Here’s a brief guide on what exactly human resources outsourcing is, as well as the benefits and the pitfalls.

1. HR Outsourcing 101
Here’s a brief guide on what exactly human resources outsourcing
is, as well as the benefits and the pitfalls.

2. Table of Contents
.01 – What is HR Outsourcing?
.02 – HRO vs. PEO
.05 – Outsourcing Benefits
.07 – Outsourcing Drawbacks
.08 – Fast Stats: HR Outsourcing
HR Outsourcing 101

3. What is HR Outsourcing?
HR Outsourcing Is:
when a company designates certain human
resources tasks to an outside service provider.
A Human Resources Firm Can:
recruit and screen potential employees,
navigate government regulations and
employment laws and more, all under an
employer's direction.
Access to Expertise:
has ranked consistently high as the number
one motive for outsourcing human resources.
Page .01 HR Outsourcing 101
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4. HRO vs. PEO
Page .02 HR Outsourcing 101
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5. Page .03 HR Outsourcing 101
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HRO: Human Resources Outsourcers
HRO Firms Can:
can address all or only a few human resources
tasks. Companies can choose which
responsibilities to outsource and which to
manage in-house.
Most HRO Companies Offer:
services individually so that clients can pick
and choose which HR responsibilities they
want to outsource.
HROs can manage:
a business’s needs including payroll, benefits
administration, training, risk management and
recruitment.

6. PEOs Are:
agencies that provides a service under which an
employer can outsource all employee management
tasks.
• A hired PEO becomes a co-employer with a client
company. The PEO serves as the administrative
employer, while the client business acts as the on-site
employer.
• A PEO assumes all associated liabilities and legal
responsibilities for its clients.
• Since the PEO is the employer-of-record, it is
responsible for federal and state taxes, as well as
workers’ compensation.
PEOs are able to provide a
broad array of HR services at a
lower cost, saving their small
business clients at least 21%
on HR administration1.
Page .04 HR Outsourcing 101
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PEO: Professional Employer Organization
1. Professional Employer Organizations: Fueling Small Business Growth, NAPEO, Sept. 2013

7. Benefits and Drawbacks
Page .05 HR Outsourcing 101
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8. HR Outsourcing as a Tool
Small and medium-sized businesses often view HR outsourcing as a tool that
relieves them of HR responsibilities and enables them to focus on what they do
best.
Lowered Costs
Lower overhead and other labor costs by allowing your HR firm to handle the
paperwork and mandatory training.
Reduced Liability
Reduce company liability that comes with hiring (and firing).
Improved Office Performance
Improve office performance by setting more descriptive job qualifications and
expectations with insight from an HR team.
Increased Company Efficiency
Increase company efficiency by allowing employees to focus on the business
instead of payroll and paperwork.
Studies show that the average
small business owner spends
20-40% of his or her time on
human resources tasks.
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Benefits of Outsourcing HR

9. From unexpected costs to poor-quality hires,
there a few things to consider when determining if
HR outsourcing is a good fit for your business, such
as:
» Secondary costs
» Candidate quality
» Company culture
» Training time
Keep in mind that through trial and error and
comprehensive research into which HR firm has
worked with companies similar to yours and clear
communication, your business can avoid many of
these drawbacks.
Secondary Costs
Secondary costs, such as trainings or orientations,
are sometimes hidden.
Candidate Quality
Candidate quality may not be up to your company
standards, without clear and continuous
communication.
Company Culture
Company culture could be affected if the HR firm
doesn’t have a clear understanding of your office
dynamics.
Training Time
Training time can be more extensive through the
outsourced company than it would be in-house.
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Drawbacks of Outsourcing HR

10. The most common resources for outsourcing include reduced operating costs,
reduced legal compliance risks, and more streamlined HR functions. The biggest
drawback, according to an SHRM study2 is a lack of face-to-face contact.
75% of those who outsource HR say that HR is able
to focus more on core business functions and 66%
say outsourcing allows HR to spend more time on
strategy development and execution.
Page .08 HR Outsourcing 101
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Fast Stats: HR Outsourcing
1. “Human Resource Outsourcing Survey Report,” SHRM, July 2004