Resourceful Human Resources
Office & People Management - HR

The Guide to Outsource Your HR Functions

Businesses (regardless of their sizes) struggle with growth. It`s way worse for small businesses as they`re forced to do more with less in a bid to remain competitive. 

Picture this. 
As a startup company, you not only have fewer resources to cater for daily HR responsibilities but also face most regulatory burdens as your larger business competitors. How then can you lead the pack? 

Well, outsourcing human resource services (even a small portion of it) can give you the freedom to focus on income-generating activities. No clue how to go about it? 

Here is a simple yet comprehensive guide on HR outsourcing that you can follow.   
Human Resources Management
Understanding your companies need for talent acquisition assistance is key before bringing HR consulting services on board. This`ll set the stage for better selection and management of a reputable HR consulting firm alongside the expectations of all internal teams.

So, first… 

Evaluate your overall company and business culture. That is, what are your short and long-term goals? Two, will outsourcing HR services complement your objectives?

Study the capabilities of HR staff members alongside the currently available infrastructure and technology within your organization. You can also ask internal teams on their view regarding the in-house HR performance. 

Consider HR outsourcing if it`ll add value in terms of benefits that`ll help in increasing staff retention rate. 

One: Determine If Outsourcing Is The Right Strategy For Your Company

Here, examine your business’ HR needs to better understand what to outsource. You can start by answering the following questions as in-depth as possible to gather realistic insights as far as HR services are concerned.

  • Are you an established or a start-up company?
  • What`s your employee count?
  • Are you likely to hire many people per year? 
  • In what mode are you in? A high growth mode (where rapid practice development, policies, and procedures are necessary to meet compliance needs) or a maintenance mode (with your recruiting infrastructure & Hr already in place)? 
  • Can you leverage the back-office infrastructure?
  • Do you need help with all HR services or just specifics?
  • Are you seeking strategic counsel and advice for your talent strategy?
  • Are you mainly in need of someone to ensure you remain compliant with employment laws and regulations?
  • Does your HR team organize team building and social activities to boost staff morale?
  • Does the work in question require an understanding of employees or face-to-face-conversation?

Ensure that in the end, you`ll have defined HR strategic role in the business. Decided what HR services are unique to your company. And established what tasks the HR department can focus on to effectively fuel the business mission. 

Once done, it`ll go without saying that any role outside the “sweet pool” you`ve just created is a candidate for outsourcing.

Note, there`s no ideal guideline for HR outsourcing. In fact, what tasks to outsource and what to leave in-house depends on the business, its priorities, and HR`s role in realizing these priorities. However, experts recommend outsourcing repetitive functions and tasks in need of high skills and advanced technology. Activities such as payroll, relocation, temporary staffing, high-volume recruiting, providing harassment training, updating employees’ handbooks, and independent contractor compliance.

On their end, functions like HR strategy, talent development, employee relations, performance management, and succession planning should remain in-house if possible. Nevertheless, don`t overload your in-house department with the tasks. Rather, arm them with platforms that can help perform more efficiently so as to provide better value to the company.

Two: Identify Key HR Initiatives

Sure, you must have had your reasons for considering HR outsourcing. Might be that internal HR services are over-taxed. You foresee an increase in hiring activity. The management team needs a more consistent and accountable option? Or are metrics relating to recruiting cost, speed, and quality unknown?

Get this!

While saving cost is an advantage of outsourcing HR services, it shouldn`t be the primary reason. This`s more so when dealing with talent acquisition processes as HR consulting services are tasks with vast differences in cost, technology, focus, and structure! While they can effectively boost candidates’ quality, they can never resolve problems relating to inadequate resources.  

That said, it`s therefore, better to focus more on long-term goals rather than the short-term – cost-saving agenda. Example, recruiting quality talents will improve your bottom line eventually making it more worthwhile. 

Three: Think Of Reasons For Hiring 

There`s always the good and the downside to everything, right?

The same rules apply to HR consulting services. Therefore, examine any and every internal implication resulting from the process and proceed only if justifiable.

According to experts, the consequences of HR outsourcing are mainly felt by employees, line managers, in-house HR professionals, and outsourced HR staff.

When it comes to in-house professionals, the most noticeable impacts are in terms of work and career patterns. There`s the issue of work intensification, change in job content, reduction of career development opportunities, and difficulty in communication in a case of organizational and geographical separation. So, should the outsourced firm mandatorily deploy the in-house staff or should they just learn how to survive in the "game"?

