Business, Management and Economics Research ISSN(e): 2412-1770, ISSN(p): 2413-855X Vol. 3, No. 2, pp: 8-17, 2017 URL: http://arpgweb.com/?ic=journal&journal=8&info=aims *Corresponding Author 8 Academic Research Publishing Group Human Resource Managers Detect Management & Legal Disadvantages to Outsourcing Joseph B. Mosca * Associate Professor Dept. of Management & Decision Sciences, Monmouth University, New Jersey, USA, Executive Director Louisiana Committee on Bar Admissions, Human Resource Track Gregory R. Bordelon Lecturer/Pre-Law Advisor Dept. of Political Science & Sociology, Monmouth University, New Jersey, USA, Executive Director Louisiana Committee on Bar Admissions, Human Resource Track 1. Hidden Costs An organization’s Human Resources manager must analyze the hidden costs before deciding whether to offshore jobs. “Decades ago, when many companies began outsourcing production overseas, they had several reasons for adopting that strategy. One of their most important objectives was to establish a presence in China, Brazil, India, and other high-growth countries with the potential to generate huge demand for goods and services. Another major driver of outsourcing was the availability of low-wage Chinese workers who could produce goods so cheaply that their output essentially flooded the global marketplace. Companies that outsourced production internationally were looking at incremental revenues, significant cost reductions, and huge profits. It seemed like a winning, can't-miss strategy.” (Burton, 2013) However, in today’s global marketplace, there are significant costs that sometimes trump the low cost labor and cheap manufacturing that is available in high-growth countries. For many companies, the offshored work is contracted with an outside vendor and anything that is not specifically covered in the contract will be an additional expense. These outside vendors usually have extensive experience in these types of contract negotiations and will ensure that they get the best deal when dealing with an or ganization’s lawyers. As a result, a Human Resources manager will have to retain an outside law firm who specializes in these types of contracts so the company won’t experience additional hidden costs. Thus, before jobs are even offshored, there requires planning and a huge cash flow investment. Once jobs are offshored, management may believe that the cost-savings and synergies will begin to take effect immediately; however, there are many additional hidden costs that will be incurred by the organization. One of the biggest hidden expenses that an organization will face is the training of the offshored workers. The outside Abstract: Outsourcing is “a practice used by different companies to reduce costs by transferring portions of work to outside suppliers rather than completing it internally.” (Outsourcing, 2013) After the financial crisis of 2007-2008, many companies in the United States began to enhance their bottom-line profits by outsourcing and cutting costs instead of through the traditional route of top-line sales growth. In an attempt to effectively cut costs and generate profits for investors, more organizations engaged in outsourcing of jobs by means of offshoring. Offshoring is a form of outsourcing whereby jobs are relocated to a foreign country with a cheap labor force and low socioeconomic standards, and less regulations such as the EPA. From a Human Resources perspective, offshoring jobs is that there will be benefits to the organization such as cost and efficiency savings, focus on core activities, reduction of overheard costs, staffing flexibility, continuity, avoid organized labor, and risk management. In theory, the argument for offshoring is plausible and synergies can be created for companies; however, issues can result, creating huge disadvantages for organizations. Outsourcing can become detrimental to the financial health of an organization because of unforeseen costs. In addition, the organizational culture and employee morale begins to diminish when employees have no job security and they fear layoffs. Thus, there are pros and cons of offshoring jobs those Human Resources managers’ must evaluate before choosing whether to offshore jobs or keep them domestically. Therefore, outsourcing jobs through offshoring can result in disadvantages to an organization because of hidden costs, bad publicity and low employee morale, quality problems, loss of managerial control, threat to confidentiality and security, and reliance on the financial health of the outsourced organization. This paper has been divided into two sections due to the comprehensive approach taken by the authors to provide a focused view on the legal aspects giving the reader an opportunity to use the information as a guide if needed, or for further research. Keywords: Human Resource; Management; Outsourcing.