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HR Outsourcing Contracts Increase in Q3 2014

by: Sarah Joson

Monday, November 17, 2014 |

UK.Finance.Yahoo.com recently shared the highlights of the Quarterly Outsourcing Index created by arvato UK, a business process outsourcing (BPO) firm, and industry analyst NelsonHal.

Growth for the HR outsourcing industry

The report found that the average deal value for HR outsourcing grew 24 percent year-on-year in the third quarter of 2014. Strong outsourcing activity was also seen from the central and local government market, even though spending activity decelerated.

The report also found that out of all the outsourcing deals signed this year, HR accounts for 25 percent with a total value of £93 million. Moreover, 25 BPO and ITO deals were finalized in July - September 2014 with a total value of £421 million. The Q3 of 2014 is the third consecutive quarter of growth in percentage of first-time outsourcing deals at 64%.

Twenty-four percent of existing contracts underwent expansions and extensions. Contracts that are set to be delivered onshore grew from 60 percent last year to 76 percent, and the public sector (healthcare, central and local government markets) spent £108 million.

The growth in HR outsourcing contracts propelled the value from just over £8 million in Q3 2013 to £10 million in Q3 2014.

The bullish year-on-year growth for the HR outsourcing industry is a sign that demand for recruitment, benefits administration, and payroll outsourcing services, as well as the ongoing development of refined client-outsourcer partnerships remains strong.

On the other hand, the report revealed that private sector clients behind 92 percent of all the HR outsourcing deals closed since January. The most active buyers in the business services segment are from the professional, property, and people services with 39 percent of deals. Manufacturers lagged behind with 22 percent of all the contracts.

Within the HR segment, benefits administration accounted for 48 percent, followed by recruitment with 36 percent, and development services with eight percent.

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