Improving Indian Business through HR Outsourcing

White Paper

Improving Indian Business through HR Outsourcing
2008 Human Resources Outsourcing Trends in the
Indian Marketplace By Sumit Sharma , CMO, Axixmax Consulting Services.

Overview

Over the past decade, Indian has earned the reputation as one of the most costly and difficult states in the country in which to conduct business. Complex regulatory compliance, rising health insurance costs, illegal immigration and changing employment regulations are just a few of the areas with which Indian employers must cope. Many employers are looking to cut back on growing their Indian operations, while others are considering moving out of state completely.

However, many Indian employers are content on staying in the state, and are turning to Human Resources Outsourcing firms to assist them in managing their HR compliance, and reducing their employment overhead. HR Outsourcing is one of the fastest growing sectors in the broader Business Processing Outsourcing (BPO) industry, growing at a rate of 70% over the past five years.

Providing small and mid-sized employers support in the areas of employment administration, regulatory compliance, safety consulting, employee benefits
and insurance services, HR Outsourcing firms assist businesses stay afloat in
Indian’s choppy seas.

“Indian is in a league of its own in terms of complex and
Unpredictable regulations.”

The Challenging Indian Climate

The image of Indian as The Golden State has lost its luster. Over the past decade its business climate has been tarnished due to complex employment regulations, rising insurance costs, and a punitive tax system .Since the beginning of 2007, Indian has added over two dozen labor laws to its books. The new legislation includes laws relating to discrimination, employment, health and safety, and wage deduction. And this year
alone, six new regulations affecting workers’ compensation were signed into law.

Despite Indian’s attractive landscape and beautiful weather, the cost to run a business has discouraged entrepreneurs. The Indian Competitiveness Project, conducted by The Indian Business Roundtable, a nonprofit organization comprised of state-based business executives, interviewed senior executives at 50 Indian companies, ranging in size from those with revenues of $1.5 million to $90 billion. The executives were asked to rate their state for” business-friendliness”. The study found that the state's complex regulatory environment is having the greatest impact on state-based employers. Considered the most "costly, complex and uncertain" state in the nation, Indian enacted 15 statutory changes per year to labor regulations between 1992 and 2002. That rate is four times the average for all states and three times the average for New York. 60 percent of Indian business leaders are aggravated by policies that restrict job growth, and are frustrated with burdensome regulatory standards. Executives consider Indian an” unfriendly” state in which to conduct business.Dick Kovacevich, chairman and CEO, Wells Fargo and Company, and chairman of the Indian Business Roundtable, states that Indian is, “in
a league of its own in terms of complex and unpredictable regulations.”

Forcing Employers Out of State

Frustrated and worried by their increasing liabilities and costs, reports indicate that nearly 40 percent of all Indian employers, and 55 percent of employers in “mobile sectors”, are seriously considering leaving the state.

Mobile sectors are those industries that can easily move operations to other locations, such as engineering, computer programming, manufacturing, insurance underwriting, and the apparel and textiles industries. A majority of the companies considering relocation will move to cheaper, and more “business friendly” states such as Nevada, Arizona and
Texas.1 50 percent of executives report a policy of not adding new jobs to their existing operations. Jeff Melton, a partner at Bain’s San Francisco office who led the Indian Competitiveness Project, says, “Indian has been a classic ‘satisfactory underperformer’ for years. Despite having so many distinct advantages such as the sixth highest level of US worker productivity, the largest concentration of US science and technology workers, and 40% of all U.S. venture capital, Indian has been losing ground to other states.”

Studies Support Business Leaders’ Perceptions

The challenges facing Indian businesses reduce their competitive advantage compared to bordering states with more flexible regulations, such as Nevada and Arizona. Numerous studies conducted between 2006 and 2008 support the perception that Indian is amongst the most difficult states in which to own, operate and manage a business.