To line managers, there`ll be work intensification due to lack of easy access to HR professionals. This can be worse given their tendency to ignore the soft part of HR management, and lack of competence, especially with legal matters.

Considering employees (your key asset), outsourcing can hit them really hard. For starters, they may find it difficult diverging confidential information to unknown HR persons online or over the phone. To them, outsourcing HR services mean the loss of human touch, the loss of an emotional aspect of the department. 

There`s also the issue of ownership. Who do they report to especially grievances involving the line managers? Note, if this`s overlooked it can result in fear and resistance among the staff.

So, analyze carefully lest risk these indirect costs (both financial and emotional) superseding the benefits.

If all the positives outweigh the negatives, proceed to…

Four: Think Of The Internal Implications 

Five: Think About Alternatives 

Outsourcing HR services can be done in a variety of ways: PEOs, ASPs, BPOs, or e-services. The terms are usually used loosely, so, get to know what outsourcing firm offers before entering into a legal agreement.


A PEO (Professional Employer Organization) take total responsibility for your business' HR administration from hiring to firing. It`s your partner and co-employer of your employees. Note, a consulting service is only a PEO if it assumes the legal responsibility of the workforce. So be cautious of outsourcing services that claim to be PEOs but only handle the primary aspects of HR.


BPO (Business Process Outsourcing) refers to outsourcing in all business-related fields, not just HR. it differentiates itself by applying existing technology in a new way or adding in new technology to improve a process say talent acquisition. In HR, for instance, a BPO would ensure an organization's HR SYSTEMS are fully supported by the newest technologies.


ASPs (Application service providers) host business-software on the Web and rent it to users.


E-services are Web-based HR services. BPOs and ASPs can be referred to as e-services.

So, who's who?

The aforementioned services are straightforward in their own right. However, they do shed some of their services or cross over into other types of responsibilities bringing in confusion.

For example, some BPOs are nowadays assuming legal responsibility just like PEOs while others do not. In the same light, some ASPs consider themselves as BPOs by virtual of implementing new technology.

Therefore, know the terms but don`t get caught up in the names when reviewing a potential vendor.

You can also consider a group purchasing organization (GPO). It`s a service that provides access to qualified, pre-negotiated contracts with managed service providers, staffing firms, and others. It`s a convenient, cost-effective, and efficient arrangement – a one-stop shop for various HR services.

Once you have settled for an outsourcing service, it`s time to…

Six: Look For A Suitable Vendor

This`s the most critical part of the process. You have to extensively research potential vendors. Examine their credentials, reputation, and financial stability. Counter-check their references, ask probing questions and be sure the provider is accredited by the Better Business Bureau

Don`t hesitate to consult other businesses that have used the firm. Read all proposals carefully. Understand what value you`ll be receiving. Compare benefits and the associated costs for different firms. 

You can solicit proposals from providers you`ve worked with or ask your business peers for recommendations too. 

In summary, consider the size of the firm in respect to your needs, its service structure, the company background, cultural fit, cost, and commitment.

In the end, select established vendors whose requests for proposal (RFP) closely suit your needs and your company culture.

According to experts, it`s wise selecting a primary and a backup outsourcing firm.
Once you have settled for the right firm, just transfer the services. Working with an attorney, draft a legal contract that outlines the firm's responsibilities, expected performance, and performance measures. Don`t forget to include possible solutions in case any party is dissatisfied before the contract period expires.


Seven: Transfer The Services 

Eight: Assess And Monitor Customer Satisfaction 

You`re done. In fact, all left to do is to remain in frequent communication with the HR consulting firm as you assess and monitor the outcomes. You should establish a routine reporting system inclusive of penalties in case the performance is below average and incentives for exceeding the set goals. Ensure all state and federal reports are accurately and punctually filed with the right agencies.  
As the business world continues to evolve rapidly, it`s crucial for your organization to stay up-to-date with the new HR models and processes to stay competitive. This`s especially when it comes to talent acquisition and recruitment processes. 

Outsourcing HR services to a reputable HR consulting service provider will ensure consistency, quality, and scalability in HR management – standards that your in-house team may fail to realize. Not sure how to go about it? Just follow the guidance provided in this article and you`ll be good to go. 
HR Consulting Service Firm

Wrap Up