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Updated May 30, 2024

The Best HR Outsourcing Companies of 2024

When you partner with an HRO company, you trust them with your team — choose the very best to know they’re in good hands.

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Kaylyn McKenna, Business Operations Insider and Senior Analyst
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.
Best for Reporting and Analytics
TriNet HR Outsourcing
Trinet logo
  • Starting Price: Custom
  • Contract Length: Annual
  • Employee minimum: 5
USALinks to TriNet HR Outsourcing
Visit Site
  • Starting Price: Custom
  • Contract Length: Annual
  • Employee minimum: 5
Best for Startups
Bambee HR Outsourcing
Bambee company logo
  • Starting Price: $99/month
  • Contract Length: Annual, multiyear
  • Employee minimum: 0
USALinks to Bambee HR Outsourcing
Visit Site
  • Starting Price: $99/month
  • Contract Length: Annual, multiyear
  • Employee minimum: 0
Best for Payroll
Paychex HR Outsourcing
Paychex company logo
  • Starting Price: Custom
  • Contract Length: Annual
  • Employee minimum: 1
USALinks to Paychex HR Outsourcing
Visit Site
  • Starting Price: Custom
  • Contract Length: Annual
  • Employee minimum: 1
Best for Strategic HR Advising
ADP HR Outsourcing
ADP company logo
  • Starting Price: Custom
  • Contract Length: Monthly, annual, multiyear
  • Employee minimum: 5
USALinks to ADP HR Outsourcing
Visit Site
  • Starting Price: Custom
  • Contract Length: Monthly, annual, multiyear
  • Employee minimum: 5
Best for Midsize Businesses
Insperity HR Outsourcing
Insperity company logo
  • Starting Price: Custom
  • Contract Length: Annual, multiyear
  • Employee minimum: 5
USALinks to Insperity HR Outsourcing
Visit Site
  • Starting Price: Custom
  • Contract Length: Annual, multiyear
  • Employee minimum: 5

Table of Contents

Open row

To find the best HR outsourcing companies, our team of small business experts closely reviewed the terms and conditions of partnering with the leading HRO names on the market. We conducted Q&A sessions with company representatives and interviewed them about what it’s like to work with their team. We also examined offerings like payroll management, benefits administration, and hiring and onboarding processes to ensure your team would be in good hands when choosing any of our best picks. We also tested the software platform to ensure it was easy to understand and simple to navigate. Finally, we researched reviews from each company’s real-life clients to determine how well they delivered on the services they offered. Learn more about our methodology.

If managing your human resources (HR) functions in-house becomes too much to handle, you can outsource some or all of these services. Human resources outsourcing (HRO) services offer expert HR teams who can take over your HR needs for you, handling areas such as employee benefits, payroll processing, recruitment and regulatory compliance.

We spent dozens of hours researching, testing and analyzing the best HROs to help you find the right partner for your business. Consider our picks for the best HR outsourcing companies below.

Gusto platform

HRO plans come with user-friendly tech platforms that allow you to view and manage all of your HR functions from one central location. Source: Gusto 

How We Decided

Our team spends weeks evaluating dozens of business solutions to identify the best options. To stay current, our research is regularly updated.

20

considered

11

reviewed

5

selected

Our team spends weeks evaluating dozens of business solutions to identify the best options. To stay current, our research is regularly updated.

20

considered

11

reviewed

5

selected

Compare Our Best Picks

BND Ribbon
Our Top Picks for 2024
TriNet HR Outsourcing
Bambee HR Outsourcing
Paychex HR Outsourcing
ADP HR Outsourcing
Insperity HR Outsourcing
Rating9.2/108.7/108.6/109.1/109.1/10
Best Use Case

Best for Reporting and Analytics

Best for Startups

Best for Payroll

Best for Strategic HR Advising

Best for Midsize Businesses

Pricing

Custom pricing

Starts at $99 per month

Custom pricing

Custom pricing

Custom pricing

Employee minimum

5

0

1

5

5

Mobile App

Yes

No

Yes

Yes

Yes

Customer Service

Phone, email, live chat, dedicated specialists

Phone, email, live chat, dedicated specialists

Phone, email, live chat, dedicated specialists

Phone, email, live chat, dedicated specialists

Phone, email, live chat, dedicated specialists

Review Link
Scroll Table

Reviews

Trinet logo
  • Starting price: Custom quote
  • Key Features: Industry-specific advisors, expansive HR features, expense reporting functionality
  • Free Trial: No
Editor's Rating: 9.2/10
Visit Site

