HR outsourcing trends in Malaysia: the undetected tiger

The purpose of this study is to provide deeper and broader insights into human resource outsourcing (HRO) trends and practices specific to the Malaysian context.

Data were collected from HR managers through a questionnaire-based survey, using convenient sampling with random selection.

HRO practices were found to have evolved into second-generation outsourcing, with considerable potential to grow further in the future. Firm size and sector had little or no effect on the degree of HRO. Both cost benefits and resourced-based benefits were key drivers of HRO decisions, with a majority of the firms reporting having achieved these benefits equally and positively. Most of the functions outsourced were traditional-transactional HR functions. Slightly more than half of the HRO decisions were made by top management without the involvement of HR managers. More than half of the firms surveyed intended to do more outsourcing in the near future (i.e. within the next two to five years), including firms that had previously experienced HRO failure.

While convenience sampling limits the generalisability of the findings, it is suitable for a study like this, especially as there is no pre-established list of firms outsourcing HR available in Malaysia. The study did not cover trends in either HR shared services or insourcing – either of which could potentially affect future HRO trends in the future. The findings also serve as a warning to future HRO researchers about the importance of contextual knowledge to strengthen the validity of their findings.

The findings provide both practitioners and service providers with insights into HRO practices and trends in Malaysia, which are comprehensively discussed in the paper.

This paper presents a broad, yet up-to-date, overview of HRO practices and trends specific to the Malaysian context. It covers aspects and details of HRO not explored or explicitly discussed before.