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A step-by-step guide to HR outsourcing

Running a small to medium-size business isn’t easy, especially when you find your money-making projects taking a back seat to your HR to-do’s. Handling issues such as payroll, leaves of absence, staffing changes, unemployment claims and changing HR-related laws can be a drain on your time.

But human resources outsourcing services can relieve your administrative overload, so you have more time to tackle business goals.

Many business owners assume that turning over their human resources administration means they’ll lose control of their company. An HR provider should enhance your company and support your workforce, not get in the way. The goal is to help with the employee-related aspects of your company while you maintain control of the business and operational decisions.

How does HR outsourcing work?

Being an employer means you wear many hats. And, for some of those you seek outside assistance, especially for those that take you away from your core business.

Outsourcing, or contracting services, can be a critical business strategy to supplement what your team can do.

Human resources is a natural fit for outsourcing – especially for small businesses that may not have someone on staff full time who knows the ins and outs of compensation, benefits, insurance and HR-related compliance. By outsourcing your HR, you’ll have access to a team of HR professionals , saving you the time and money of hiring a complete department of several positions. Finding the right HR support for small business can be a game changer.

Companies outsource human resources for a variety of reasons, including:

  • Fill knowledge gaps
  • Little time for HR-related tasks
  • Access to a team of HR specialists
  • A desire to focus on core business objectives
  • Payroll processing
  • Help with benefits
  • Help with HR-related compliance
  • Recruiting, hiring and onboarding support
  • Performance management support
  • Employee training and development
  • Time and attendance solutions
  • Employer-related liability guidance

What types of HR functions are generally outsourced?

An HR outsourcing company can provide many solutions, from basics such as payroll processing or time and attendance to more complex services such as HR-related compliance and benefits administration. But the most comprehensive HR solution is known as a professional employer organization, or PEO.

With a PEO you can get a full slate of HR services that can help maximize your talent and minimize your risks.

Here’s a look at four of the top benefits of small business HR outsourcing with a PEO:

1. Employee benefits

In the search for quality benefit plans at affordable rates, business leaders must research insurance carriers and their numerous offerings. Complexity, compliance and cost are driving factors that can make this experience painful. A PEO that is the employer sponsor of the benefit plans can offer benefits to employees and manage the benefits process from beginning to end.

2. Payroll and payroll tax-related tasks

Look for a PEO to assume the obligation for the payment of wages including payroll processing, withholding, and remitting payroll taxes and payroll tax return filing, as well as taking care of garnishments and other payroll deductions. Having an online hub where employees can access paystubs, timesheets and forms and administrators can run reports to manage job costing provides ease and efficiency.

3. HR-related risk management and compliance

As a business owner, you must stay on top of the changing government statutes and regulations that affect your business. Compliance with federal and state employment laws and regulations is mandatory. A PEO, such as Insperity, assumes, shares, helps manage or provides assistance on many of your employer-related risks and responsibilities, saving you time and money. This can include:

  • Unemployment claims administration
  • EEO services
  • Substance abuse awareness and drug-free policies
  • Workers’ compensation and claims resolution
  • Employment practices liability insurance
  • Hazard and safety review training
  • HR liability management training
  • Employment termination assistance

4. Talent management

Managing your employees can include everything from daily administrative tasks to recruiting and performance management. HR outsourcing can give you the tools and support to put your employees in a position to help your business thrive and grow. That could include:

  • Recruiting and hiring support
  • Applicant tracking
  • Job descriptions
  • Climate surveys
  • Performance appraisals
  • Analyzing performance gaps
  • Learning and training resources
  • Coaching for supervisors
  • Developing an employee handbook
  • Outplacement support

Some HR-related tasks do stay in-house and may include:

  • Visa sponsorship
  • Payroll data collection
  • Employee status changes
  • Hiring decisions
  • Employee coaching and counseling
  • Employee work direction and training
  • FLSA job classifications
  • I-9 certification
  • Safety program accountability

How much does it cost to outsource human resources?

When you’re looking into how a professional employer organization determines its fees and whether it’s the right move for you, ask yourself, how much are you already paying to handle the services the PEO will provide?

HR-related costs include more than the cash compensation you pay your employees. There are payroll taxes, insurance such as EPLI and workers’ compensation, paid leave programs, employee benefits, payroll and administration costs, etc.

Many elements affect the fees charged by a PEO. Your company’s size, overall workers’ compensation risk and the benefits package offered to employees all play a part. Most PEOs bill based on a percentage of gross payroll or total number of employees. Some things to consider when you’re beginning your search:

  • Evaluate the list of HR services and who/how they are provided (person-to-person, on-demand, a team of HR specialists, etc.).
  • Review the level of HR experience and knowledge you’ll receive: Do you need more or less support than what’s being offered?
  • Assess the HR technology capabilities and whether they suit your needs.
  • Determine whether they have different plans or pricing structures for HR support for small and large-size businesses.

Things to look for in pricing from a PEO:

  • Direct costs – These costs can be compared with what you’re currently paying. They include payroll taxes, workers’ compensation insurance, benefits, Employment Practices Liability Insurance (EPLI).
  • Administrative fees – These costs can vary among PEOs. They can be charged as a flat charge or as a percentage of your payroll. These fees may cover HR technology and the administration costs of payroll, workers’ compensation insurance, safety training and HR compliance.

The way PEOs price their services can be different from one to the next, so it may be hard to compare apples-to-apples. Ask your potential service provider to be transparent about their fees, including how they’re calculated. Because when it comes down to it, it’s a matter of trust: Do you trust the system they use to bill you for your services?

Get the step-by-step guide to HR outsourcing

Most business owners aren’t employment experts. HR tasks, including employee management, benefits and HR-related compliance are time-consuming. Insperity’s team of HR specialists knows how to get the most out of your human capital and processes to help you reach your business goals. Our breadth and depth of services and the level of care we provide are unmatched in the industry.

Finding the best HR provider for your business can be daunting, if you don’t know where to start. There are many factors to consider when deciding whether it’s right for your business. Access this free e-book to learn everything you need to know about HR outsourcing.

You’ll learn:

  • Which tasks you can hand over to an HR outsourcing company.
  • How an HR outsourcing company can provide better benefits to your employees.
  • The truth behind the three most common myths about HR outsourcing.
  • How to compare HR outsourcing companies and find the right fit for your business.