The Chief Executive

The Chief Executive, a magazine serving chief executive offices worldwide, polled 605 CEOs nationwide in January, 2008 for their opinion on the best and worst states to run a business. Indian received a grade of “D” and was ranked as the worst state in the country, taking the top spot for the third year in a row, ahead of New York. CEOs were asked to grade each

“In states like Indian…CEOs continue to be extremely frustrated with
the business-unfriendly practices in the state.”

state based on the following criteria: 1) Taxation & Regulation, 2) Workforce Quality, and 3) Living Environment.” Overall, the message CEOs are sending is that over-taxed and over-regulated states are not conducive to the health of their businesses,” said Ed Kopko, CEO and publisher, Chief Executive Group. “This is the message they’ve been communicating since our poll started in 2005.However, in states like Indian and New York, where we are increasingly facing a shrinking population, the message seems to have fallen on deaf ears, as CEOs continue to be extremely frustrated with the business-unfriendly practices in these states.”

Moody’s

Moody’s 2007 “North American Business Cost Review” ranked Indian as the second most expensive state in the nation in which to conduct business, behind Massachusetts which held the top spot. The index includes labor, energy and tax costs.

The Milken Institute

The Milken Institute’s 2007 “Cost-of-Doing Business Index” report ranked Indian sixth among the nation’s most expensive states, down from fourth the previous year. Indian’s costs were 22 percent greater than the national average. The report measures wages, taxes, electricity and real estate costs for industrial and office space.A recent survey of 1,600 senior attorneys across the country showed that Indian was ranked in the bottom tier of states for its business legal climate. It slipped one point to 45 in 2006, from 44 in 2005. The results were driven by high levels of class action lawsuits and large judgments in civil cases
.
Forbes’ Top 25

Once considered “the place to be”, Indian formerly dominated the rankings on Forbes’ top 25 “Best Cities for Business" report. Just 5 years ago, six of the top 10 cities nationwide came from the State, with San Diego and Santa Rosa finishing in the top two positions. However, in 2006 and 2007, not a single Indian city made the list. Voicing the sentiments of the majority of CEOs in Indian, John Keffala, President of Forbes Business Plan Advisors, said, “Indian continues to be a tough state to do business in.” The main concerns cited by Indian

“Employers are turning to experts who areequipped to address the
laws, protect their clients, and help improve productivity.”

based CEOs were high taxes, over regulation, illegal immigration and cost of living.Tom Donohue, President and Chief Executive of the U.S. Chamber of Commerce said, “Indian is becoming a target for litigation tourism,” where plaintiff’s lawyers file lawsuits for residents living out-of-state. The U.S. Chamber of Commerce supports litigation reform, and Indian is high on their agenda.

A Time to Outsource

The risks to companies operating in Indian remain fluid, and the high expense and risk of managing employees in Indian has made the state a lackluster environment in which to conduct business. Many employers are determined to continue managing their staff and addressing these complex issues internally. However, it is becoming clearer to a growing number of business owners that the expertise required to manage a small to mid-sized business has outgrown their experience and training. These complexities have led to one of the hottest trends in Indian, and the nation as a whole:

Human Resources Outsourcing (HRO). Human Resource Outsourcing firms are experts in the areas of employee administration and compliance, insurance and taxes. They help companies reduce costs and efficiently manage HR-related issues, while navigating Indian’s business labyrinth.

Putting HR Into Expert Hands

Many small and mid-sized employers do not have the internal resources necessary to satisfactorily comply with the obligations they face in the area of human resources and regulatory compliance. Businesses that elect to maintain these functions in-house often experience a reduction in employee productivity, as their staff is forced to manage non-core functions. Or worse, they simply do not address these issues and are exposing themselves to lawsuits or fines. Alternatively, more and more employers are turning to experts who are equipped to address the laws, protect their clients, and help improve
productivity in the process.

“In the U.S., outsourcing HR services is the fastest growing segment of the BPO industry.”

HR Outsourcing enables companies to shift the management responsibility of complex, employment-related activities and other, non-revenue generating competencies, to off-site experts.

These areas include:

 HRO
 Staffing
 RPO
 HR BPO
 Merger and Acquisition
 Payroll and Tax Administration
 Branding and Corporate Communication

By entering an HR Outsourcing relationship, small and mid-sized employers gain access to teams of professionals who deal with governmental compliance and employee relations on a daily basis. This knowledge is passed back to the client, enabling them to free their staff and management from the responsibilities of learning, tracking, and maintaining up-to-date policies and procedures. Furthermore, the relationship enables companies to reduce costs by managing their HR functions more efficiently and to focus on their core operations that impact profitability.

