outsourcing project involves a great deal of changes, especially in cases of reorganization

4. Performance monitoring and support:• Performance should be review frequently to make sure the

service can meet the organization’s expectation.• Mutual support, understanding and solving problems with a

we’re- in-this-together attitude.

PagePage 18

HOW TO CHOOSE A GOOD HR VENDOR IN VIETNAM

Hewitt’s HR Outsourcing Trends and Insights 2009 Survey gives top factors to consider in choosing outsourcing provider:

• Service quality• Track record• Strong HR Process expertise• Brand trust• Strength in customising solutions

Very few organizations select their HR providers based on lowest cost

PagePage 19

HOW TO CHOOSE A GOOD HR VENDOR IN VIETNAM

Case study of ABC in choosing a vendor for payroll service05/2009 to 11/2009

PagePage 20

Case Study

Negotiation and finalise

Strategy+ Scope

•Invite 3 HR vendors to come to present their services and discuss with them the scope of service need to outsource

• Get 3 quotations from 3 HR vendors

• Check reference in the network, or current clients using payroll services on technical expertise, customer services, staff turnover, deadline… (by email, telephone)

• Visit vendor’s office (HR team+IT) to access server room, filing system, software, and interview the IT manager and the consultant to deliver the services ( some organization the Sales manager is very excellent, while the staff to deliver the services is not qualified)

• Finalise the vendor based on quality, cost ..

• Finalise the contract and sign- off

•Timelineness: Jun to July 2009

• Internal discuss about strategic outsourcing of payroll as the number of employee increase double or tripple in 2 year time

• Finallize the scope of work need to outsource

• Timeliness: May 2009

PagePage 21

Implementation

• Review the services quality by each quaterly and then 6 month

• Renew the contract after one year and a half.

• Inform staff about the payroll outsourcing arrangement: explain the reasons why outsourcing payroll and get their inputs and expectation

• Arrange a meeting between vendor and all staff: to introduce the vendor, and introduce some new method as e-payslip access

• Inform the vendor all the information related to services as ABC’ payment policy, staff expectation, management expectation, culture…

• Handover employee data to new vendor for setting up in Aug 2009

• Run paralell in two payroll circles: Sep and Oct 2009

• Go live on Nov. 2009

• Monthly check list of documents exchanged between the parties and the output reports are followed up

Post- Implemen

tation

Case Study

PagePage 22

Summary

In other countries, companies have embraced HR outsourcing enthusiastically

How can we help companies in Vietnam learn from their experience and share in the benefits?

PagePage 23

Q&A

PagePage 24

For more details on HR Outsourcing services, please contact:

Ms. Nguyen Thi Thanh Huong

Senior Manager, Payroll & HR Outsourcing services

TalentNet Corporation

4th Floor, Star Building,

33 Mac Dinh Chi Street

District 1, HCMC, Vietnam

Tel: (84 8) 6291 4188 ext: 202

Email: nguyen.t.thanh.huong@talentnet.vn