The Best HR Outsourcing Services of 2021

Over the years, the role of human resources professionals has evolved from recordkeepers to an essential component of a business's executive team. Besides coordinating employee activities, HR departments provide conflict resolution and training, help manage budgets, and ensure companies comply with employment laws and regulations. If you don't have an internal team to handle these responsibilities, you can partner with an HR outsourcing company to meet your needs.

There are several benefits to partnering with an HRO company for both employers and employees, depending on the services your business needs.

1. It saves time and money.

Hiring an HRO service to take care of your HR processes can save your business time and money. Instead of wasting hours performing administrative tasks manually, you can streamline your efforts by outsourcing certain tasks. You can then spend your valuable time performing revenue-generating functions to improve your business.

Did you know? Hiring an internal HR staff can cost 24% to 32% more than outsourcing your HR functions.

2. It helps you maintain legal compliance.

Your HRO is responsible for maintaining the security and privacy of your employee data, including compensation and personal matters. It must also ensure your company's compliance with federal regulations surrounding healthcare, 401(k) plans, workers' compensation, payroll processing and taxation, and the Consolidated Omnibus Budget Reconciliation Act (COBRA).

3. It streamlines the process of hiring and onboarding employees.

Effectively recruiting and onboarding employees can make a big difference in the success of your business. An HRO can streamline your recruiting, hiring and onboarding processes to ensure you hire the best members for your team. HROs help you not only acquire the right employees, but also onboard them in a way that adheres to labor and employment laws. For example, your HRO can help you distribute the necessary new-hire documents, obtain the required signatures, and file the documents securely.

If your company hires immigrants, you can benefit from an HR outsourcing service that is well versed in foreign worker laws and has experience with the process. Immigration compliance at both the state and federal level is a complicated process that your own HR staff may not have expertise in. HROs help protect your company and immigrant workers from unintended violations of immigration law, which can be extremely costly.

4. It provides expert HR insight and support.

Managing every human resources task for your team is a big feat, even in a small business. Without an entire department to manage and track your HR needs, there is a good chance you will need to hire a service like an HRO to help you. An HRO is an expert service that can offer your company a large breadth of HR knowledge and support. Even if you have an internal HR manager, they can benefit from the helping hand. An HRO can help you meet all your company's human resources needs, even if you're on a tight budget.

Just about any human resources function can be outsourced. You can outsource a couple of HR functions at a time, or all your HR needs together.

Here are some commonly outsourced HR functions: 

• Applicant tracking
• Background check services
• COBRA insurance
• Compensation plan development
• Employee benefits administration
• Employee discipline
• Employee handbook creation
• Employee recruitment
• Employee termination assistance
• Employee training and development
• HR administrative tasks
• HR audits and consulting
• HR policy development and implementation
• New-hire reporting
• Payroll
• Retirement services
• Risk management and regulatory compliance
• Tax administration and compliance
• Time and attendance
• Unemployment insurance and claims administration
• Workers' compensation
• Workplace safety training

Although these are the most commonly outsourced HR services, it's not a complete list of HR functions that can be outsourced. Speak with an HRO representative if you have questions about outsourcing additional HR functions.

When selecting an HR outsourcing provider, assess the HR services you need assistance with – you may need to outsource all of them or just a few. Many HROs allow you to choose either a full-service package or just the specific services your business currently needs.

Tip: However few or many HR services you need to outsource, the HRO you choose should have expertise in employment compliance to insulate your company from penalties or lawsuits.

Full-Service HR Outsourcing

A full-service HRO is a good option if you own a small company and cannot yet afford to hire HR personnel. It provides the resources that an in-house HR staff can offer without the expenses of hiring your own team. A full-service HRO is also advantageous if you have workers in different parts of the U.S. or world. HROs are knowledgeable about global, federal, and state employment laws, so they will ensure your company complies with the varying rules for anywhere you have employees.

When companies skimp on HR, they put the business and their employees at risk. A full-service HRO helps you appropriately manage day-to-day HR tasks like reporting misconduct and ensuring workplace safety compliance. These services also work closely with your payroll team to handle compensation. In addition to day-to-day tasks, you can enroll in services like recruiting and employee training.

Partial HR Outsourcing

Partial outsourcing is recommended for companies that have an in-house HR staff but need extra help. For example, perhaps you have an HR representative who handles your recruiting strategy and ensures the correct filing of your employment paperwork, but you need help with employee development. If you do not have the resources or desire to hire a full-time training specialist, you can outsource this service to an HR company, many of which offer employee training and development programs.