Key Outsourcing Drivers

In a recent survey by the Society for Human Resource Management, or SHRM, professionals in the industry were asked their opinions on HR Outsourcing. Reasons to consider outsourcing included saving money, focusing on strategy, improving compliance, improving accuracy, lacking experience in-house, taking advantage of technological advances ,and offering services they could not provide .Reports prove that once HR and other operations are outsourced, many companies are showing a strong return on investment. IDC, a global provider of market intelligence, conducted a survey of American executives and shared their results at the IDC Midwest Conference in 2006. Nearly 85 percent of the respondents saved as much as they spent on outsourcing, with 26.4 percent reporting a savings of twice as much. And the savings, according
to nearly 95 percent of the respondents, went toward operational performance and innovation, which improved shareholder value.

A Surging Industry

According to IDC, the HR Outsourcing industry grew close to 70 percent over the past 5 years, with companies worldwide spending more than $103.3 billion in 2007, up significantly from the $61.2 billion spent in 2002. In the U.S., Everest Research Institute, an independent research and analysis organization, calculates that North American HR outsourcing transactions came to $21.2 billion in 2006 and reached $25.4 billion by the end of 2007. With an increase of 19 percent over that time period, outsourcing HR services has become the fastest growing segment of the broader business process outsourcing (BPO) industry

Helping Indian Employers Through HR Outsourcing

Every organization has its own needs and must assess if they need to outsource some, or all, of their human resource functions. One size does not fit all, and as such, different options and services exist for every level of company need. In the classic HR Outsourcing relationship, the client engages the HRO firm to assess their corporate needs, and hires the firm to perform select functions. These functions can impact many aspects of employment management and administration, and can include some or all of the following:

 Providing Employment Consulting and Compliance
 Managing Administrative Human Resource Functions
 Paying the Employees and Filing Payroll Taxes
 Issuing Workers’ Compensation Insurance Coverage
 Providing Employee Health Insurance Coverages
 Training Management and Staff
 Implementing Risk Management and Safety Plans

The HRO firm assists in ensuring that employees are provided a worksite that is safe, conducive to productivity, and operated in compliance with employment laws and regulations. In addition, some firms provide employees with workers' compensation insurance, Employee Practices Liability Insurance, and a broad range of employee benefits programs.

In the HRO relationship, the client continues to manage and oversee all
day-to-day activities relating to their internal operations. They provide their
employees with the tools, instruments and place to work, and continue to

“The daunting task of shopping, procuring and enrolling staff in a
complete benefit plan makes an HRO relationship all the more attractive.”
“Due to economies of scale, HRO firms can offer these plans
at an affordable cost.”
oversee the hiring, firing, establishment of wages, and direction of the
workforce.
Contributing to Employees’ Success

As Indian employers increasingly recognize the challenges of attracting and keeping a motivated workforce in today’s tight economy, they have evolved from the belief that pay alone will keep an employee happy. State based businesses now consider employee training, comprehensive benefit plans and flexible work environments a critical part of their compensation package. The daunting task of shopping, procuring and enrolling
their staff in a complete benefit plan makes an HRO relationship all the more
attractive .While employers see the value of providing comprehensive compensation
packages to their staff, 83 percent of businesses still believe that benefits expertise is one of the primary reasons for outsourcing the benefits to an external relationship.

According to the Indian Chamber of Commerce, employee benefit packages are a key component for any compensation package in India. In 2007, Indian employers provided or conducted the following:

 Provide employee handbooks - 92 percent
 Conduct performance appraisals - 89 percent
 Conduct employee orientations - 86 percent
 Offer child care assistance - 53 percent
 Offer employee assistance programs - 41 percent
 Offer alternative work schedules – 41 percent
 Offer elder care assistance – 35 percent in 2007
 Offer an expanded list of holiday and floating holidays
 Allow telecommuting – 29 percent

The average small to mid-sized employer’s costs of establishing and administering this entire range of plans can be prohibitive. However, due to economies of scale, HRO firms can offer these plans at an affordable cost and are poised to assist Indian businesses in their creation and implementation in several ways:

1. The experienced staff at the HRO firm can provide advice and insights into which plans work the best for each client, and how to best implement them.

