From Skill Gaps to Outsourcing - A Growing HRM Challenge in Sri Lanka
The present economic scenario in Sri Lanka has led many businesses to cut down on expenses (Sriyani, 2022). Consequently, there has been a sharp decline in expenditure on employee training and development programs. In most businesses, particularly SMEs, newly hired workers are employed immediately without adequate training. This has caused inexperienced staff to commit errors, thus putting the organization in tough positions.
As an example, In the present condition of Sri Lanka, most of the staff employed by the organizations lack adequate knowledge on taxation. This could lead to errors in the computation of taxes, payment of taxes which will ultimately affect the business organization adversely in terms of huge tax assessments and penalties. Ultimately, more costs are incurred by the organizations. The above scenario becomes even worse since the government's tax department has become very stringent recently.
Due to such difficulties, companies believe it would be much more economical to outsource rather than keep internal staff who would be paid salaries, along with the EPF, ETF, and training expenses (Gambal, Asatiani and Kotlarsky, 2022). Therefore, many companies in Sri Lanka have begun to outsource functions including accountancy, taxation , marketing, payroll, hiring and etc.
The process of outsourcing is likely to be relatively economical in practical terms. For example, some subsidiaries of our company outsource the task of accounting to few audit firms, and these auditing firms are likely to charge a comparatively lower price for providing services, owing to the fact that the trainees hired by the audit firms receive very small allowances from the firms but still gain experience and prepare themselves for professional qualifications like Chartered Accountancy. Hence, these firms provide the required manpower to our company at a very nominal fee per month.
Outsourcing also presents certain disadvantages. Employees within the organization might be unhappy because of inadequate possibilities for gaining knowledge and advancing their careers. Moreover, there can be problems associated with the safety and secrecy of the information since it will be provided to third parties. Finally, companies might not always receive high quality products and services. For a example, one of marketing partner we hired, who initially gave some good guarantees, did not meet our expectations, causing financial damage to us.
In the case of recruitment being outsourced, an organization may not necessarily get candidates that exactly meet its requirements because some characteristics like attitude and culture cannot be easily measured without the active participation of the company himself. There may also arise problems between the internal and outsourced staff, and it can become a headache for the management (Gunasekera and Gooneratne, 2025).
Conclusion
This means that outsourcing presents new challenges to Human Resource Management. Human resource departments, Companies should now step out of their conventional and routine roles into more strategic ones. They will need to be responsible for managing their outsourced partners, ensuring confidentiality, ensuring adherence to organizational policy, and maintaining balance between their internal workers and outsourced partners. At the same time, the organization should also look to develop its internal workers to avoid over reliance on outsourcing.
References
- Sriyani, G.T.W., 2022. Impact of economic crisis and way forward for the survival of SMEs: A Sri Lankan perspective. Wayamba Journal of Management, 13(2).
- Gambal, M.J., Asatiani, A. and Kotlarsky, J., 2022. Strategic innovation through outsourcing–A theoretical review. The Journal of Strategic Information Systems, 31(2), p.101718.
- Gunasekera, S.P. and Gooneratne, T. (2025) ‘Best of both worlds: Management controls in a business process outsourcing (BPO) organisation in the post-pandemic hybrid era’, Colombo Business Journal, 16(2), pp. 61–91.
This blog clearly explains a very relevant issue in the Sri Lankan business context. It highlights how economic pressures are pushing companies toward outsourcing, while also showing the risks involved. The real-life examples make the discussion more practical and easy to understand. It also gives a balanced view by discussing both the benefits and challenges of outsourcing. Overall, it provides useful insight into how HR needs to adapt and play a more strategic role in managing both internal employees and external partners.
ReplyDeleteGreat post! You clearly explain how reduced training and increased outsourcing are impacting organizations in Sri Lanka.
ReplyDeleteThis blog shows that HR is now more strategic, not just about hiring and admin work. HR must focus on developing employees, managing outsourced partners, protecting company information, and keeping a good balance between internal staff and external workers.
Should companies prioritize short-term cost savings through outsourcing, or focus on long-term employee development?
Companies should focus on long term employee development, but first they need to find a way to survive in the environment. They can find the best talent within the company and start developing them step by step. One day, they may be able to move back to internal talent.
DeleteYour blog presents a very relevant and well-structured discussion on the growing HRM challenge of skill gaps and outsourcing in Sri Lanka. I particularly appreciate how you clearly link the current economic conditions to reduced investment in training and development, which provides a strong real-world context for your analysis.
