If you own a business, you need to know about Human Resource Outsourcing (HRO). For a small to medium-sized company, having an in-house HR team can be a drain on your resources. So, it makes sense to hire outside companies to handle personnel functions such as health benefits, employee compensation, insurance, company retirement plans, and many more services. But, we’ll cover these later.
But, what is the cost of outsourcing HR services for your company?
Prices depend on how many employees you have working for you. However, typically costs range from $50/month to $1,500/month.
This amount might seem extensive and not much use when deciding whether outsourced HR services are a cost-effective solution for your company. But, there are aspects of HR that you’re legally required to introduce, implement and maintain, such as employment law compliance and other regulations that govern contracts, wages, working hours, discrimination, training, and many more.
According to Global Industry Analysts, Inc. USA, the US HRO services market in 2020 was valued at $9.7 Billion; Whereas globally, the value was $32.8 Billion in the same year. Furthermore, the global value is estimated to rise to $45.8 Billion by 2027.
How Much Does HR Outsourcing Cost?
Honestly, HR outsourcing prices depend on the number of employees your company has and how many add-on services you want the HRO company to look after. Moreover, you’ll always have HR companies that target a specific business type and adjust their rates accordingly.
However, a typical HRO company will charge anywhere between $50 and $1,500 per month per employee. Plus, different add-on services cost extra.
An employee handbook
Every employee needs to know the rules and regulations in force at their workplace. Some are state and federal regulations, while others are workplace policies and procedures applicable to the company. The best way to get this information across to your employees is through an employee handbook. By informing your employees what you expect of them on their first day in the workplace, you limit the potential for any legal liability in the future. And this might set you back about $500,000 in lawsuit awards and costs.
An outsourced HR consultant can create an employee handbook covering all the legal aspects of working in your company for between $1,500 to $3,000.
Not every industry needs a background check on its employees. But, even so, it makes a lot of sense to check on a prospective employee’s background, whether it’s necessary or not.
After all, if you own a retail store, you don’t want anyone with a history of shoplifting working for you, do you? Similarly, you hardly want a truck driver who has driving offenses.
But, background checks don’t need to be as severe as these. Typically, a standard screen for new employees involves checking on name, address, and social security number. Furthermore, they will also check on the national database and look for federal crimes. Usually, these checks are all you need to protect yourself, your business, and your other employees; A background check, as we’ve just described, costs around $50 per employee.
It’s essential to pay your employees at the correct rate, or you’ll find them leaving for better-paid jobs. Therefore, a compensation strategy comes in useful. You could develop a market-based compensation structure based on salary figures obtained free from the Bureau of Labor Statistics. Alternatively, you can purchase a salary survey from an HRO that looks at a benchmark salary and shouldn’t cost more than about $400. Or, you can purchase a more in-depth compensation plan that looks at all the positions within your company, their salary ranges, when the salaries are due to increase, and the number of benefits you should provide. An in-depth survey such as this usually ranges from $100 to $150 per hour.
Recruiting new employees takes a lot of time. If you haven’t already got dedicated HR staff to handle this, you are probably already aware of how much time this takes out of your day when you should be running the company.
HR outsourcing companies can organize:
- Job descriptions.
- Posting adverts.
- Screening candidates.
- First-round interviews.
- And more.
Many HRO companies charge a flat fee based on the salary of the prospective employee. Each company will set its fee based on this; the average fee is about 20% of the vacant position’s salary but could be as much as 40%.
Let’s assume that you’re looking for an employee who will earn $60,000 per annum. In this case, recruitment fees set at 20% would cost $12,000.
All company owners and managers should know that non-compliance with state and federal regulations will attract very steep fines and penalties. However, many people consider that hiring an HR outsourcing company is worth every penny for this service alone. An outsourced HR specialist will be up to date on all the new laws and regulations applicable to your industry. Furthermore, they will review your company policies and procedures to see if you comply with the regulations governing wages, working hours, annual leave, discrimination, and more.
For a compliance assessment, you can expect to pay from £1,000 to $2,000. This might sound like a lot of money, but it is less expensive than defending a lawsuit.
Sexual harassment training
Federal and state anti-harassment laws require more in-depth training than ever before. Generally, most companies don’t have the in-house expertise to organize and run training such as this; however, it’s simple to ask a specialist HR company to organize this training for you. You can buy an online training class or a live class to be held on-site or online.
