HR Outsourcing: Is it Right for Your Business?

HR Outsourcing

Human resources is a fundamental part of every company, and it needs to be managed by qualified workers to ensure everything runs smoothly. Many HR services, such as recruitment and payroll, are integral to business operations, and many HR vendors can offer different services. Here is a short guide to help you decide if outsourcing HR services is right for you.

Internal HR

Human resources plays a significant role in a company, and it encompasses most employee-related aspects of a business. Depending on your business needs, there are many different services within an HR department, and so only qualified HR workers should be employed to take on these tasks. The benefits of employing an in-house department include a static, dedicated team thatis solely focused on your business’s HR needs. Having someone in-house also means that you can communicate and get regular updates. However, a team of skilled personnel can be expensive. According ‌to ‌the ‌‌U.S.‌ ‌Bureau‌ ‌of‌ ‌Labor‌ ‌Statistics‌,‌ ‌the ‌median ‌annual ‌wage ‌for ‌an ‌HR ‌manager ‌is ‌$116,720‌ ‌per ‌year, and the median annual wage for ‌a ‌human ‌resources ‌specialist ‌is ‌$61,920‌ ‌per ‌year. Some companies simply do not have the resources to hire an in-house department.

Different Types of Providers

HR outsourcing trends are ever-changing. Businesses who are looking to outsource their HR should look at the size of their business and weigh up their specific needs. Different types of providers can offer HR services at different levels.

Professional Employer Organizations

Professional Employer Organizations, or PEO, act as a co-employer of a business. This enables the PEO to perform employment-related functions such as employing staff and providing payroll services. The PEO also ensures the business is compliant with state and federal employment laws. While the PEO is the ’employer of record’ for your company, you remain in charge of your employee’s functions and company decisions. PEOs are a great choice for small businesses and can offer a wide range of benefit packages.

HR Outsourcing and Administrative Services Organizations

Unlike PEOs, HR Outsourcing (HRO) firms and Administrative Services Organizations (ASO) do not act as co-employers. They are more flexible and are used for ongoing services. If a business requires a high level of expertise, they may turn to an HRO or an ASO. These third-party providers handle specific HR functions such as benefits administration, payroll, recruitment, and more. A business can choose the level of support they require, and these providers can tailor their services to the company’s specific needs.

HR Technology

Businesses with HR processes and an HR team in place may choose to hire an HR technology vendor to use specific tools and programs. Using advanced HR technology allows companies to stay up to date with the latest software. It can also increase productivity, save time, and ensures data is safe and secure. Companies that use external HR technology still manage their own HR services.

HR Consulting Firms

Companies that require assistance with specific tasks, or need a limited amount of help, can turn to an HR consulting firm. HR consultants offer expertise in specific areas and can pinpoint weaknesses. Once problem areas are identified, HR consultants work with the business to develop a strategy that can address and resolve these problems.

Benefits of Outsourcing

It may be tempting to take on HR functions yourself or delegate the tasks to senior employees. However, this is a waste of resources and can lead to decreased productivity. Outsourcing HR functions has many benefits. It can help you save money, increase productivity, and it will also enable you to focus on core business goals.

Cut Costs and Save Money

As highlighted above, an HR department can be a costly affair, and for some small businesses, it is simply unachievable. Outsourcing your services to a third party can help save you the costs of hiring a new person and all the additional costs that come with it. An in-house department requires space to work, and the extra resources they will need will cost extra. In addition, there are benefits, insurance, and taxes to think about when recruiting in-house. Hiring externally can prevent you from spending money on ongoing overhead costs and other expenses.

Recruiting the Right People

Employing HR specialists to manage the recruitment and staffing of a company is common in business. Good recruitment is key to a thriving workplace. To ensure you have a solid team of qualified employees, the recruitment process has to be done professionally. The process includes advertising a job role, collecting resumes, selecting candidates, interviews and employing the right person for the job. External providers have the expertise and the resources to execute this service properly. Utilizing an HR specialist will ensure the best possible candidates are considered for the position.


Companies need to ensure they understand the many employment and labor laws and regulations and are able to keep up with any changes. This can be overwhelming for most business owners, and it can be easy to miss a law or regulation change. Unfortunately, accidental non-compliance can result in heavy fines and serious penalties. To avoid this, many businesses choose to work with HR service providers. It is their job to keep on top of regulation changes, and HR experts are aware of the many different local, state, and federal laws. HR compliance specialists can assist you with all things related to compliance and have the expertise to implement new changes.

Managing Risks

It doesn’t matter if you have a small company or a large organization; every business has risks. Third-party providers can pinpoint problem areas and identify potential business risks. They then work with you to create a strategy to help you manage and resolve these risks. Human-caused risks can include decreased productivity and absenteeism. HR specialists can help you find the root of the problem before developing a plan to reduce these risks.

In addition, external HR vendors are experts in workplace safety and compliance. They can deploy a program to ensure your business is risk-free in terms of compliance and employee safety. HR specialists can also implement specific training and provide you with the support and resources to enable you to identify risks, keep employees happy and protect your business.

Recommended Articles