ReplyDeleteThe explanation of how skill shortages, especially in technical areas like taxation and accounting, lead organisations to rely more on outsourcing is very practical and easy to understand. I also like how you balance both the advantages and disadvantages of outsourcing, including cost efficiency, confidentiality risks, and employee development concerns, which shows good critical thinking.
Your discussion on the strategic shift required in HRM roles is especially valuable, as it highlights the need for HR to move beyond traditional functions and focus on managing external partnerships while also developing internal talent.
One area that could further strengthen your work is the inclusion of more industry-specific examples or case studies from Sri Lankan organisations to support your arguments.
Overall, this is a very insightful, balanced, and well-developed blog that effectively connects HRM theory with real organisational challenges in Sri Lanka. Well done 👍
This is a very insightful and practical discussion on how skill gaps and outsourcing have become a growing HRM challenge in Sri Lanka, especially under current economic pressures. I like how the blog clearly balances the cost advantages of outsourcing with important concerns such as confidentiality, service quality, and reduced employee development opportunities. It also strongly highlights the evolving strategic role of HR in managing both internal talent and external partners. How can organizations in Sri Lanka balance the short-term cost benefits of outsourcing with the long-term need to develop internal employee skills and retain knowledge?
ReplyDeleteYour blog presents a very realistic view of how the current economic situation in Sri Lanka is shaping HRM practices, particularly the shift from internal development to outsourcing. I found your practical examples especially relatable, as many organisations are now prioritising short term cost savings over long term capability building. While outsourcing may seem economical, it also raises important concerns about the loss of internal knowledge and reduced opportunities for employee development. From an HRM perspective, this creates a strategic dilemma between efficiency and sustainability. This can be linked to the resource based view, which suggests that organisations gain competitive advantage through developing unique internal capabilities rather than relying heavily on external providers. It would be interesting to further explore how organisations can strike a balance between outsourcing and investing in employee training, especially in a resource constrained environment like Sri Lanka.
ReplyDeleteSkill gaps are becoming a major challenge as many industries struggle to find employees with the right technical and soft skills required for modern business environments. Because of this, organizations are increasingly turning to outsourcing as a quick solution to maintain productivity and efficiency.
ReplyDeleteI feel while outsourcing can help bridge immediate skill shortages, it also brings long-term challenges such as dependency on external providers, loss of internal knowledge development, and reduced employee growth opportunities within the organization.
This is a very practical and relevant discussion of a growing HR challenge in Sri Lanka’s current economic context. It clearly shows how short-term cost-cutting such as reduced training can create long-term risks, pushing organizations toward outsourcing as a quick fix. However, as highlighted, over-reliance on outsourcing can weaken internal capability, affect employee morale, and raise concerns around quality and confidentiality. A more sustainable approach would be balancing outsourcing with continuous internal skill development, ensuring organizations don’t lose critical knowledge and strategic control.
ReplyDeleteThis blog clearly outlines how outsourcing has become both a solution and a challenge for businesses in Sri lanka. I like how you have highlighted the cost-saving benefits, especially for SMEs, while also pointing out the risks such as loss of employee development, confidentiality concerns, and mismatches in recruitment. It captures the dual nature of outsourcing very well. A strong emphasis on highlighting how HR departments can create hybrid models which includes outsourcing certain technical tasks while still investing in core employee training, would be a fruitful prospect. That way, organizations can avoid overreliance on external partners and they can maintain internal knowledge and culture. This balance would strengthen the argument that HR’s role is shifting from routine administration to a vital strategic standpoint.
ReplyDeleteThis well-articulated article effectively captures the complex outsourcing dilemma facing Sri Lankan businesses during economic hardship. Your analysis skillfully balances cost efficiency against hidden organizational costs—a tension particularly relevant to developing economies. I like your your recruitment point about unmeasurable cultural fit is especially perceptive—this represents a critical, often overlooked transaction cost. The 2025 citation suggests emerging research on internal-external staff friction; exploring whether Sri Lankan labor law or cultural hierarchies amplify these conflicts would add valuable context.
ReplyDeleteThis post clearly explains the 'Training vs. Outsourcing' problem in Sri Lanka today. You’ve shown that while outsourcing looks like a cheap way to fix skill gaps, it often comes with hidden dangers. By skipping staff training to save money, companies risk making huge mistakes—like your example on taxation errors—which can lead to heavy fines. You also highlight that outsourcing can hurt company culture and data privacy. Your conclusion is spot on: HR must evolve from just managing 'employees' to managing 'partnerships.' To stay strong, businesses shouldn't just outsource to save a rupee; they must keep developing their own people to maintain high quality and secret knowledge.
ReplyDelete