Why We Chose TriNet

TriNet’s HRO services provide access to the company’s robust technology platform, which includes strong workforce reporting and analytics tools. We like that TriNet offers a wide range of pre-built HR reports, as well as a user-friendly report builder for customized reporting. Organizations can also schedule reports to run regularly. Administrators can choose the frequency of the report, who should receive it, and its format. They can also create customized reporting dashboards for quick access to the most relevant data.

TriNet offers a variety of HR functions, like recruitment, payroll, risk mitigation and employee benefits. You can also train your staff with TriNet’s 360Learning management vendor, with the ability to record employee course completion. These HR services are even more useful when used in conjunction with TriNet’s robust reporting and analytics tools to obtain data-driven insights about different areas of your business’s HR operations.

TriNet dashboard

TriNet’s workforce analytics dashboard makes it easy to see employee metrics. Source: TriNet

TriNet Pricing & Features

Plan Standout Features Cost (billed annually)
TriNet HR Platform – Essentials Employee onboarding and management, scheduling, time off tracking, analytics, integrations and a mobile app (add-ons available) $8/employee/month
TriNet HR Platform – Growth Everything in the Essentials plan, plus compensation management, configurable people analytics and performance management (add-ons available) $16/employee/month
TriNet HR Platform – Zen Everything in the Growth plan, plus payroll, employee surveys and a people hub (add-ons available) $27/employee/month
TriNet PEO TriNet technology platform, HR admin services, benefits administration, payroll, employee training and development and risk mitigation (add-ons available) Custom quote required

TriNet Pros

  • TriNet offers highly customizable reporting tools.
  • TriNet has a network of industry specialists to provide industry-specific expertise.
  • TriNet’s technology platform is easy to navigate.

TriNet Cons

  • TriNet’s customer service has mixed reviews.
  • It doesn’t list all of its pricing online.
  • Certain high-risk businesses are not eligible for its services.

What TriNet Users Have to Say

TriNet users like the platform’s implementation process and scalability. They also like TriNet’s employee onboarding and training features. However, some users noted that customer support can be difficult to reach at times. TriNet earned a 7.1/10 rating on TrustRadius.

READ OUR FULL TRINET REVIEW HERE

Bambee company logo
  • Starting Price: $99 per month
  • Key Features: Dedicated HR support, policy development tools, HR auditing
  • Free Trial: No
Editor's Rating: 8.7/10
Visit Site

Why We Chose Bambee

Bambee’s offerings are the best for startups that need help getting their HR activities off the ground. We like how companies are assigned a dedicated HR manager who provides direct support on HR matters such as onboarding, terminations, hiring and company policy creation. When testing the platform, we were impressed with Bambee’s automated tools that can be used to simplify compliance, payroll and other HR processes for startups. For rapidly growing startups, Bambee stays on top of ongoing legal compliance issues and updates.

Bambee’s guided payroll feature and employee policy tools are well suited for new startups that don’t have an employee handbook or HR processes in place, or for businesses that may be new to approving or processing payroll. Many startups need to build everything from scratch, including HR policies and documentation, and Bambee is designed to support startups in doing so.