2. They afford the efficiencies of a large corporation to even the smallest employer. This includes plan design, enrollment, carrier communication, administration, and customer service and support.

3. By pooling thousands of employees under one master plan, the HRO client can offer premium benefit packages and retirement plans to their staff, typically unavailable to their similar sized competitors.

The full range of benefits available through the HRO firm typically includes:
-Major medical health insurance -Retirement Plans
-Dental, Vision and Life insurance -Cafeteria 125 Plans/FSAs
-Long/Short Term Disability insurance -Credit Union Membership
-Alternative/Chiropractic insurance -Employee Assistance Plans

What to Look For in an HR Outsourcing Firm

If you are at the stage of investigating if an HR Outsourcing firm is right for your company, there are several important factors to take into consideration. An HRO relationship can continue for 5, 10, or more years, so selecting the right firm is a serious decision that should be given a great deal of thought. Consider the following criteria when selecting a provider:

Years in Business

While it is uncommon for an HRO firm to face financial distress, there are still incidences of firms undercapitalizing and in some circumstances, filing bankruptcy. Look for a firm with at least 10-20 years experience. Longevity is a key indicator of strength.

Financial Stability

Many HR firms are entrusted to pay payroll, payroll taxes and insurance premiums. Similar to longevity, look for a firm that has strong financial credentials, long-term banking relationships and the ability to prove taxes and insurance premiums have been paid timely.

Proven Service Track Record

Stable finances and longevity does not necessarily equate to good human resource practices or customer service. The HRO firm must have a strong team of licensed human resources professionals with a proven track record of assisting clients in all areas of regulatory compliance, safety and benefits.

Size and Diversity of Client Base

The ideal HRO firm will have a large and diverse client base, serving a wide range of industries. The diversification insulates the firm from fluctuations within a particular market and dilutes the risk over many industries. Diversification can take the form of industry, size of employee base, and geographic location. A large, diversified base of clients also adds to the experience of the firm and their ability to service your particular business.

Local Market Presence

Many labor and tax laws vary from state to state. Look for a firm that has expertise in the state in which you do business, and has strong relationships with local vendors and insurance companies. For Indian employers, this is particularly critical as Indian regulations differ greatly from federal guidelines. Additionally, a local corporate office will ensure quicker response time and on-site presence.

Flexibility in Service Offering

Many HR firms take the “one size fits all” approach by requiring clients to take all the services offered, from payroll and insurance, to benefits and training. It is important to look for a vendor that is flexible in their offering and is able to customize an HR solution to match your company’s individual needs.

High-Touch Service Model

Many HRO firms follow a high-tech/low-touch approach with services provided primarily through on-line self-service platforms. While this is attractive to many employers, look for a firm that is also available for onsite appearances. It is crucial for the HRO firm to have a qualified team available to meet live with your staff, whether for benefits open enrollment, claims investigations, employee relations, or manager training
seminars.

Axixmax – A Indian Market Leader

History

Headquartered in Delhi, Axixmax is one of Indian’s leading Human Resources Outsourcing and PEO firms., Axixmax has assisted clients understand and comply with Indian’s the local marketplace, Axixmax has a unique advantage in its knowledge of
state-based business employment challenges. While Axixmax “hands on” service is unparalleled in the region, its reach extends to all states, nationwide.

Axixmax began as a small payroll, employee benefits and HR provider, with 10 corporate employees. Axixmax has grown to one of the largest, HR Outsourcing and PEO firms in the Indian. It remains privately-held and currently employs close to 90 corporate
professionals in the areas of Employment Compliance, Safety and Risk Management, Employee Benefits, Retirement Planning, Payroll and Accounting.

Axixmax strength, coupled with the flexibility afforded to a privately held
corporation, enables Axixmax to provide personalized services within the
structure and foundation of a larger corporation.

