HUMAN RESOURCE OUTSOURCING: Definition, Benefits & Examples

Human resource outsourcing
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Human resource functions and examples are among the services that businesses are most likely to outsource because of benefits including reduced overhead and the ability of HR experts to devote their time to other strategic endeavors. As a result, human resource specialists are being asked to assess the benefits and drawbacks of various outsourcing models so that firms may better pick and manage their vendors. Furthermore, human resources experts may use the information in this article as a guide as they embark on HR outsourcing. A business strategy for HR outsourcing is presented, as is HR’s involvement in the outsourcing process and the many sorts of agreements that are common in HR outsourcing. In this post, we’ll go over some of the more nuanced aspects of drafting an outsourcing company’s agreement and making the switch from internal to external management of some human resource tasks.

What is Human Resource Outsourcing?

Human resource outsourcing is a technique where a business contracts a third-party company to manage its administrative and human resources responsibilities. In other words, human resource outsourcing is the process of getting work that has already been done by corporate staff members from sources outside the organization.

What Exactly Are the Benefits of HR Outsourcing?

If your company may benefit from Human resource outsourcing, explore the following list of typical human resource outsourcing services to see where your demands intersect with those of third-party HR specialists. (These are simply the most typical human resource outsourcing services; many vendors provide far more.)

#1. Payroll Management

It’s possible that payroll processing is the most outsourced HR activity. It may be difficult and time-consuming to keep track of and manually calculate all the deductions that need to be withheld from your workers’ paychecks. Payroll deductions include wage garnishments and taxes in addition to benefit premiums, and mistakes may get you in problems with the law and the IRS. For this reason, many businesses choose to outsource their payroll processing to experts.

#2. Management of Employee Benefits

Maintaining employee satisfaction and giving your organization an edge in the job market may be accomplished with a comprehensive benefits package that includes health insurance, retirement savings plans, and more. Unfortunately, it doesn’t imply that coordinating benefits is simple. To save time and effort on researching programs and complying with benefits requirements, many businesses outsource their employee benefits administration.

#3. Performance Management

Conversations about performance, whether they be annual evaluations, compensation negotiations, or anything else, are an inevitable aspect of operating a firm. You’ll want your own team to steer these discussions, but you may not have the resources to adequately prepare for or manage them. Then it’s time to hire an outside firm to handle your performance management responsibilities. The human resource outsourcing companies you hire may also advise you on setting performance standards and implementing disciplinary measures for underachievement.

#4. Collaboration Between Employers and Employees

You may need to hire an outside human resources firm to handle employee relations if you don’t have the time to handle issues between employees and managers or draft new corporate regulations. A human resources consulting firm may help arbitrate workplace disputes and update outdated rules to better address employees’ needs. Your human resource outsourcing partner may assist you in drafting an employee handbook as part of their employee relations services.

#5. Credibility Assessment Using History and Reference Checks

Performing checks on a candidate’s past and experience is standard procedure before employing them. This will give you a good idea of the kind of individual you’re letting into your company. In spite of this, it may take a considerable amount of time to complete either procedure, particularly if you need to contact references by phone. This is why many businesses have begun outsourcing this task to other organizations.

Human Resource Outsourcing Examples

Here are a few examples of how outsourcing human resource and getting the HR support your team needs that can be of benefits to the organizations.

You may get the help you need from an HR consulting business on an as-needed or project basis. Human resource outsourcing experts and examples may help advise businesses on how to comply with regulations and set best practices. They can take on initiatives like the ones listed below, as well as assist design tools and procedures to help you better support your workforce.

#1. Recruitment

With a booming economy and/or tight labor market, finding the appropriate personnel with the necessary abilities may be difficult and time-consuming. You might hire a search company to relieve the burden or speed up the process.

Search companies might work on a retained or contingency basis. A retained search implies the recruiter works on your behalf to completely understand your firm, structure, culture, role duties, and accountabilities. The hiring manager conducts the pre-work and presents qualified candidates for your ultimate decision. Often used for senior or hard-to-fill jobs.

In addition, a contingency search assignment may be given to many companies, with no costs due until the applicant is hired. With this alternative, the corporation would receive less-specialized service, but the rates would be reduced.

#2. Payroll Services

Paying employees is crucial to every organization. Human resource outsourcing companies may help with payroll so your employees are paid on time and efficiently. HR services can handle payroll so you don’t have to. Not only is employee experience important, but also punctuality and accuracy. Furthermore, Companies can handle all the paperwork, compliance, and software so you can be sure it’s done properly and consistently.

However, an established company with two to five employees may utilize Quickbooks for payroll. When a firm has 10, 15, 20, or more employees, it outsources its payroll to an HR company that calculates time and administers payroll effectively and in line with rules. Also read, OUTSOURCING BUSINESS: Processes & How to Start One in Simple Steps

#3. Outplacement

An employee (or workers) may become redundant due to corporate operations or the economy. Many corporations give an outplacement service as part of their severance package, and courts prefer to favor this clause. This function is frequently outsourced to an HR Consulting firm if the incumbent is senior or has a lot of tenures.