Typically, online classes can cost less than $50 per employee, while live classes can range from $1,500 to $5,000 for all employees. If this is initially too expensive for you, why not join together with another small startup and split the costs of a live class?
HR Outsourcing Cost Factors
We have mentioned time and time again that the cost of help from an HRO provider depends on the number of employees, the type of service you want, and the price plan you choose:
Most companies offer one of these ways to charge you for their services.
- A flat fee for a service.
- A fixed monthly rate per employee.
- An hourly rate.
- Or a fixed percentage of each employee’s pre-tax salary.
In addition, you might also pay on a set period.
- Payment per pay period.
- Monthly payments.
- Annual payments.
Furthermore, you might also be charged a set-up fee. Always ensure you know how you will be charged and how much the company expects you to pay.
However the company charges you, the total cost will depend on several factors:
- What services do you require, and whether they are bundled or single?
- What type of service do you require, and its complexity? Some tasks such as preparing job descriptions need less skill to complete than complex strategic guidance such as those needed for harassment allegations or employee termination.
- How many employees do you have? Generally, fewer employees need less work.
Typically, you can expect an HRO company to provide the following standard services:
- Recruitment management, ranging from job descriptions, job postings, to interviews and induction of new employees.
- Carry out background checks on new employees.
- Prepare an employee handbook based on your company’s policies and procedures.
- Provide your employees with anti-harassment training.
- Develop compensation strategies.
- Assess your company for compliance with state and federal laws and regulations.
You can find out more about these services elsewhere in this article.
Different services depending on company size
Some companies already have permanent in-house HR employees who handle the day-to-day workload. In this case, only hire an HRO company when you need specialist knowledge or if you need cover for vacations or long-term illness.
Alternatively, if you need long-term assistance, we can better understand how much HR outsourcing companies cost by looking at a few different-sized businesses and what services they might need.
- A typical non-profit wanted essential HR services such as HR management, payroll services, and regulatory compliance. If that’s you, you could pay around $3,500.
- A Colorado-based IT company wanted payroll and benefits administration. They paid about $100 per month per employee.
- A New York office-based company needed assistance with payroll, risk management, and HR technology. They paid about $200 per month.
Medium and large businesses
- For general HR management, regulatory compliance, and HR technology, a Minnesota manufacturing company paid about $600 per year per employee.
- A St Louis health care company asked for complete HR outsourcing and paid about $80,000.
Types of HR Outsourcing
Generally, we can place HR outsourcing companies into three categories.
- Professional Employer Organization (PEO). This type takes over sole responsibility for your company’s HR needs. They become legally responsible for employee’s services, become business partners, and co-employer with the existing company and its owners. Using a PEO gives you the peace of mind that all HR services are looked after. However, you will have to take on a partner and share ownership.
- General outsourcing firms look after a wide range of HR services. Typically, they handle payroll, benefits, and risk management. Probably, this type is the most useful for day to day running of HR within your company. However, you or your HR manager are ultimately responsible for their actions and must understand what they do.
- Specialist outsourcing firms take on one or two specific areas, such as recruitment or payroll. This type is ideal if you have in-house HR employees who are good at day-to-day tasks but need someone to take on specialist roles.
Generally, a PEO is probably the best type of company to use if you don’t want to deal with HR personally. They will handle all types and make sure the work gets done to the company’s advantage. The other two are useful if you still want control over what’s happening in your HR department.
Top 12 Best HR Outsourcing Companies
We’ve compiled a profile comparison of HR outsourcing providers trading in North America. Although many companies publish their HR outsourcing prices, some companies don’t. Even if a company prefers to keep its pricing schedule confidential, we have tried to find as much information as possible.
Please note: The companies are ranked in no particular order. Prices we’re correct as of writing (July 2021). Providers may change prices, our guide should be used as a starting point for research on your own part.
1. ADP Comprehensive Services
ADP HR Outsourcing services include:
- This firm is one of the largest HR outsourcing companies trading in the USA.
- It’s an ideal choice for companies with more than 500 employees.
- The company offers a wide range of HRO services as well as other management features.
- The company specializes in the entire employee lifecycle, from first-round interviews to exit interviews.
- They offer excellent customer service.
ADP charges a monthly base rate of $85. But this will increase depending on the HR and management features you choose. However, you must have a minimum of 25 employees to use this company.
