EquaTerra, the outsourcing consultancy, expects the Chinese HR outsourcing industry to be worth more than £41bn by the end of 2008, according to a new report by the company. The firm also predicts rapid growth of up to 25% in 2008 and 2009.

The report, written by EquaTerra’s Shanghai-based consultant, Vibhash Ranjan,  provides a snapshot of the maturing human resource outsourcing (HRO) market in China today and an expert analysis of current and future trends.  Some other interesting points highlighted in the report include:

Drivers of growth

· The recent spectacular growth in the Chinese economy is compelling foreign owned organisations based in China to adopt sophisticated HR related practices.  Factors influencing the growth of HRO include rising labour costs, new types of employee supplemental benefits and a rise in the focus on employee engagement and talent management.  

Market Growth

· In 2008 and 2009, the HRO market is expected to expand by at least 25 per cent.  However, due to the prevailing operational complexities in China, most multinational companies choose to adopt the services of Chinese HR service providers such as FESCO or CIIC.

Differing drivers of change

· One of the key reasons that Chinese organisations will choose to implement a HRO strategy is to free up the HR department from transactional and administrative tasks and let them focus on strategic tasks of planning and management.

Important markets

· The adoption of HRO in China has traditionally been driven by multinational client companies which account for over 90 per cent of the number of deals and total contract value. As these companies have their major operations based in Shanghai, Beijing and Guangdong regions, these three areas account for approximately 85 per cent of the market.

Future outlook

· To date, China still does not have enough skilled manpower to meet the growing demand of the HRO services market. This will lead to wage acceleration for providers, margin erosion and raiding other providers (especially of benefits administration and compensation providers) for resources. Ultimately, the dominant provider players will be those companies that can obtain and retain quality delivery people.

The full whitepaper can be seen here: Human Resource Outsourcing in China