Losing a job may be emotionally difficult. Outplacement services assist employees to cope with the emotional and financial impacts of layoffs and give job search support (such as networking, résumé writing, and interview preparation). This shows the company’s devotion to its personnel.

Why Is Human Resource Outsourcing Important?

The major benefits of Human resource outsourcing are having experts at your disposal who are well-versed in things like employee benefit plans, insurance policies, current market trends, and more. Outsourcing Human resource allows you to focus on developing a better benefits package for your employees.

Human Resource Outsourcing Companies

Unquestionably, companies most important asset is human resources. Any firm that wants to succeed and develop over time must effectively manage it. That said, managing a ton of administrative chores related to HR may be time- and resource-intensive for any firm.

Particularly small enterprises may suffer as a result of having insufficient time and resources. Being overburdened with HR-related activities, such businesses often struggle to achieve their primary goals while taking part in a number of intricate processes, including payroll, recruiting, etc.

Typically, a human resource department is established to handle these responsibilities on a regular basis. However, “outsourcing” has emerged as a superior, more economical, and faster option in recent years.

Your organization might delegate all of the HR administrative tasks to professional human resource outsourcing companies. When you have a trustworthy HR consulting service on your side, you can concentrate on the things that really important for your company. Here are companies that are often acknowledged as among the top human resource outsourcing services now operating.

#1. TriNet

When it comes to human resource outsourcing, TriNet is one of the companies that has you covered in practically every major area. With TriNet, handling payroll and taxes is a breeze. Employee compliance concerns are also preemptively handled by TriNet.

In addition to streamlining the hiring process, the firm also develops tactics to ensure that you find and hire only the most qualified employees. One of TriNet’s many strengths is the reliable training program it creates and rolls out to enable all workers, including managers, to acquire and hone new abilities. Best for advice on salary and leadership development.

Founded: 1988

Employees: 3600+

Headquarters: Dublin – California, USA

Location: United States

#2. Gusto

With its suite of products, Gusto streamlines HR processes for its clients. When it comes to handling the payroll for your business, it’s hard to beat. You may use Gusto to electronically submit payroll taxes, keep tabs on employee benefits and changes in the law, and securely save W-2 and 1099 forms for both permanent employees and independent contractors.

Furthermore, gusto is a payroll service that also facilitates the recruiting and onboarding of new staff members. Gusto’s mobile wallet app is perhaps its finest feature. This program helps workers with their financial needs by allowing them to track their earnings, have access to quick cash in an emergency, and save money. The best mobile wallet app and full-service payroll administration.

Founded: 2011

Employees: 1000 – 5000

Headquarters: California, USA

Location: United States

#3. Rippling

The PEO services that Rippling offers are its bread and butter. However, its human resource outsourcing potential is too obvious to pass up. Rippling is a platform that helps businesses with the whole procedure of finding and bringing in new employees.

Furthermore, the software they provide allows users to submit several job openings to various job sites at once. The next step is to tailor the interview process to the specific job, level of experience required, and/or division you’re trying to fill. You may also generate in-depth reports to evaluate the success of your hiring strategy across a variety of dimensions. Best for payroll administration, onboarding, training, and talent recruiting.

Founded: 2016

Employee Size: 1001-5000

Headquarters: San Francisco, California

Location: United States of America

#4. Bambee

Bambee is the industry standard in human resources outsourcing for companies of all sizes. Helping companies with less than 500 workers, they provide services that streamline HR processes. Bambee is able to provide its customers with individualized HR services because to its use of highly qualified HR personnel.

These individuals have extensive training in regulatory compliance as well as customer service. Bambee also excels well at automating a number of critical HR-related activities. They  Bambeeensures that your organization is HR compliant by supporting modern HR policies, regular two-way feedback between workers and management, and obligatory training. best for small companies.

Founded: 2016 +

Employees: 300

Headquarters: Los Angeles, CA

Location: USA

Which Activities of HR Are Outsourced?

You can outsource your company’s payroll processing, employee benefits administration, and talent recruiting.

Human Resource Outsourcing Services

By contracting out part or all of your HR job, you gain flexibility. These human resources experts are equipped to handle anything from payroll and benefits management to compliance with employment laws. Here are some of the human resource outsourcing services.

#1. Paychex

One of the most critical responsibilities of any HR department is the delivery of accurate payrolls to employees. Paychex lives up to its reputation as one of the leading online payroll systems available today.

It is exceptional in this regard since it provides services for almost every kind of financial transaction. Paychex not only processes payroll but also offers excellent HR outsourcing services. It is a wonderful choice if you want more than just precise payroll processing since it can:

  • Retirement assistance
  • services for insurance
  • HR specialists
  • Benefits management
  • services for adherence

Furthermore, Paychex provides a reliable mobile app for monitoring HR metrics including new hires, labor expenses, and employee churn. The software is also user-friendly enough for workers to utilize it for self-service purposes and as a learning tool. This is terrific news for organizations with remote or mobile workers.