AonHewitt offers all the usual HR services except for those related to recruitment. However, they have an excellent reputation for outstanding performance management services and provide educational resources. The company seems to associate itself with large corporate customers, to the exclusion of other company types.
The company doesn’t publish its rates, preferring to deal with each company on a one-to-one basis.
BambooHR currently has the majority of its customer base in the small to midsize business range. The company offers basic service plans with various add-ons such as payroll, time tracking, and employee performance management. They won’t lock you into long-term contracts, preferring the flexibility of month-to-month plans. As an added sweetener, they also offer a seven-day free trial.
The company doesn’t publish its rates, but they charge depending on the plan you choose and how many employees you have.
4. Checkpoint HR
Checkpoint is probably one of the most popular HR management outsourcing companies used by medium-sized businesses. The company has an extensive list of HR resources available to its customers, including:
- Full lifecycle recruitment.
- Benefits management and integration.
- Payroll management.
The company doesn’t publish its rates for outsourced HR. However, they are estimated at between $35 and $80 per person per month.
So what makes this company special? Well, they offer all the traditional HR services. Plus, you can choose individual services to add to the basic deal. This arrangement is much better than subscribing to a preset bundle of features, many of which you might not need.
This company is an excellent choice for businesses that need attention from individual human resource specialists and one-to-one employee contact.
Unfortunately, except for the basic plan of $50/month, this company doesn’t publish its prices. However, it’s simple to ask for a quotation, but you’ll probably need help deciding which features you need; the easiest way is to use the form on this page.
6. G&A Partners
G&A Partners offer the traditional HR services as well as the following specialist services:
- Employee recruitment.
- Payroll management.
- Employee benefits.
- Workplace safety management.
- Risk assessments.
- Compliance management.
- Comprehensive training programs.
Prices depend on the services you choose and the number of employees you have. Furthermore, you can choose between two pricing models:
- Percentage of employees pre-tax monthly salaries.
- Fixed monthly fee per employee.
Typically, fees can range from $50 to $1,500 per employee per month.
Insperity offers the same plans as all the others with the addition of custom recruitment services, especially for small businesses. And, they don’t insist on you choosing bundles of features you’re never going to use. They can handle all your recruitment needs, including background checks and drug testing on every recruit.
They also offer:
- Payroll services.
- Recruitment services.
- Regulation compliance.
- Risk management.
- Benefits administration.
Unfortunately, Insperity doesn’t publish its prices, so you have to contact them for individual costs. However, we believe that pricing starts at $230 per person for small/middle-sized companies.
8. Oasis Outsourcing
Not all human resource outsourcing companies work well with large businesses. Oasis Outsourcing doesn’t make you sign a long-term contract and offer almost every HR outsourcing service you can think of. Therefore, they’re ideal for small companies, no matter how tiny.
In addition to supplying user-friendly methods of managing your account, they also offer:
- Employee management issues.
- Performance reviews.
Plans range from $40 to $500/month, but you must contact them to find out the prices of individual HR features.
If you own a small business, you might want to try out Paychex as your HR outsource and staffing contractor.
Why? Because you can use the company without a long term contract. But, that’s not all. The company also provides:
- Payroll Services.
- Benefit services.
- Training and education.
- Tax advice.
- Recruitment services.
- On-site assistance by placing HR professionals within your office.
Although you don’t need to sign a long-term contract, they charge $200 as a set-up fee, plus the plans start at $60.
The payroll services start at $60 for each pay period and are among the cheapest HRO companies you can choose from.
10. TriNet HR Services
TriNet is one of the best HR outsourcing service companies around. The company offers the traditional HR services, but they go one step more and offer HR services specific to your particular industry. So, whether your industry is one of the following:
- Financial services.
Or any other sector, you can be confident that you’ll have relevant HR.
Typical prices range from $80 to $600 per person per month, so you can see that their services are very affordable.
XcelHR offers its HR outsourcing services to businesses of all sizes. And it has a mobile app for its customers that is compatible with Android and IOS devices.
The services on offer include:
- Payroll management.
- Benefits integration.
- Risk management.
- General administration.
The company’s rate depends on the package you choose but varies between $50 and $100 per month per employee.
Zenefits is an HRO company that has features ideal for startups. It has many plan options to suit just about any customer. They include core HR services, in addition to:
- All aspects of recruitment and onboarding.
- Document management.
- Time tracking.
- Employee scheduling.
- Performance management.
Probably the best feature for startups is that your plan can start small but then incorporate new add-on services as the company grows.