Bambee HR tasks

We found it easy to view and manage HR tasks within the Bambee platform. Source: Bambee

Number of employees supported Standout Features Cost (billed annually)
0 Four core HR policies; two custom HR policies; two job descriptions; email and chat support $99/month
1-4 Four core HR policies; two custom HR policies; three job descriptions; an HR manager with unlimited phone, email and chat support $299/month (plus $500 setup fee)
5-19 Four core HR policies; four custom HR policies; four job descriptions; an HR manager with unlimited phone, email and chat support $399/month (plus $500 setup fee)
20-49 Four core HR policies; eight custom HR policies; five job descriptions; an HR manager with unlimited phone, email and chat support $499/month (plus $1,500 setup fee)
50-70 Four core HR policies; 12 custom HR policies; five job descriptions; an HR manager with unlimited phone, email and chat support $1,299/month (plus $2,000 setup fee)
71+ Custom features included Custom pricing required (plus a $2,500 setup fee)

Bambee Pros

  • Bambee offers knowledgeable HR advice for startups.
  • The company can help you tailor your internal HR policies to your business.
  • Bambee has no employee minimum, so you can use this service when hiring your first batch of employees.

Bambee Cons

  • Bambee is not well suited for larger companies.
  • It charges a setup fee for most plans.
  • Bambee doesn’t have any mobile apps.

What Bambee Users Have to Say

Real-life Bambee users appreciate their dedicated Bambee HR managers, stating that they are helpful and accessible. However, some users see Bambee’s pricing as a potential drawback, saying its services are expensive. Bambee earned a 4/5 rating on TrustRadius.

READ OUR FULL BAMBEE REVIEW HERE

Paychex company logo
  • Starting price: Custom quote
  • Key Features: Seamless payroll process, contractor payments, 24/7 customer support
  • Free Trial: No
Editor's Rating: 8.6/10
Visit Site

Why We Chose Paychex

Paychex is a leading provider in the HR space, with established and well-respected solutions. The company offers affordable HRO services for small businesses alongside one of the best payroll processing solutions we reviewed. When testing the software, we found that Paychex offers a seamless payroll processing experience on the employer side, as well as easy-to-navigate self-service tools for employees who need to enter their time or view their pay stubs. Of the companies we reviewed, Paychex offers one of the easiest processes of transitioning to an HRO from a PEO. Many businesses use a PEO service at first but transition to an HRO as they grow. The transition is usually bumpy, but with Paychex, it can be seamless.

Paychex tax dashboard

We like that Paychex helps you stay compliant with federal and state tax regulations. Source: Paychex

Paychex Pricing & Features

Service Plan Standout Features Cost
Paychex PEO Employee benefits administration, payroll, compliance and safety, HR guidance and support Custom quote required
Paychex Flex Select Payroll and tax administration, analytics and reports, labor posters, employee self-service, financial wellness and cashflow assistance and an HR library (add-on features available) Custom quote required
Paychex Flex Pro Everything in the Select plan, plus garnishments, general ledger service, pre-employment screening, employee handbook builder, state unemployment insurance service and workers’ compensation reports (add-on features available) Custom quote required
Paychex Flex Enterprise Everything in the Pro plan, plus performance management, document management, job costing and paycheck preview and approval (add-on features available) Custom quote required

Paychex Pros

  • Paychex provides a variety of payroll tools, including direct deposit, off-cycle payments and contractor payments.
  • Paychex’s team of experts actively monitors and reports on new employment laws and regulatory changes.
  • Paychex offers 24/7 live support within the U.S., allowing customers to discuss their payroll, HR and other related business or personnel questions with a Paychex expert.

Paychex Cons

  • Paychex doesn’t list pricing online for all of its plans.
  • It doesn’t offer a free trial.
  • Its custom reporting tool is less intuitive than what some competitors offer.

What Paychex Users Have to Say

Users of Paychex like how user-friendly the software is, especially when it comes to payroll processing and tax filing. The biggest drawback users mention is its custom reporting tool, which some say is not very intuitive. Paychex earned a 6.6/10 rating on TrustRadius.

READ OUR FULL PAYCHEX REVIEW HERE

ADP company logo
  • Starting price: Custom quote
  • Key Features: Fortune-500-level benefits, easy open enrollment, user-friendly self-service tools
  • Free Trial: No
Editor's Rating: 9.1/10
Visit Site

Why We Chose ADP

ADP’s human resources and payroll outsourcing services combine ADP’s robust tech platform with a personalized support team of HR specialists. We found ADP’s strategic HR advising to be an excellent resource for businesses that need hands-on support from an experienced HR partner. We like that ADP’s advisors can help businesses address employee retention, build recruiting strategies and more. Customers may also receive support for compliance matters related to employment laws and regulations, workplace safety, payroll and taxes, and more. Businesses that select these services get a strategic HR expert assigned to them; this representative acts as a go-to resource for HR questions.

