Solving your payroll and HR issues with insights, answers, and action.

  • Startup
  • Payroll/Taxes
  • Human Resources
  • Employee Benefits
  • Business Insurance
  • Compliance
  • Marketing
  • Funding
  • Accounting
  • Management
  • Finance
  • Payment Processing
  • Taxes
  • Overtime
  • Outsourcing
  • Time & Attendance
  • Analytics
  • PEO
  • Outsourcing
  • HCM
  • Hiring
  • Onboarding
  • Recruiting
  • Retirement
  • Group Health
  • Individual Insurance
  • Health Care
  • Employment Law
  • Tax Reform

10 Reasons to Outsource Your HR Functions

Human Resources

HR has grown immensely more complex since the late 1970s. Ever-evolving health care programs, the Consolidated Omnibus Benefits Reconciliation Act (COBRA), 401(k) retirement plans, the Americans with Disabilities Act, the Family and Medical Leave Act, and now the Affordable Care Act are just a few of the many requirements challenging employers.

Small companies with limited personnel may find themselves overwhelmed by HR demands. If you feel stretched thin ensuring compliance to federal and state regulations, managing employee hiring, administering a benefits package, and handling payroll, you might need help.

Benefits of Outsourcing HR

An increasing number of small businesses are outsourcing their HR functions. The Society for Human Resource Management (SHRM) conducted an in-depth survey of HR outsourcing, and found that the 10 leading reasons companies turn to external HR experts are to:

  1. Save money and reduce operating expenses;
  2. Control legal risk and improve compliance;
  3. Gain greater HR expertise;
  4. Streamline HR functions;
  5. Offer services the organization could not otherwise provide;
  6. Allow the company to focus on its core business;
  7. Reduce the number of HR staff and related expenses;
  8. Improve service delivery;
  9. Allow HR staff to put more emphasis on strategy; and
  10. Make up for the lack of in-house expertise.

SHRM noted that the top 10 HR functions turned over to an outsourced HR administrator, completely or in part, were:

  1. Background checks;
  2. Employee assistance and counseling services;
  3. Flexible spending account administration;
  4. COBRA administration;
  5. Health care benefits administration;
  6. Temporary staffing;
  7. Pension benefits administration;
  8. Retirement benefits administration;
  9. Employee relocation; and
  10. Payroll administration.

Dedicated HR firms may also be able to assist your business with other services, too, including retirement planning, executive development and coaching, compensation plan administration, risk management, and training programs.

Choose Your Partner Carefully

If you think your company would benefit from outsourcing some or all of its HR functions, evaluate vendors with care. You're trusting a key function of your company to outsiders, so if you go this route, ensure that the vendor has a solid track record, offers superior customer service, and is a good fit philosophically with your organization. You want a firm that will work with you as a partner, tailoring its services and products to your organization's needs. Responsive customer service is a must, as is a sterling reputation in the marketplace. You should also expect a prospective vendor to offer online tools and other technological support. Perform your due diligence to find an HR administrator that will meet your needs and budget.


This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
View More in Human ResourcesView All Categories