#2. Insperity

provides first-rate Human Resource and PE Outsourcing services.  While Insperity’s HR capabilities are similar to those of other goods discussed here, the company really shines because of the comprehensive nature of its offerings. It provides a variety of human resource outsourcing services in a single bundle. Their HCM system incorporates features such as payroll management.

Having everything you need for human resources in one place ensures that your many HR duties will coordinate with one another without a hitch. Insperity’s ability to provide a comprehensive suite of services means that HR departments can “set it and forget it.” This is also the foundation upon which you may build a totally bespoke HR service.

#3. ADP

Provides end-to-end human resources management tools. However, I think this business is fantastic for organizations that just want a few HR-related services on an as-needed basis.  The HR features may be added individually, making this a true modular system. ADP gives you the flexibility to pick and select the payroll services you need, whether it be retirement planning or health insurance.

In addition, this is a fantastic option for smaller companies that may not have the resources to invest in every possible perk. Add additional employees until switching to their PEO arrangements makes sense.

What Are the Pros and Cons of Human Resource Outsourcing?

Pros of human resource outsourcing

  1. It saves money.
  2. It can lower your benefit premiums
  3. It saves time

Cons of Human resource outsourcing

  1. It makes it hard to hire people.
  2. It might feel like a big deal.
  3. Making changes takes more time.

Are HROs and PEOs the Same Thing?

No. HROs make it possible for businesses to keep control of their systems and employees while also gaining access to the administrative benefits that come with outsourcing HR functions to a third party. PEOs either directly manage the employees of the client or employ the employees directly themselves. In other circumstances, PEOs need access to their employees’ data in order to automate a variety of processes, including payroll, benefits, and time off.

Can I Ask My HRO Provider to Fire an Employee?

No, but a reliable HRO provider will coach you and offer suggestions about how to proceed with employment actions such as termination in the most effective manner, including when to involve legal counsel in the process.

Can an HRO Take Care of My Benefits Management?

Yes, in many of these instances. You will be required to ask potential HROs specific questions relating to benefits management. These questions should focus on topics such as open enrollment and overall service offerings.

Can My HRO Provider Handle Workers’ Compensation Claim Management?

HRO providers have the ability, in certain circumstances, to collaborate with a client in the processing and management of a workers’ compensation claim. This service varies not only from one HRO provider to the next but also from state to state, which is where the laws governing workers’ compensation are established and governed.

Do HRO Providers Know All State Employment Laws Within the U.S.?

Even though the HRO providers we researched are familiar with all federal and state employment-related laws, not all HRO providers offer their expertise or services to customers located in international markets. When speaking with an HRO provider, make sure to ask them detailed questions about your requirements.

Can I Cancel My HRO Provider Relationship if I Do Not Like Their Service?

Most HROs require 30 days’ notice. However, the length of the offboarding period should increase in proportion to the number of services a company has delegated to their HRO provider. The process of terminating a partnership with an HRO ought to be approached with caution in order to guarantee the smooth operation of your HR operations during the transition.

What Effects Would HR Outsourcing Have On My Employees?

By giving them access to experts who will take inquiries, complaints, and concerns, HR outsourcing benefits your staff. Employees may have access to greater benefits, more effective procedures, and streamlined systems by outsourcing to one of these suppliers.

Why Is HR Outsourcing Important to a Small Business?

Small firms, especially those with limited financial and human capital, benefit from HR outsourcing since it allows them to receive top-notch services and advising without spending time and money on hiring and training a full-time HR team. The ability of small firms to focus on growth, care for their employees, adhere to complex rules and regulations, and practice prudent spending is another reason why HR outsourcing is crucial.

Why Should You Outsource HR Services?

You can save money by outsourcing your HR functions, but it also helps you grow your company. You may trust the outsourced HR service provider to find the top personnel worldwide while you shoulder the responsibility of hiring and managing full-time internal staff.

What Are HR Outsourcing Strategies?

An employer and an external third-party provider enter into a contract whereby the employer delegates administration and accountability for some HR services to the external provider. Employers have access to a wide range of HR outsourcing options.


It is important to have a legally binding agreement governing any human resource outsourcing partnerships. Expected performance levels and consequences for falling short of those levels will be outlined. However, a service level agreement is a key contract that has to be correctly created to allocate responsibility for the HR functions to the outsourcing business and eliminate any risks and dangers in the process.

Human Resource Outsourcing FAQs

Is outsourcing HR a good idea?

This is a great financial move (if done wisely). When you outsource, you have access to a group of individuals with senior/strategic experience and tactical knowledge for the same or lower price than employing a single employee.

What are the HR issues in outsourcing?

Security and privacy If the company’s software isn’t secure, HR outsourcing may compromise employee data. Many service providers utilize web-hosted HR software, exposing sensitive employee data to security risks and breakdowns.

Which HR activities Cannot be outsourced?

  • De-escalation and settlement of conflicts.
  • Offering help to staff members who are experiencing hardship.
  • Attending to the wishes of one’s staff.
  • Calling an employee’s resignation.
  • Culture-setting in the workplace.

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