9 Pearson Road Everton KwaZulu Natal South Africa 3610 Tel (031) 767 0625 Fax (031) 767 3280 david@drgoutsourcing.com

DRG Outsourcing describes BPO… And the South African HRO industry climate, service level standards, and opportunities for international groups to enter the South African market.

BPO… an introduction
In describing what business process outsourcing is about… Consider your business from the core leadership outwards. Your team then has core and non-core activities. Identify each of the activities/processes that are needed to complete your business cycle, and divide them into the business environments of human resources, marketing, IT, finance and accounting, and operations (procurement and logistics). In looking at your business from this perspective you will see business process outsourcing from an outsourcing suppliers perspective. Within every business similar activities are done, outsourcing companies identify these activities, and market ready-made solutions. A good example can be seen in human resource outsourcing (HRO) where companies use outsourcing suppliers to supply routine administrative activities as payroll management and third-party payments.

The advantages in having a professional and reliable business process partner in your business are many. The wise know their business well enough to know which activities to outsource, and which activities are best handled within the companies core. Each business environment can be divided into six or seven basic activities. In the human resource environment the activities include; payroll management, contract employee management, HR Training, HR audits and consulting, placements and employee benefits. Many companies do not have formal human resource departments to effectively manage and motivate their staff, but with help from a one-stop-shop human resource outsourcing supplier, they can draw in skills and routine services as they require. The business leaders just need to understand which activities are more effectively given to an outsourcing supplier to manage, and how this business decision will enhance their companies business.

World over studies have shown that the largest reason why companies outsource… is to draw in the skills of professionals. There are, however, many other good reasons why companies choose to outsource. There is often a cost advantage, a freeing up of valuable time advantage, a reduced liability advantage, a refocus of resources advantage, and other. The real advantage in outsourcing, however, is in identifying what outsourced activities would enhance your business in some way that it gives you a competitive advantage. Even if that edge is "thinking" at a deserted beach on a summer day. Outsourcing suppliers are there to help small, medium and large companies better perform their business functions and routines, and are successful for as long as their clients are successful. It is a transfer of skills and responsibilities, and is best viewed as a business partnership relationship, with transparency, reviews, service level agreements...

HR Outsourcing in South Africa

Throughout the world outsourcing has grown at a phenomenal rate, but no place has it grown more quickly than in South Africa. The climate for human resource outsourcing has been unique; consider that since South Africa's new Constitution was implemented almost 10 years ago, eight new labour acts have been promulgated, and a new income tax system (Nits) created to help manage individual and company tax payments. The many changes in employer-employee management structures in South African provided the platform for the growth of outsourcing as an industry, and many sophisticated outsourcing brands now provide professional and reliable services.

Many changes occurred in employment structures as each new act was put in place. Outsourcing companies, trading successfully through these years, benefited through varied experience with their clients, and learned to supply professional, lasting solutions. Coupled with the changes in labour and taxation structures, South Africa instituted an economic empowerment programme encouraging cross-cultural integration with previously disadvantaged groups. The aim of the Black Economic Empowerment (BEE) program is to stimulate the economy through shared business knowledge, reaching common goals, and sharing prosperity through equity ownership. The result of this structure in South Africa's business environment has created many entrepreneurial small and medium size companies. Corporate employee structures have also reduced considerably over the past years, with corporate companies preferring to focus more on their core business and having relationships with small and medium size companies who provide specific and professional services. The many new companies that have begun in South Africa have been supported by corporate business, and many are doing extremely well.

Outsourcing suppliers are able to supply these emerging companies with, for example, the backing of a full human resource management structure, which allows their attention to be on their core business, and supply their focused services to their client. Many corporate organisations also use the services from outsourcing companies to supplement their human resource structures. These services include; payroll management, HR audits, placements, HR training… Outsourcing as a business sector has therefore been fueled from many sources, and is becoming more understood and used by companies every day.

To guide service levels in employment outsourcing relationships governmental bodies have developed structures to encourage compliance of regulation. An example is an IRP30 certificate from the South African Revenue Service (SARS). For companies to supply labour to a third party they must be in the possession of and IRP30 or Tax Exemption Certificate. The labour supplier needs to reapply each year to the SARS for this certificate, and the certificate is only issued if each aspect of the business relating to the SARS is current and correct. The SARS collects employment contributions for three employment statutory bodies, namely employee income tax (PAYE and Site), unemployment insurance, and skills development levies. In choosing the right outsourcing relationship for your company, consider the length of time the client has been in the industry, reaction from references, and the loyalty of their brand. There are many acclaimed business support structures like the DTI, local Chambers and Proudly South African (an employment encouragement program) that would provide guidance in choosing the right outsourcing supplier for an international business requirement.

There are certainly investment opportunities for international companies to have relationships with South African outsourcing companies, and these relationship discussions can be assisted through one of the many investment agencies the South African government has provided to support foreign investors (Durban Investment and Promotion Agency (www.dipa.co.za). However, the greatest opportunity for international investors considering South Africa as their preferred destination is to securing a relationship with a human resource outsourcing company to provide local set up (and ongoing administrative) needs. It is no doubt a daunting thought for any international investor when first considering the management of human capital in a foreign land. But, with a professional human resource partner to provide the facilities and guidance, this aspect of the business becomes comfortable. The synergistic values in the right outsourcing relationships are surmountable, and there are many to choose from in South Africa.

DRG Outsourcing (Pty) Ltd is based in KwaZulu Natal, the home of the Zulu King, and a welcoming province within the rainbow nation of South Africa. DRG Outsourcing provides one-stop shop administrative human resource outsourcing services to small, medium and corporate clients.

We look forward to providing international clients with DRG Outsourcing professional and reliable human resource management solutions.

Written by David White 1st September 2003
www.davidwhite.co.za

Your partner in professional and reliable human resource management solutions