The Best HR Outsourcing Companies of 2023

What is HR outsourcing?

HR outsourcing (HRO) is the process of hiring a third-party service to conduct human resources operations for your business, rather than employing an in-house HR team. HR outsourcing offers an exceptional level of expertise to manage your workforce and can cut costs by saving 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’ HR operations. Should you use an HRO service for your small business? Read more in our guide to HR outsourcing or check out our reviews below.

Best HR Outsourcing Services of 2023

• Bambee: Best for Startups
• TriNet: Best for Industry Expertise
• Paychex: Best for Payroll
• Insperity: Best for Midsize Businesses
• ADP: Best for Benefits Administration
• Zenefits: Best for Ease of Use
• BambooHR: Best for Talent Acquisition

• Your business can outsource any or all of its HR processes to a human resources outsourcing (HRO) service.
• An HRO can save your company money you would otherwise spend on salaries and wages for HR personnel while introducing a heightened level of HR expertise to your company and employees.
• HROs can help your business comply with several rules and regulations in various areas, including employment law, payroll, benefits management, recruiting, hiring, firing and more.
• This best picks page is for business owners and decision-makers who are considering whether they should partner with an HR outsourcing firm to conduct some or all of their HR processes.

Small businesses can partner with HR outsourcing companies to help alleviate the complexity and burden of managing various HR administrative processes. HROs have expertise in labor laws, employee benefits and compensation management, hiring and onboarding, employee tracking, and retirement planning. They can be a smart way to help manage your HR department.

Our best picks and buyer’s guide will help you determine what to look for in an HRO service and which one is right for you. If you’re considering outsourcing your HR functions, read on to learn more about the leading HRO services out there today and how they work.

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

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

Consider your business’ needs before purchasing 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 your monthly costs increasing. Costs are also influenced by the size of your business, whether or not you have multiple locations, and the complexity of your organization. Examples of add-ons include time-tracking, recruiting services and advanced reporting features. Pay close attention to add-ons when comparing plans, 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. These fees can range anywhere from $200 to $3,000. Some HROs don’t charge any setup or implementation fees, so consider these fees when shopping around and factor them into your cost comparisons between HRO providers.

Dedicated HR Support

Running a business isn’t easy, and you’ll inevitably encounter issues that require HR services. That’s what your HRO’s dedicated support team is there for. The exact support level and options vary. Some HROs provide a dedicated HR manager, others provide industry-specific support, and some provide 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 when it comes to your employee’s payments or payroll taxes. HROs typically provide a user-friendly payroll platform that can help you manage your salaries and wages. This platform can also 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 HROs also provide payroll specialists that can offer you guidance when it comes to managing your business’ payroll.

Compliance Assistance

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

Benefits Administration

Offering employee benefits is an important but sometimes complicated part of being an employer. There is a lot of variation on what an HRO will do for you when it comes to benefits, so pay special attention to the benefits tools while you’re shopping around. Most HROs will integrate with different benefits providers so that employees can complete their enrollment and check in on their benefits information in a centralized platform. If you already have a preferred vendor, inquire about available integrations when choosing an HRO. Some HROs can also help you choose benefits providers, handle ACA compliance, or otherwise support your benefits administration needs.

When you’re assessing, researching and comparing features and costs from one HRO to the next, there can be a lot to keep in mind. Not only are there dozens of HROs to choose from, but when you add in the different services and products each offers, there’s a lot to compare.

Below are three hypothetical yet representative examples of subscription plans you might find when investigating HRO providers. Give careful thought and analysis to the exact features you need — and which you can do without — when determining which service level is appropriate for your business.

Service Level No. 1: The Basics

Regardless of the size of your company, when you partner with a third-party HRO, these are some of the core services that HROs usually offer:

• Payroll processing
• Tax preparation (including Form 990 and Form 5500 related reporting)
• 401(k) retirement planning (if your company offers that benefit)
• An HRIS platform, with some degree of employee self-service functionality

Service Level No. 2: Expanded Service

Mid-range plans are likely to offer the services and features in the previous tier, plus the following:

• Automated time and attendance and paid time off (PTO) tracking
• Unemployment insurance case management
• COBRA, flexible spending accounts (FSA), health savings accounts (HSA) and eligibility tracking
• Employee recordkeeping, retention and reporting
• Employee benefits administration, including open enrollment and insurance renewals
• HR compliance management, including postings, handbook updates and communications
• Job description and employee performance evaluation templates, and related supervisory training
• Recruitment and interviewing support and automated applicant tracking systems
• New employee orientations and onboarding/termination management

