Being a full-time business owner is already challenging enough, which is why many choose to outsource some of the services they need. Outsourcing has become a popular way of saving time and money while allowing the business owner to focus on running the business. Outsourcing your HR functions helps you ensure proper employee management since most things or everything to do with your employees will be handled by the human resource outsourcing firm. Since human resource management entails lots of functions, which of these functions can you outsource?

Understanding PEOs and HROs

Before outsourcing your HR functions, it is important to understand the difference between a personal employer organization (PEO) and a human resource outsourcing firm (HRO). The main difference between the two is how they are structured. 

A PEO will handle your employers for you in a co-employment model. These employees are the PEO’s responsibility as far as tasks and legal purposes are concerned. However, you still get control over how they are promoted or fired, what tasks they handle, and the like. A PEO will handle all your HR functions while bearing all the legal and financial responsibilities of your employment practices.

An HRO, on the other hand, does not use a co-working model. They handle most or all of your HR functions but do not bear the legal, tax, and financial burden of having these employees. HROs are more flexible than PEOs, allowing you to outsource as many or few services as you need.

Payroll Processing

Payment processing is one of the most commonly outsourced HR functions. Calculating everyone’s payrolls is not that difficult if you have less than 20 employees, but things quickly become complicated when you have more. Things get even murkier when you add overtime and part-time payments.

Outsourcing this function can help ensure everyone is paid what they are due without the business making any mistakes. There are companies that provide payroll processing services, whether you need only one function handled or lots of them. An example of the services typically provided can be found at

Benefits Administration

Some might see benefit administration as part of payroll management, but many HR outsourcing companies see them as a separate function. Benefits packages are incredibly important in attracting top talent and keeping employees happy. They also give your company a significant competitive edge when recruiting from the same pool as similar businesses.

Administering benefits can be challenging in businesses with lots of employees and that have different benefits for different employees. Many businesses outsource this function to spare themselves the work and headache of keeping up with everything, which can include benefit regulation compliance and research.

Law and Regulation Compliance

Business environments as well as the mandates, rules, regulations, and legislations that govern them change all the time. Many small business owners feel overwhelmed, especially in industries where they have to keep up with a lot of them.

Keeping up with these requirements takes a lot of time, stealing focus from important work. It also adds to the things a business owner has to worry about as it becomes their sole responsibility.

Outsourcing can help relieve this pressure, ensuring compliance while taking some responsibility from the business owner. 

Talent Acquisition

Growing businesses are always looking for employees to fill various roles. The problem is that the business owner might have to sift through hundreds if not thousands of applications to hire for several positions. 

HR outsourcing companies have experts who understand your industry and the hiring process. In addition to taking this responsibility from business owners, these firms also ensure the business owner ends up with the best candidates possible.

These firms can also help businesses find talent in a global pool, especially in cases where the business is interested in supporting remote or hybrid work. Opening up things like this also means the business can hire better people because they are choosing from a much wider pool.

Background and Reference Checks

Background and reference checks are good practices when hiring. They both help you understand who you are hiring. As with sifting through applications, both of these processes can take a lot of time and manpower. These are the reasons why many companies rely on HR outsourcing first to do both for them.


An HR department performs many tasks in a business. Despite how useful it is, it can be costly to hire HR professionals and thus is not a viable idea for growing businesses. HR outsourcing companies help fill the gap by handling different HR functions for businesses at a fraction of the cost.

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