The most common skill development training that HROs provide is software and processes training, though other options are available. The best HR outsourcing services will work with you one on one to determine the best training programs for your employees.

Other common partial outsourcing services are payroll processing, employee screenings and background checks, employee recruitment, and immigration compliance.

During your research on HR outsourcing, you may also see references to professional employer organizations, or PEOs. While many of the companies we reviewed offer both HR outsourcing and PEO services, they are not the same thing.

The main difference between an HRO and a PEO service is the legal employment arrangement they operate under. When you outsource your HR functions, you are still the employer of record for your staff members, and you retain full control of your business operations and data. With a PEO, the company you hire acts as a co-employer and is responsible for all your business's HR tasks, including hiring and firing, employee training, and tax and compliance obligations.

Which Option Is Best for My Business?

Whether you should use an HRO or a PEO depends on your business's needs. If you need help with a few basic administrative tasks, like payroll and benefits management, an HRO might be your best option. If you'd rather have an expert company shoulder the full legal and financial responsibilities of employing your staff members, hire a PEO.

If you are interested in learning more about PEOs and the companies we recommend, check out our selection of the best PEO service providers of 2021.

Tip: If you need to partner with a PEO right now but think you'll want to switch to HR outsourcing later, or vice versa, consider a company that offers both.

DOES HR OUTSOURCING SAVE MONEY?

Yes, outsourcing your HR functions is one of the best ways to maintain legal compliance while saving money. Instead of paying salaries for an in-house HR department, you can limit your team to one HR manager and outsource any functions they need assistance with. Many HRO companies can bundle your HR functions to save you even more money. Additionally, outsourcing functions like risk and compliance management can help your company stay atop current regulations, potentially saving you thousands in legal fees.

WHEN SHOULD YOU OUTSOURCE HR?

Unless you have an entire in-house HR department, you will likely need to outsource at least some of your HR responsibilities as soon as you start your business. A company's HR is more than one professional can manage alone, and having no HR expertise at all puts you at an even greater risk of legal ramifications. The specific functions you outsource – and when – will completely depend on your needs. For example, if you are hiring your first employees, you may want to outsource your employee benefits administration. You should outsource HR functions as soon as you need them, especially if you don't have an in-house person to do the job.

WHAT ARE THE DISADVANTAGES OF HR OUTSOURCING?

Although HR outsourcing has many advantages, it can have a few drawbacks as well. For example, an external company managing your human resources can cause a disconnect with your staff. An external organization will not be an expert on your company culture, and it likely won't focus on team building and personal development as much as an in-house HR expert could.

Outsourced HR is also less flexible than in-house HR staff. An external HR company or software provider is less likely to make special arrangements when a loyal employee has a unique request, for instance. It may also take longer than an in-house HR department would to settle employee disputes or hire new recruits.

Outsourcing any business process always comes with a security risk. Most HRO companies use web-based PEO software, leaving your business's and employees' information potentially vulnerable to security threats. Always check an HRO's security measures before hiring it, especially if your business is in a highly regulated industry.

WHAT BUSINESS NEEDS ARE MET BY OUTSOURCING HR SERVICES?

HR outsourcing services can meet all your human resources needs. Whether you want to recruit and train new employees, administer employee benefits, track time and attendance, process payroll and tax filings, or do all of the above with one platform, an HR outsourcing company can help. An HRO can ensure you meet legal requirements as well. As federal, state, local and industry regulations are constantly changing, it can be hard to stay up to date, so find an HRO company that is experienced in your region and industry to maintain legal compliance.

You could also outsource tedious administrative HR tasks, giving your in-house representatives more time to focus on recruiting the right employees and fostering team growth and development.  

Business.com strives to research and review companies fairly and objectively. For our review of HR outsourcing services, we began with 20 companies. We found these companies based on extensive HRO research, key industry players and recommendations from other review sites.

After analyzing each company, we pared our list down to the top 11 services. From this list, we researched various aspects of the services each company offers, including administrative HR tasks, benefits administration, employee recruiting, payroll management, employee training and development, risk and compliance, HR technology, and additional services. We also established the type of accreditations and customer reviews each company had.

From these 11 companies, we chose the three that stood out as the best for small businesses, benefits administration, and employee development. We then reviewed their pricing structures, contract requirements, employee minimums, mobile access and standout features. 

We looked even further into these three best picks, evaluating the customer support and features that each plan offers. We contacted support representatives by phone, online chat and email, posing as small business owners. We inquired about each HRO's plan structure, pricing and contract requirements. The three companies withstood each round of our testing and stood out in all of our interactions with them.