ADP benefits enrollment

ADP can advise on common HR tasks such as benefits enrollment. Source: ADP

ADP Pricing & Features

Service Plan Standout Features Cost
ADP TotalSource Employee onboarding, document management, benefits administration, payroll processing, employee learning materials, reporting, workers’ compensation and claims management, unemployment claims administration, compliance support, dedicated support representatives Custom quote required
Optional Add-ons Recruitment, time tracking, employee scheduling, performance management, employee engagement, leadership training, compensation management, succession planning, integrations Custom quote required

ADP Pros

  • ADP can offer both strategic HR advising and administrative support.
  • ADP is an experienced, proven leader in the HRO industry, so businesses can feel confident about the quality of the company’s services.
  • It offers competitive employee benefits from top-rated benefits providers.

ADP Cons

  • ADP does not list pricing online; you must contact a representative for a quote.
  • ADP does not offer a free trial for its services.
  • It has an employee minimum.

What ADP Users Have to Say

Real-life ADP users found many of its features to be useful, especially its benefits administration and payroll processing capabilities. However, some users note the software as a potential drawback, saying it looks older than competitors’ software. ADP earned a 6.1/10 rating on TrustRadius.

READ OUR FULL ADP REVIEW HERE

Insperity company logo
  • Starting price: Custom quote
  • Key Features: PEO and non-PEO plans, easy employee onboarding, dedicated customer support
  • Free Trial: No
Editor's Rating: 9.1/10
Visit Site

Why We Chose Insperity

Insperity offers specialized experts to help midsize businesses navigate complex issues relating to time and attendance, payroll, performance management, recruitment and onboarding, employee safety, and benefits and compensation. We like that it assigns customers a dedicated account representative who can answer questions and, for more complex questions and issues, serve as a liaison to route queries to the appropriate expert.

Small businesses with plans to expand their workforce can also rest assured that transitioning from Insperity’s PEO service to its HRO service is simple. This isn’t something we found readily available with all of the vendors we researched. This can offer growing businesses the reassurance that they won’t run into the common challenges that come with migrating to a completely new platform.

Insperity dashboard

We like Insperity’s user-friendly dashboard. Source: Insperity 

Insperity Pricing & Features

Service Plan Standout Features Cost
PEO for Small Business Administrative HR services, benefits administration, payroll, compliance assistance and personalized HR support Custom quote required
PEO for Middle Market Business Administrative HR services, advanced workforce technology, benefits administration, payroll, analytics, compliance assistance and personalized HR support Custom quote required
HCM + HR Technology Suite (non-PEO)  Administrative HR services, workforce technology, benefits administration, payroll, compliance tools and HR Custom quote required

Insperity Pros

  • Insperity offers a comprehensive selection of HRO services, including solutions tailored to midsize businesses.
  • Insperity provides extensive health benefit administration tools.
  • Insperity offers hundreds of online learning materials and courses for employee training and development.

Insperity Cons

  • The plan pricing is somewhat confusing, and it may be difficult to determine whether to use Insperity’s PEO or HRO services.
  • It doesn’t list pricing on its website.
  • It isn’t compatible with third-party payroll processors.

What Insperity Users Have to Say

Insperity users like the platform’s usability, especially its employee onboarding features. However, some users see Insperity’s pricing as a potential drawback. Insperity earned a 4.4/10 rating on TrustRadius.

READ OUR FULL INSPERITY REVIEW HERE

HRO Costs

The cost of HRO services varies widely. Most providers charge based on one of two models: by the individual service provided, or by a subscription plan that includes a bundle of features and/or services.

For small and midsize businesses, base costs typically range from $8 to $50 per employee per month. Of the services we reviewed, Zenefits had the lowest per-employee price, with plans starting at $8 per employee per month. Many of the HRO providers we reviewed offer custom pricing at all levels, so the cost depends on your service selections and company size.

