HR Outsourcing Pros and Cons

HR Outsourcing Advantages and Disadvantages

Join us as we take a look at the advantages and disadvantages to HR outsourcing that companies and organizations encounter.

Hiring the right people for the job can be a complex process. A recent study reported that 48% of CEOs surveyed said their organizations had lost revenue due to inefficient hiring.

A great HR team is then critical to a company’s success. The job isn’t just about hiring people quickly and cheaply. Instead, their work ensures that you have suitably qualified candidates who will take your business to new heights.

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Companies across the world realize the power of a fantastic HR team. This has led to the growing phenomenon of HR outsourcing. But is this service right for your business?

This article will explore HR outsourcing and its main advantages and disadvantages so that you can decide if it will suit your needs.

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What Is HR Outsourcing?

Let’s first understand what insourcing human resources is. Insourcing involves delegating hiring duties to a team within the company.

On the other hand, human resource outsourcing involves hiring another company to complete the hiring responsibilities for you.

It is ideal for small to medium-sized companies who require effective and immediate help. HR outsourcing will help avoid the time and resources needed to grow the HR team internally.

HR Outsourcing Solutions

There are many different functions that HR outsourcing strategies can provide you with. Here are some of the primary responsibilities an outsourcing agency can manage for you.

Employee Relations and Compliance

HR is responsible for addressing any issues, feedback, or complaints within the workplace. Whether it is from co-workers or managers, outsourcing these functions is a great way to ensure your business is compliant with labor regulations.


Payroll is a time-consuming and mechanical task. It involves paying employee wages, calculating work periods, and deducting appropriate taxes.

This task also requires staying up to date with state and federal laws on employee compensation.

Outsourcing payroll can significantly reduce billable employee hours and redirect time towards tasks with more critical output.

Employee Screening and Background Checks

Another responsibility most HR teams carry out is performing background checks on employees.

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They also screen them to ensure they are suitable for the position they’re applying for. This can include checking provided information, physicals, and even drug screens.

Outsourcing these tasks will free up time for your employees to focus on training future hires and ensuring they fit into the company properly.

Workers’ Compensation

Employee satisfaction is key to long-term retention and loyalty. Most companies delegate ensuring that employees’ needs are met to staff who can work full time on the issues.

Managing worker’s compensation, ensuring employees are receiving medical care, and being treated fairly is significant part of HR responsibilities.

The HR department also handles renewals and audits to ensure you’re getting the best rate for your insurances and claims. These tasks are easily outsourced as well.


Advantages of Outsourcing HR

Following HR outsourcing best practices can significantly improve your business’s overall output. It is a tool that provides high-end support, allowing you to focus on growing the business.

Let’s take a look at the main benefits that occur when you outsource HR.

Reduced Turnover

Employees come and go. The change and turnover within a company’s structure is a normal process.

Retention is critical to the success of a company because it means less time, effort, and money spent on training new individuals. The longer an employee stays with an organization, the more suited they are to carry out tasks correctly.

However, outsourcing HR will ensure you have a team dedicated to filling in the blank gaps. Not only will you have qualified candidates lined up, but you’ll also benefit from increasing production output.

Increased Employee Satisfaction

It is essential that your employees feel heard and appreciated, as it improves work output and loyalty in the long run.

HR provides a neutral force that will ensure that your company follows fair practices and that employee feedback is taken into account.

Increased Savings

Typical HR insourcing requires a large team of trained and skilled employees. This is often unsuitable for smaller organizations that are unable to develop so much infrastructure.

Outsourcing HR reduces the employee pool and infrastructure. It also reduces the need to hire multiple employees for various tasks.

These benefits result in tremendous cost savings for the organization without compromising on quality and skill.

Increased Efficiency

Outsourcing also helps employees reduce their focus on paperwork and basic administrative tasks such as payroll. These seemingly simple tasks can be time-consuming and stressful if you’re not familiar with the standard protocols.

Instead, allow your employees to concentrate on the efficiency and quality of their work. Focusing on long-term goals that are important to the company is essential to drive company growth.

Expert Outlook on Hiring

This way, you can leave the HR tasks to professionals who use advanced technology to make the organization more organized and productive in the long run.

With outsourcing your human resources needs, you’ll have experts guiding you on policies, practices, regulations, and laws. This will also ensure that your organization revises and updates its strategies to be fully compliant.


Disadvantages of Outsourcing HR

While outsourcing HR functions is a largely positive and beneficial process, it can come with some potential downsides.

Some aspects of it may not be the right fit for your business needs. In order to get the most out of this tool, we believe it is essential to be fully educated on some problems that may come up.

Following are some of the downsides of outsourcing HR and tips on overcoming the pitfalls to make the most of the process.

Lack of Control

Outsourcing HR might mean you have to give up a certain degree of control. Often HR teams are at the center of workplace dynamics and well versed in the internal company happenings.

Outsourcing HR can mean losing touch with the pulse of your organization, which can affect insights and decision-making for your employees.

How do I maintain control?

  • Remember that you have the final say in HR matters
  • Set up an HR manager to collaborate with the outsourcing team
  • Constantly supervise and support providers to ensure their work is in line with your vision

By implementing these suggestions, you’ll get the best of outsourcing while still managing productivity and output.

Undue Cultural Changes

Company culture is critical to growth and success. The culture is responsible for setting the organization’s tone and motivating employees to work more efficiently.

Many organizations have concerns that outsourcing their HR team can dramatically impact the company dynamic and employee morale. It can also reduce loyalty and engagement.

How can I maintain my company culture?

  • Work with a vendor who respects the dynamic you’ve built up while carrying out their functions
  • Outsource administrative and policy tasks while insourcing team events and meet and greets
  • Ask for references to ensure that previous clients have not experienced any impact on their culture.

Ensuring your company stays true to itself is a great way to manage connection and employee satisfaction.


Many managers who avoid outsourcing HR believe that professionals will come at a hefty price.

The median pay for an HR manager in the US is around $116,000. Hiring an entire team will, of course, come at an even more significant price point.

Compare that to outsourcing, where you can expect to pay anywhere between $45 and $1500 a month. The total cost depends on the service levels and add-ons you decide to go with.

But the difference between insourcing and outsourcing is significant! Outsourcing your HR team is the ultimate cost-effective solution, so don’t let your expectations deter you.


Focus on Your Business and Outsource the Rest

A big part of managing a company is determining what responsibilities are worth the time and effort. Growing and supporting a massive HR team usually puts a strain on resources, not to mention efficiency.

The best solution here is to outsource your HR department to save costs while maintaining quality. Qualified HR professionals will find suitable candidates for you, manage day-to-day functioning, and keep up the company culture for employee satisfaction.

Are you ready to get down to business? Check out Price It Here for the definitive guide on finding the right HR outsourcing company. We compare prices, output, tasks, and more so you can find the proper organization to grow your business!

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