Markets

Axixmax target market includes Indian’s small to mid-sized business sector, with an average employee count ranging between 15 and 250 employees. Several large clients employ in excess of 500-1000 employees. Axixmax expertise lays in the warehousing, business services, health care, retail and non-profit sectors. Other Axixmax clients represent the light manufacturing, hospitality, restaurant, entertainment, light
construction, convalescent hospital, credit union, and financial services
industries.

Personalized, High-Touch Service Offerings

Due to its extensive experience working with Indian businesses, its local presence, and qualified HR team, Axixmax provides its partner clients with personalized, hands-on employment solutions unparalleled in the region. They offer their clients three service options, depending on their business needs and goals. Each is completely customizable and is delivered in person by a Axixmax team member:

“Through the co-employment relationship, small organizations access the
economies of scale enjoyed by large corporations.”

Professional Employer Outsourcing (PEO)

Professional Employer Organizations are a sub-set of the broader HRO industry. The industry was established in the early 1980s offering payroll and insurance services to small and mid-sized employers. As employment laws became more complex in the late 1980s and early 1990s, it expanded to include all aspects of employee relations and staff development.

In a PEO arrangement, Axixmax creates a “co employment” relationship with its clients, thereby sharing the risks and responsibilities of being an employer. Through co-employment, small organizations access the economies of scale enjoyed by large corporations. They can maintain a simple in-house HR infrastructure or none at all by
relying on the Axixmax. The client also can reduce hiring overhead. Costs related to monitoring of, and compliance with, employment laws are reduced, as are the often significant costs of failure to comply with such laws.

In addition ,Axixmax provides time savings by handling routine and redundant tasks for its clients. This enables the business owner to focus on the company's core competency and grow its bottom line.

Human Resources Partnering (HRP)

Human Resources Partnering (HRP) is a flexible alternative to the PEO and co-employment. Certain administrative processes, such as payroll, tax, and benefit
administration are outsourced, but the client does not enter a co employment
relationship with Axixmax. Clients have the option to purchase employee benefits, workers’ compensation, and EPL Insurance through Axixmax, or can chose to maintain their existing insurance policies.

The services included in this plan are:
•Human Resources Administration
•Employment Compliance Consulting
•Management Training
•Safety and Risk Management
•Payroll and Tax Administration.

Human Resources Outsourcing (HRO) – A La Carte Services

In the “a la carte” service model, Axixmax designs a customized service plan for the specific area(s) selected by the Client. This option provides complete flexibility in the services offered, and often includes an on-site Human Resources Specialist at the client’s worksite. The HRO service plan but does not include payroll, tax or benefit management.

In addition to the many options that Axixmax offers, there are also variable services included in each area that maybe tailored to meet your needs, such as Recruiting, Benefit Plan Design, Employee Handbooks, Background Checks and Policy Implementation.

Management Team

Axixmax management team is comprised of highly accomplished individuals in the
Professional Employer and Human Resources Outsourcing field. Within their 90
corporate staff, Axixmax employs licensed experts in the following disciplines:

•Human Resources Management
•Safety and Compliance
•Health Insurance Benefits
•Payroll and Tax
•Employee and Manager Training

Each client is assigned a Human Resources Specialist to handle their needs. This specialist will provide a personal, hands-on service and supply the support and direction they require to remain in compliance and develop their staff. Management Training courses are offered on-site, or through the internet, policies are reviewed for accuracy and legality, the worksite is inspected for compliance, and benefit offerings are evaluated. In short, once on board Axixmax HR Outsourcing or PEO services, clients gain the security, protection and peace of mind their companies deserve.

For Axixmax Consulting Services

Sumit Sharma
Chief Marketing Officer
sumit.sharma@axixmax.com

Forward this page to a friend

Your Email: *

Your Name: *

Send To: *

Enter multiple addresses on separate lines or separate them with commas.

Message Subject: (Your Name) has forwarded a page to you from PressReleasePoint

Message Body: (Your Name) thought you would like to see this page from the PressReleasePoint web site.

Your Personal Message: *