Outsourcing, contracting-out and labour hire: implications for human resource development in Australian organizations

Outsourcing, contracting-out and labour hire all have potentially dramatic consequences for human resource management and human resource development in particular. Advocates of outsourcing have traditionally warned that outsourcing and related strategies should not be seen as simply cost-cutting exercises. Nevertheless, cost reduction continues to be a major motivation for many Australian employers. While there may be short-run cost benefits associated with declining employer-funded training, there appear to be longer term costs associated with declining employer-funded training, skill...  [+] Show more

Outsourcing, contracting-out and labour hire all have potentially dramatic consequences for human resource management and human resource development in particular. Advocates of outsourcing have traditionally warned that outsourcing and related strategies should not be seen as simply cost-cutting exercises. Nevertheless, cost reduction continues to be a major motivation for many Australian employers. While there may be short-run cost benefits associated with declining employer-funded training, there appear to be longer term costs associated with declining employer-funded training, skill losses, reduced employer commitment to human resource development generally, and declining employee loyalty, trust and commitment. The paper reviews previous research and presents new evidence drawn from a series of case studies of three very different large organisations that have utilised a variety of outsourcing and labour hire strategies. The findings drawn from case studies confirm Gonos' (1997) interpretation that outsourcing and the use of labour hire involve an attempt by management to engage 'labour without obligation'. As a result it is unsurprising that many workers implicated in outsourcing and labour hire tend to feel little obligation in return. It is likely therefore that the increasing use of labour hire and outsourcing runs the risk of contributing to lower levels of employee commitment as well as reduced employer commitment to sophisticated human resource development strategies.

Published abstract.