The Best HR Outsourcing Companies of 2023

What is HR outsourcing?

HR outsourcing, or HRO, involves hiring a third-party service to conduct human resources operations for your business rather than employing an in-house HR team. HR outsourcing firms offer an exceptional level of expertise to manage your workforce and can save you money on salaries and benefits. However, using a third-party team means relying on their customer service department to ensure you have a full understanding of your business’s HR operations. Should you use an HR outsourcing service for your small business? Read more in our guide to HR outsourcing, or check out our reviews below.

• An HR outsourcing service can handle some or all of your business’s HR functions, taking the burden off your team.
• An HR outsourcing provider can save you money that you would otherwise spend on salaries and wages for HR personnel while introducing a heightened level of HR expertise to your company and employees.
• An HR outsourcing service can help your business comply with several rules and regulations in various areas, including employment law, payroll, benefits management, recruiting, hiring and firing.
• This best picks page is for business owners and decision-makers who are considering partnering with an HR outsourcing company to conduct some or all of their HR processes.

Whether you’re looking to outsource all of your HR functions or your in-house team just needs a bit of support, HR outsourcing services may be just what you need. These companies offer expert HR staff who can take over this critical function for you, handling areas such as employee benefits, payroll, regulatory compliance and documentation. If you’re thinking about outsourcing some or all of your HR department, consider our picks for the best HR outsourcing companies below.

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.

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:

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.

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.

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.

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.

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.

The state of the workplace has changed significantly in recent years, and it will continue to evolve throughout 2023. It seems clear that HR outsourcing and PEO services will play crucial roles in how companies navigate that change.

An HR Dive study found that the use of HR outsourcing increased significantly across all major HR functions from 2021 to 2022. We expect this year-over-year growth to continue in 2023 and beyond. A report from Global Industry Analysts estimates that the HR outsourcing industry will grow at a compound annual growth rate of 7.2 percent from 2022 to 2030 and reach a valuation of $65.3 billion by 2030.

We expect G&A Partners to lead in that growth, as it continues to expand and acquire HR outsourcing firms. The company recently acquired Employer Advantage and expanded into several new states in early 2023. G&A is currently one of the most rapidly growing HRO and PEO providers in the U.S.

As many workers permanently settle into a remote or hybrid workplace, we anticipate HRO providers to enhance their features to allow employees to take charge of their HR needs via digital platforms. Expect to see an increase in cloud-based platforms, self-service functionalities and flexible benefits administration.

Speaking of employee benefits, employees are changing their minds about which benefits mean the most. Employees prioritize affordable health insurance, health and wellness benefits, and career development and advancement opportunities. As such, HRO companies must enhance their employee benefits and administration processes to keep up with new demands and stay competitive.