Consider your business’s needs before you purchase a bundled subscription plan — you don’t want to pay for services you don’t need.

Other Add-on Costs

If you need what many HRO providers consider add-on services, plan on increases in your monthly costs. The pricing is also influenced by the size of your business, whether you have multiple locations and the complexity of your organization. Examples of add-ons include time tracking, recruitment services and advanced reporting features. When you compare plans, pay close attention to add-ons, because what one vendor considers an add-on may be a standard part of another HRO vendor’s basic service bundle.

Implementation Fees

Besides service-related costs, you may see one-time implementation fees, which can range from $200 to $3,000. Some HRO providers don’t charge setup or implementation fees, so consider these fees when you’re shopping around and factor them into your cost comparisons.

HR Outsourcing Features

HRO service offerings vary among providers, and businesses can often pick which functions they would like. While your business may not need to outsource all of these services, here are the key features that you will typically find in a well-rounded HRO provider:

FeatureDescription
Dedicated HR supportOne of the main advantages of working with an HR outsourcing company is the dedicated support. Most HRO companies provide you with a dedicated contact or team to help you navigate HR questions.
Payroll processingHRO providers give you the tools you need to process payroll accurately and efficiently.
Compliance assistanceHRO providers can help you navigate complex compliance issues and stay up to date on applicable employment laws.
Benefits administrationNot all HRO companies offer benefits enrollment and administration, but many can help you provide benefits such as health insurance to your staff.
RecruitmentMany HRO providers can help you find top talent to fill your open roles.

Dedicated HR Support

Running a business isn’t easy, and you’ll inevitably encounter issues that require HR services. That’s why your HRO provider’s dedicated support team is there. The exact support level and options vary. HRO companies may provide a dedicated HR manager, industry-specific support, or a whole team of experts in different areas of HR. For smaller businesses, a dedicated account manager may be enough, but for larger, more complex businesses, an expert team or specialized industry knowledge could be useful.

Payroll Processing

You don’t want to make any mistakes with employee payments or payroll taxes. HRO companies typically provide a user-friendly payroll platform that can help you manage your salaries and wages. This platform can often automatically calculate applicable local, state and federal payroll taxes and benefits deductions so that you’re always withholding the right amount from your employees’ paychecks. Some HRO companies also provide payroll specialists who can guide you in managing your business’s payroll.

TipTip

If you’re looking for one of the best payroll software providers that offers a great user experience without a steep learning curve, consider our Rippling payroll review.

Compliance Assistance

HRO providers typically support compliance in a number of ways. They tend to have automated tools to improve payroll compliance, and some HRO companies help businesses develop compliant company policies or provide online compliance training services. The dedicated HRO support team often can advise on specific compliance issues to help businesses manage risk and legal compliance. Many business owners turn to their HRO provider for advice with processes such as terminations, which could have negative compliance or legal consequences if processed incorrectly.

Benefits Administration

Offering employee benefits is important, but sometimes, it’s complicated. HRO providers vary greatly in their benefits services, so pay special attention to the benefits tools while you’re shopping around. Most HRO companies integrate with different benefits providers so employees can complete their enrollment and check on their benefits information in a centralized platform. If you already have a preferred vendor, inquire about available integrations when choosing an HRO service. Some can also help you choose benefits providers, handle Affordable Care Act compliance, or otherwise support your benefits administration needs.

Did You Know?Did you know

We’ve reviewed some of the best employee retirement benefits plans available. If you’re looking for benefits packages to offer your employees, check out our best picks page.

Recruitment

HRO providers offer varying levels of recruitment support. Many offer simple job posting and applicant tracking functions, while others have expert recruiters to help you find the best talent available. Some don’t offer any recruitment support at all. As recruiting becomes increasingly competitive, outsourcing some of the process may alleviate stress for your internal team and help you fill vacant roles more efficiently.

Choosing an HRO Service

Selecting the right HRO does not have to be an overwhelming task. Aside from getting to know what services a provider offers (which can be difficult if all you are doing is visiting provider websites), you must assess its reputation for customer service and product customization.

