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Enterprise HR Outsourcing

Everything your enterprise business needs to know about outsourcing your HR department and tasks

When your business manages hundreds or thousands of employees, it can be difficult to provide them with adequate human resources services.

Instead of paying for a large and unwieldy internal HR department, you have the option to outsource those business functions to a third-party HR specialist. HR outsourcing organizations specialize in managing employees for their clients – from recruitment and hiring, to time and attendance, to payroll and benefits management.

Related: See HR outsourcing vendors at

What to Expect

An HR services provider undertakes the administrative responsibilities of your HR department in a traditional “outsourcing” structure. These providers standardize functions, such as payroll services or benefits administration, in order to offer you a cheaper and more effective way of completing HR functions.

When it comes to outsourcing HR, your business can pick and choose which functions it outsources or keeps in-house.

  • For example, according to Hewitt’s “HR Outsourcing Trends and Insights 2009” survey of 104 US organizations of varying size and industry, 89% of the companies surveyed outsourced their defined contribution program, while 72% outsourced their employee benefits administration and 61% their health insurance plans.
  • Businesses have also used HR service providers to take over the recruitment, screening, and hiring of new employees. Industries with a high employee turnover rate and businesses with thousands of employees can benefit from passing the responsibility for recruitment to a third party.

The HR service can take over as many steps in the process as needed: it can create and distributes job postings, organizes incoming applications, interview applicants, perform background checks, and even provide new hire training. The extent to which the service is involved in your business’s recruitment is entirely the prerogative of your business.

HR Outsourcing Benefits

The benefits of HR outsourcing are numerous. Since your HR services provider specializes in all the functions of HR administration, you can expect higher quality service and competence than an in-house HR department.

Furthermore, 58% of businesses surveyed by Hewitt who outsourced their HR did so in order to reduce the costs of HR administration. 62% reported that this cost-savings objective was fulfilled by HR outsourcing.  Nonprofit Quarterly, reported that “The most important reason that organizations outsource HR functions is because of the need to comply with employment laws and regulations.”

  • Employment regulations and tax law change regularly. If your business is not in compliance with the latest state and federal regulations, it can face steep penalties.
  • By outsourcing to HR professionals, you can reduce costs, gain access to qualified HR experts, and guarantee that your hiring, payroll, and benefits processes are current and legal. According to the Hewitt survey, 82% of responding companies indicated they have achieved the expected benefits from HR outsourcing.  

Be aware that there are several barriers to a successful implementation of HR outsourcing, including: budget concerns, concerns over an adequate ROI, and concerns over loss of control over key business processes. These concerns can be mitigated by choosing the right HR service provider, planning ahead for the transition, and maintaining open communications with the provider.

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