Service Level No. 3: Comprehensive Package

Top-tier plans generally include all of the services and features in the previous tiers, plus the following:

• Insurance provider invoice reconciliation and payment processing
• Family Medical Leave Act (FMLA) and various state-related medical and family leave-related claims management
• Workers’ compensation claims management (which varies from state to state)
• Legal guidance, coaching, and, at times, oversight on employee corrective actions

Different providers offer unique service levels. The above is intended only as a rough depiction of how a typical HRO service package might look. For specific pricing plans from HRO providers, read our reviews to learn more about the service plans they provide.

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 HROs 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. Ask others within your industry. We highly recommend talking to other companies within your industry to see which HROs are held in high regard and which ones you should avoid.
2. Check its background. Check references, credit ratings and industry reputation (customer reviews are a good place to start). Any HRO you partner with must be licensed, insured and bonded.
3. Ask the HRO for a demonstration of its platform. Besides giving you a thorough demonstration of its platform, many HROs offer a free trial of their software.
4. Find customer references. If you have selected an HRO provider that you are excited about, do not proceed further until it 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:

• Within your industry
• Roughly the same size as your company in terms of employee headcount
• A customer of the HRO for at least two years

5. Confirm best practices. Ensure that the HRO provider has 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.
6. Confirm the total slate of services and products. Chances are, your HR needs will evolve. You’ll want an HRO partner that meets both your current and future strategic needs. Ask yourself: If your business doubles in size in the next two years, will the HRO you’re considering still be a good partner?

The advantages of a strong HRO partnership are many for small and midsize businesses. An HRO tracks, reviews and informs your business of changes to 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:

• Frees up resources. The first thing many businesses realize when they hire an HRO 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 time, 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 not only shifts these tasks to a third-party, it places them in the hands of experienced professionals who know how to get them done in an efficient manner.
• Expertise. Your HRO’s knowledge and HR practices are shaped by expertise and an ongoing study of the HR landscape. The best HROs are adaptable and are always on top of current and evolving HR trends and regulations.
• Diversity, equity, and inclusion (DE&I) training and development. Employee development and diversity training is an increasingly important focus area for businesses. A good HRO 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 or not your company employee handbook is up to date can be a hassle. If you outsource this time-consuming task to an HRO, your handbook will always be up to date with current federal and state laws and regulations.
• Recruitment and onboarding guidance. Not only are recruitment and onboarding labor intensive, but they are also easy to get wrong. Recruiting and hiring the wrong person is a costly mistake. Well-equipped HROs can help with these processes or, at the very least, provide templates, policy samples and guidance to get these all-important tasks right.

Are HROs and PEOs the same thing?

No. HROs allow companies to maintain control over their employees, systems and access the administrative benefits through HR services third-party outsourcing. PEOs either 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.

Can I ask my HRO provider to fire an employee?

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

Can an HRO take care of my benefits management?

In many cases, yes. You will need to ask prospective HROs specific questions relating to benefits management, such as overall service offerings and open enrollment.

Can my HRO provider handle workers’ compensation claim management?

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

Do HRO providers know all state employment laws within the U.S.? What about international laws?

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, ask specific questions about your needs.

Can I cancel my HRO provider relationship if I do not like their service?

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

The state of the workplace has significantly changed in recent years, and it will continue to evolve throughout 2023. We expect the HR outsourcing industry to meet employers’ and employees’ new needs and expectations. Keeping up to date with labor laws, regulations and workplace trends can be challenging for small business owners, so we believe there will be a greater reliance on experienced HR outsourcing services to remain competitive and compliant.

As many workers permanently settle into a remote or hybrid workplace, we anticipate HROs 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 switching gears when it comes to which benefits mean the most. Gone are the days of office lunches and ping pong tables – employees are prioritizing affordable health insurance, health and wellness benefits, and opportunities for career development and advancement. HROs must enhance their employee benefits and administration process to keep up with new demands and stay competitive.

The advancement of technology is influencing HROs as well. AI and automated processes are becoming the norm for some HR functions, and HROs are adapting. HROs have become a great source of relief to small businesses when it comes to maintaining legal compliance. HROs can help implement HR policies and monitor compliance through data analytics.