Most HRO companies want your contact information before they share any useful information about their services and their costs. We recommend that you take the following steps during your search process:

1. Research HRO options.

Start by researching different HRO providers. Work to create a short list of HRO companies that have the features and support your business currently needs. Each HRO provider has its own strengths. Often, you can customize their HRO service packages so that you pay only for what you need. So, when you compare options, be sure to focus on the core functions you specifically need in an HRO service. We highly recommend talking to other business owners within your industry to see which HROs are held in high regard and which ones to avoid.

2. Ask the HRO service for a demonstration of its platform.

While HRO companies offer a lot of hands-on services, including consulting from expert advisors, a solid tech platform is also important. Sign up for demos with several providers to find a platform that you find user-friendly and that offers the tools you need. Don’t forget to ask about mobile app offerings for employees and administrators. Besides giving you a thorough demonstration of their platforms, many HRO companies offer a free trial of their software, so take some for a spin to see what you like best.

3. Compare price quotes.

Many HRO providers offer custom pricing based on the HR functions your organization wishes to outsource, so you’ll need to obtain quotes from each vendor. You can often get a quote when you meet with the sales team for a demo or by completing a quote form on the vendor’s website. Then, you can compare the pricing and the included services to find out which vendor offers the best value for your money.

4. Find customer references.

If you have selected an HRO provider that you are excited about, do not proceed further until the company provides at least three customer references that you can contact to learn about their experiences with the HRO provider.

Customer references should meet the following criteria:

  • They are in your industry.
  • They have roughly the same number of employees.
  • They have been a customer of the HRO for at least two years.
  • They have documented and up-to-date processes, policies and systems. Inquire about how they remain current on best practices regarding employment, payroll, leave laws and other regulatory issues.

Advantages of HRO Services

For small and midsize businesses, there are many advantages of a strong HRO partnership. An HRO provider tracks, reviews and informs your business of changes in HR trends, laws and best practices. It also allows your team to focus on business operations instead of compliance.

A good HRO service provides the following benefits:

  • Saved time and resources: The first thing many businesses realize when they hire an HRO provider is the available time that their in-house personnel get back. For small business owners who have been trying to manage HR functions themselves or with a small team, the ability to rededicate these resources to operations that drive return on investment is a powerful benefit.
  • Comprehensive HR services: Many new business owners (and their staff) are unfamiliar with employment laws and regulations. Many also know little about recruiting, hiring and retaining top talent. Working with an HRO provider not only shifts these tasks to a third party but also places them in the hands of experienced professionals who know how to handle these responsibilities efficiently.
  • Expertise: Your HRO provider’s knowledge and HR practices are shaped by expertise and an ongoing study of the HR landscape. The best HRO companies are adaptable and up to date on current and evolving HR trends and regulations.
  • Diversity, equity and inclusion (DE&I) training and development: Diversity training is an increasingly important focus area for businesses. A good HRO company can provide training and development assistance that can help a small company effectively create a DE&I program that fosters employee engagement. Companies with more engaged employees are more productive, and HR plays a major role in employee engagement.
  • Employee handbook updates: Figuring out whether your company’s employee handbook is up to date can be a hassle. If you outsource this time-consuming task to an HRO company, your handbook will always comply with current federal and state laws and regulations.
  • Recruitment and onboarding guidance: Recruitment and onboarding are not only labor intensive but also easy to get wrong. Recruiting and hiring the wrong person is a costly mistake. Well-equipped HRO providers can help with these processes or, at the very least, provide templates, policy samples and guidance to get these important tasks right.
Key TakeawayKey takeaway

HRO providers free up your team’s time so you can focus on your business’s operations without neglecting any compliance issues or essential processes, like payroll, employee development and internal policies.

Alternatives to Consider

If you are interested in learning about more top-rated HR outsourcing providers, these alternative solutions are worth considering.

BambooHR

BambooHR is a comprehensive HR outsourcing provider that includes many of the services and tools needed to manage your workforce, such as recruiting, document management, time-off management, approvals and workflows, organization charts, performance management, and hiring and onboarding solutions. You can also add services for payroll, employee benefits administration and time tracking. Additionally, BambooHR helps employers craft compensation packages and workplace policies that make a company more attractive to candidates. Read our BambooHR review to learn more.

