International Journal of Innovation, Management and Technology, Vol. 2, No. 2, April 2011 127 Abstract—Purpos:The present paper focuses on different types of HR outsourcing and the factors which need to be considered before a company goes for outsourcing of Human resource Functions. Design/methodology/approach:A review of available literature was done in order to understand how today’s HR firms offer a wide variety of services to companies that need to focus on their core business activities and still establish and maintain good HR policies and to explore the factors that affect the HR outsourcing decision with special emphasis on a proper cost benefit analysis of HR outsourcing. Findings:The findings of the paper implicitly point out that the decision of HR outsourcing is contingent upon factors like flexibility, availability of adequate resources, affordability, and acceptability (openness to information-sharing) etc. The paper also suggests a systematic process and certain pre-requisites to successfully execute HR outsourcing. Originality/value:Based on literature review, the paper makes specific recommendations with regard to the process of HR outsourcing and its pre-requisites; and is an attempt to highlight the fact that HR outsourcing is a double-edged sword; and should be viewed in totality keeping in mind the pros and cons it has. Index Terms—Cost-benefit, HR Outsourcing, Need, Strategic I. INTRODUCTION Outsourcing has been defined as work done for a company by people other than the company’s full-time employees. In the modern setting, outsourcing turns out to be highly complex and organizations use outsourcing vendors for a variety of reasons. According to analysts, companies usually cite cost reduction as the most crucial reason for HR outsourcing. As companies were discussing how to cut costs in the face of an economic downturn, many look at outsourcing for some of their HR processes. As the Managing Director of Capita HR Solutions, Wayne Story, rightly puts it, “HR outsourcing is on every HR director's list of things to do. It has to be driven by the business case though – the right partner at the right time, for the right reasons.” However, some analysts argue that by outsourcing major HR activities, the number of HR jobs is decreasing, others feel that on the contrary by outsourcing these kinds of repetitive Manuscript received January 8, 2011 First Author - Manisha Seth is working as Assistant Professor with Jaipuria Institute of Management, Vineet Khand, Gomti Nagar, Lucknow (Phone: 919415764002; e-mail: mseth@jiml.ac.in) Second Author - Deepa Sethi is working as Senior Lecturer with Jaipuria Institute of Management, Vineet Khand, Gomti Nagar, Lucknow (Phone: 919889297279; e-mail: deepa@jiml.ac.in) and administrative jobs, higher-level HR professionals get the time they need to tackle strategic workforce challenges. With more and more companies looking to rationalize employees on their payroll, manpower outsourcing is slowly becoming the new buzz in India. And the trend seems to have hit not just big multinational companies but the public sector and government undertakings as well, though on a very low key yet in the latter. HR services are among the key elements in the enlarging outsourcing game. Recognizing the fact that senior management needs to get out of mundane day-to-day processing work and focus instead on strategic planning, core competencies, customer satisfaction and decision making, a number of large companies, across globe have begun opting for outsourcing of their HR services. Some of the functions most commonly handed over to outside providers include payroll, benefits administration, background checks, drug testing, recruiting and training. Even small companies that might not get noticed much in big studies of outsourcing trends, turn to outside services to help with such chores. There are a number of issues related to HR Outsourcing. Some of these issues include: • The future purpose and contribution of HR because of possibilities of functions being transformed, or partially outsourced, through HRO deals. • The strategic and management complexities of HRO deals. • Deciding what is "core" and "non-core" in HR. • The difficulty that HR has in assuming more strategic or value-adding roles after implementing HRO. • The position of off shoring, including job losses and redeployment. The challenges of trying to manage HR process affect on a global scale and across different cultures. Some organizations believe the HR function is an integral business success factor, but others view HR as over-resourced, inefficient and thus vulnerable to the cost reduction possibilities of HRO. II. LITERATURE REVIEW There are a number of reasons, at both the strategic and operational level, why firms want to outsource HR activities. Many share similarities with the outsourcing of other organizational functions. In particular, demands for increased productivity, profitability, and growth have forced organizations to examine their internal HR processes, Human Resource Outsourcing: Analysis Based On Literature Review Dr. Manisha Seth and Dr. Deepa Sethi