Pricing starts at $8 to $20 per employee per month plus additional fees depending on the add-on features.
How Does HR Outsourcing Work?
HR departments have developed and evolved to be an essential part of a modern company’s business strategy.
By outsourcing your company’s HR requirements, you can safely leave all the legal compliance in the hands of specialists who will make sure to do the work professionally and according to the law. Moreover, it will also cost you between 25% and 30% less than using permanent in-house HR staff.
Your company must comply with many state and federal regulations, such as healthcare, worker’s compensation, payroll, and taxation.
An HRO handles all recruitment and training and will streamline how your company deals with its employees’ safety, security, and privacy. They will distribute the necessary documents needed when new employees are taken on and obtain the appropriate signatures. Finally, they will file everything according to your company’s filing protocols. Moreover, many laws cover foreign workers; therefore, an HRO will ensure immigration compliance at the state and federal levels.
How Does HRO Reduce Costs?
Outsourcing HR functions within your company saves you money while at the same time maintaining employment law compliance. Using an outsourced HR company, you only need to pay the salary for an HR manager and call on the HRO when needed, rather than have a full-time staff.
Depending on the HR duties, an HRO can either charge you singly or as a bundle. And, bundles usually save you even more money. Furthermore, HRO companies are specialists and educate their employees in the latest legislation, thereby saving you the trouble of doing it for your staff and ensuring that your company is fully compliant.
Human Resources Outsourcing Benefits
You can guarantee that outsourcing your HR department will save your company money, but are there any other advantages?
Frees up work time
An outsourced HR specialist is a professional and trained to the latest standards. Therefore, they can give insight, find solutions to problems as they occur, and solve the problems in the least possible time. And more importantly, your employees can focus on the company’s goals.
Update your policies
An HRO will review your company’s HR policies and procedures and give guidance on which need to be updated to comply with the latest local, state, and federal laws.
Every company must train its employees to high standards, and this doesn’t just mean job training. A new employee must fit into the existing hierarchy and know what rules and procedures exist to protect their rights and the company’s. This is where the employee handbook comes into play. An outsourced HR specialist knows what must be in a handbook and how to compile it, so it’s clear and easily understood. They will also write the handbook with your industry in mind and provide regular updates as laws change.
Every employee needs regular training. Not only those new to the company but also existing employees who want to advance professionally and seek promotion. HRO companies can organize training for job advancement and supervisory roles. And for interpersonal training such as anti-harassment and discrimination.
Many HR tasks are repetitious and time-consuming. Tasks such as unemployment claims, medical insurance, timekeeping, and other basic tasks can be stressful if you don’t know your way around the law and the correct forms to complete. An HRO has employees to whom this is second nature and can speedily complete tasks such as these, leaving you to run your company.
Which HR functions do companies typically outsource?
Companies outsource many different HR functions. However, the most common include:
- Recruitment. An HRO can handle job descriptions, job advertising, interviews, background checks, and initial company induction.
- Benefits. Many companies outsource pensions, health care, and retirement plans to HRO companies.
- Payroll. This involves time tracking, personal and sick leave, and organizing compensation by passing the data to the finance department for payment.
How does HR outsourcing reduce costs?
By moving some of the administrative duties necessary to make your company run smoothly to an HRO, you give complex or mundane tasks to HR specialists. At the same time, your employees concentrate on making money for your company.
Is payroll part of HR?
Many companies outsource part of the payroll processing to HR. For each person to receive correct compensation, the finance department must know the hours worked and how much personal leave and sick days have been taken. HR also compiles monthly or quarterly reviews of each employee’s hours for performance assessment.
What are the HR issues in outsourcing?
Although outsourcing HR can benefit your company, your employees might feel disconnected from the service, especially if they need to speak to HR about a personal matter. Furthermore, outsourcing might also be a problem with employee data security. The HRO software might be vulnerable and prone to cyber-attacks.
To overcome these problems, run an audit on the HR company’s policies and procedures and be selective on the HR services you outsource.
Get Quotes From Leading Providers
Outsourcing your HR function will save you money if you choose which functions to outsource and choose the company wisely.
HR outsourcing costs can be a nightmare to understand, especially if plans include services you don’t need. Therefore, it would be best if you seek professional advice.
Complete the forms at the top of this page, and you’ll get 3 to 4 quotes from efficient and trustworthy HR outsourcing companies to help you along the way.