BambooHR dashboard

BambooHR has a clean, user-friendly dashboard. Source: BambooHR

WorkSight by G&A Partners

G&A Partners’ WorkSight is a secure and robust online HR platform that can automate many common HR tasks for small businesses. WorkSight stands out most in employee training and development. With a large library of training resources and customizable performance management and professional development offerings, WorkSight is an excellent choice for small businesses that want to improve employee productivity and performance.

Gusto

Gusto is best known for its payroll platform, but it can also be used to outsource a wide range of HR tasks, including employee onboarding. Gusto supports the hiring process with seamless job postings and personalized offer letters through the new-hire onboarding and training process. Although Gusto was previously limited to U.S.-based employees, it now offers an employer-of-record service that allows you to onboard and pay employees around the globe. Businesses can get advice from Gusto’s team of HR experts; certified HR professionals are available by phone or email to walk employers through HR questions and complex processes. Read our Gusto review to learn more.

Gusto payroll screen

Gusto users can manage payroll and HR for employees and contractors. Source: Gusto

HR Outsourcing FAQs

No. HROs allow companies to maintain control over their employees and systems and access administrative benefits through HR services third-party outsourcing. PEOs directly manage or employ the client’s employees. In other cases, PEOs require access to employee data to automate various processes, such as payroll, benefits and time-off management.

No, but a good HRO provider will coach you and offer suggestions for the best way to proceed with employment actions such as termination, including when to involve legal counsel.

In many cases, yes, an HRO can manage benefits. You will need to ask prospective HROs specific questions relating to benefits management, such as those regarding their overall service offerings and open enrollment process.

In some cases, HRO providers can partner with a customer to process and manage a workers’ compensation claim. This service differs among HRO providers and states, where the workers’ compensation laws are set and governed.

HR outsourcing services are robust in what they can do for you, but there are a few human resources functions that shouldn’t be outsourced: employee support, conflict resolution and company culture. An internal HR professional understands your team better than someone from an HR outsourcing agency, so they will be better equipped to provide employee support when someone on your team is going through a hard time. Similarly, if two employees have a disagreement, an internal team member can use their knowledge of each individual to help resolve the conflict.

Another major HR function that should not be outsourced is the development of your company culture. An external organization does not understand the details of your culture as well as an internal team member does. As such, you should create and grow your company culture internally.

Although the HRO providers we reviewed know all federal and state employment-related laws, not all HRO providers extend their expertise or services to international markets. When talking to an HRO provider, you should ask specific questions about your needs.

Most HROs require 30 days’ notice. However, the more services a business has assigned to its HRO provider, the longer the offboarding period should be. Winding down a partnership with an HRO should be a careful process to ensure the continuity of your HR functions during the transition.

Outsourcing HR functions to an HRO company may be cheaper than hiring an in-house team, depending on your organization’s needs. However, many businesses use HROs to supplement, rather than fully replace, their in-house teams.

HR outsourcing providers prioritize the security and confidentiality of sensitive employee data through several measures. They employ encryption techniques for data transmission and storage, implement strict access controls with multi-factor authentication, and utilize secure data centers with physical and environmental safeguards. Adhering to industry standards like GDPR and HIPAA, they conduct regular security audits, provide employee training on data security, and have backup and recovery plans in place.

author image
Kaylyn McKenna, Business Operations Insider and Senior Analyst
For more than 10 years, Kaylyn McKenna has studied the ins and outs of the workplace experience. With guidance designed to help both employers and employees, she advises on workplace matters affecting small businesses. This has ranged from providing recommendations on HRO and PEO services to sharing pointers on job interviews and managing increasing workloads. Her expertise has been trusted by JobGet, Business Management Daily and others. McKenna holds a bachelor's degree in business administration. While pursuing her master's in industrial and organizational psychology, she focused on relevant topics like organizational change, high-performance teamwork and customer relations. McKennna has also led webinars on workplace happiness and unconscious bias in the workplace. With her additional interest in e-commerce and finance, McKenna's work has appeared in Forbes, CBS News and Accounting.com.
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