Human Resource Outsourcing: Definition, Benefits, Tips

Outsourcing HR activities has become a popular practice for businesses across industries. In this blog, we will delve into the world of human resource outsourcing, exploring its definition, the benefits it offers, and the common functions that companies outsource. We will also shed light on the difference between a professional employer organisation (PEO) and HR outsourcing. So, get ready for an engaging and dynamic journey into the world of HR outsourcing!


What is Human Resource Outsourcing? 


Human resource outsourcing involves partnering with a third party to handle various HR activities. It allows businesses to offload their HR workload, freeing up their internal team to focus on profit-generating activities. Small businesses can particularly benefit from this practice, as it provides them with additional resources and advanced services to boost productivity.

Benefits of Human Resource Outsourcing: 

Let’s explore the advantages that HR outsourcing brings to the table. There should be 1.4 HR staff for every 100 employees. Businesses can rely on HR outsourcing to stay up-to-date with administrative work from recruitment efforts.

human resource outsourcing

1. Unlimited support to free you from risk:

When organisations expand into new markets with different tax procedures, outsourcing HR activities can provide the necessary support to ensure compliance. A competent outsourcing firm thoroughly understands your business operations and assists in navigating complex HR processes.

2. Risk Minimization: 

By delegating HR tasks to specialised professionals, the chances of errors and risks are significantly reduced. This, in turn, helps increase productivity levels and ensures a smooth HR operation.

3. Save Money:

Outsourcing HR activities eliminates the need to hire and train additional staff. By relying on an efficient HR operation, businesses can focus on other administrative services and increase their overall profitability.

4. Security of Data: 

Working with sensitive information requires the utmost care. Outsourcing partners employ advanced security systems and software encryption to ensure the security and confidentiality of your data.

Common HR Functions Outsourced by Companies: 

Let’s take a closer look at some of the HR functions commonly outsourced by companies:

1. Hiring and Recruitment: 

In today’s competitive job market, outsourcing HR services can help track and hire skilled employees. HR outsourcing providers handle tasks such as mass recruitment and hiring temporary workers, making the hiring process more efficient.

2. Compensation and Payroll: 

HR outsourcing companies offer solutions to automate payroll processing, direct deposits, and benefits administration. They help manage paid time off and maintain accurate records, ensuring smooth compensation and payroll processes.

3. Specialized Consultancy Services:

Many organisations seek specialised HR outsourcing services that offer industry-specific insights and tools. These consultants gather, analyse, and interpret market information, helping businesses make informed decisions and reduce the risk and cost of adoption.

Difference between a Professional Employer Organization (PEO) and HR Outsourcing: 

While HR outsourcing involves partnering with a third-party provider to handle HR activities, a professional employer organisation (PEO) takes it a step further. In a PEO arrangement, the PEO serves as the employer of record for employees, sharing responsibilities and offering a range of services, including strategic offerings.

Tips for Outsourcing HR

If you are considering HR outsourcing, keep the following tips in mind:

  1. Provide a Point of Contact: Designate a point of contact within your organisation to coordinate with the outsourcing provider. This ensures effective communication and helps address any questions or concerns.
  1. Reflect on the Support you Want: Determine the level of support your organisation requires and identify specific tasks that may need additional oversight. Engage with senior-level managers and key stakeholders to define the desired level of control over HR processes.
  1. Establish Corporate Relationships: Share information about your corporate environment, work culture, goals, and objectives with the outsourcing partner. This helps them understand your organisation better and facilitates a smoother transition.
  1. Explain the Outsourcing Relationship: Educate your employees on how to leverage the outsourcing provider’s resources to achieve their goals effectively. Consider providing educational resources to help your employees navigate the new HR landscape.

Frequently Asked Questions

1. What HR functions can be outsourced? 

A wide range of HR functions can be outsourced, including recruitment, payroll and taxes, onboarding, time entry, employee records, applicant tracking, performance tracking, compliance, background checks, hiring temporary workers, retirement planning, and safety management.

2. What types of companies perform HR outsourcing? 

HR outsourcing services are offered by various types of companies, including Software as a Service (SaaS) providers, Business Process Outsourcing (BPO) firms, single-source outsourcing companies, professional employer organisations (PEOs), and shared service and administrative service organisations (ASOs).

3. Why is HR outsourcing important? 

HR outsourcing helps organisations be cost-effective, minimise risks, ensure compliance, and maintain the security of data. It also allows businesses to stay up to date with administrative tasks, freeing up internal resources for more strategic activities.

Closing Thoughts:

When engaging in HR outsourcing, it is crucial to establish clear contractual agreements to govern the partnership. Define performance requirements and outline penalties for non-compliance if necessary. Some outsourcing agreements also offer customizable HR packages, allowing businesses to select specific services and determine the level of involvement of the outsourcing provider in day-to-day activities.

HR outsourcing can be a game-changer for businesses, providing them with specialised expertise, cost savings, and enhanced efficiency. By partnering with the right outsourcing provider, organisations can focus on their core operations while ensuring that their HR needs are met by skilled professionals. So, take advantage of HR outsourcing and unlock the potential for growth and success in your organisation!



Award-winning recruitment software that will find, attract, hire and analyse the way you want to work. At LogicMelon, we have experienced software recruitment marketing specialists to help you build effective recruitment solutions supported by the best customer service you’ll find anywhere!

Email: or call LogicMelon (UK) +44 (0) 203 553 3667 (USA) +1 860 269 3089

This entry was posted in Blog post | Recruitment | Tools & Tips