Outsourcing HR operations to an external vendor means contracting out time-consuming tasks that weigh down your internal staff — from recruitment and onboarding to employee relations and vendor management. Yet many organizations are unaware HR outsourcing is even an option. Could it make sense for your business?

An experienced outsourcing provider can help identify specific areas within your HR operations in need of development and support, saving you money, reducing risk, and streamlining critical processes. From routine administrative tasks like filing taxes and managing job postings to more laborious efforts like workers’ compensation claim management — partnering with an HR outsourcing provider can help you and your team focus on the strategic initiatives that matter.

There are various types of HR outsource vendors out there, so consider the following differentiators when you begin your search:

• Software-as-a-service (SaaS): In this scenario, a vendor hosts an HR application and offers that resource to individual companies. The software can be used to simplify and automate certain HR tasks like reviewing candidate resumes or administering payroll reports to workers.
• Business-process outsourcing (BPO): A BPO is a third-party contractor that handles individual HR duties, allowing you to choose which services to outsource and providing a specialized provider for that specific service.
• Single-source outsourcing: A single third-party partner manages all HR functions throughout employees’ tenures. They may also help develop personnel policies and are able to hire, onboard, pay, and manage talent — freeing up their clients to focus on other core business initiatives.
• Professional employer organization (PEO): A PEO pairs with a business as a co-employer, meaning employees work for both organizations. The business typically continues to manage employees and day-to-day work dynamics, while the PEO coordinates HR tasks like payroll and scheduling.
• Shared services: This is a third-party company that helps the internal HR department manage their tasks and also typically provides a software system for staff members to utilize.
• Administrative services organization (ASO): An outside contractor handles key administrative duties, staffed by employees who work directly for that contractor.

Which HR functions can be outsourced?

A better question might be, which HR functions can’t be outsourced? Depending on the needs of your organization, nearly any HR operation can be outsourced, but only if you choose the right partner. Human resources teams, like many others, are often short-staffed and overworked. An HR outsourcing provider can help companies improve time management, control costs, and navigate compliance administration.

• Time-consuming tasks such as recruiting, applicant tracking, onboarding, screening, and testing take up a large chunk of an HR team’s workday. And with each new hire, the process starts anew. Outsourcing these time-consuming tasks can create significant bandwidth within an HR department, especially for those companies facing high turnover rates and a shallow talent pool.
• Costly tasks can also be outsourced — from handling benefits, awards, and recognition to securing temporary staffing and training new hires.
• Compliance administration requires significant expertise to mitigate noncompliance risks. An experienced outsource vendor will navigate the complex world of employee classification, state employment registrations, labor law requirements, safety management, and workers’ comp on your behalf, assuming both responsibility and liability.

Benefits of outsourcing HR

With the Great Resignation still a reality, human resources departments are under more stress than ever. Consider outsourcing HR operations to realize the following benefits:

• Save money. Outsourcing HR reduces operating and personnel-related costs. Working with an outside provider can help minimize administrative errors and increase productivity in parallel, while improving employee satisfaction and retention and lowering the high cost of turnover.
• Increase efficiency. Outsourcing HR helps internal HR professionals manage their workloads more efficiently, shifting the burden of routine administrative tasks, such as writing job descriptions or generating financial reports, thereby enabling your staff to further develop their skills and careers as they focus on the larger issues impacting organizational growth. It also allows them more time to work directly with employees, monitor recruitment activities, and predict future business needs — areas especially important to smaller, growing businesses.
• Access expertise. Outsourcing HR enables access to high-quality HR services supported by HR experts who have extensive knowledge in specialized areas.
• Streamline processes. Outsourcing HR helps automate tasks and provides more streamlined resources for your HR department. For example, an external company may systemize processes like onboarding or payroll, and their specialists can provide immediate, reliable assistance to employees who have questions or need updated training.
• Increase training opportunities. Outsourced HR companies may provide and support training programs for employees, keeping them updated on skills and technology and increasing their knowledge of industry requirements. For example, your contractor may provide specialized training programs for safety or cultural sensitivity, improving your organizational culture and increasing job satisfaction at the same time.

In the current business environment, realizing efficiencies, saving money, bolstering retention, and easing the workload of overwhelmed teams are more critical to success than ever. Is your company ready to consider outsourcing HR operations?