Outsourced HR—Is it Right For You?

There comes a point for every growing company when you must begin evaluating how to make the best use of your time and resources. You might first look to the revenue generating areas of your business to see how you can streamline processes or outsource certain duties, but don’t forget that as your company grows, your HR department will require quite a bit of attention as well.

There are so many functions of an HR department, such as legal compliance, compensation planning, records management, FMLA administration, training and employee relations, so it makes sense that entrepreneurs could spend up to 40 percent of their day on these tasks. When those tasks become too much or are keeping your company from reaching maximum potential, it may be time to outsource some or all of your HR services. Luckily, there are plenty of companies that are just dying to swoop in and save the day (for a modest fee, of course.) In fact, in 2011 there were more than 700 professional employer organizations (firms that provide a service under which an employer can outsource employee management tasks).

As with anything in life, there are pros and cons to outsourcing and pros and cons to keeping your HR services in house.

Keeping it in the family

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When it comes to keeping all your HR services internal, you have some obvious advantages. One of the main advantages is the fact that your HR personnel have an opportunity to create and maintain relationships with employees. This means they can assist employees, and tailor that assistance and attention based on what each employee needs. The other side of that, though, is that when you have too may employees for your HR personnel to give personalized attention, it begins to beg the question of what’s the point of keeping it internal?

Internal HR services also offer your company the opportunity to manage projects internally and have personnel that are in the trenches, so to speak, and know what your company needs. Being in your company and among your people, their ears are to the ground.

One of the main downsides of keeping all your services internal is that it’s hard to be an expert at everything. Your HR staff has a wide array of duties and as amazing as they are, it would be really difficult to be stellar at every single one of them. There are many ways to augment their expertise, though most will incur expenses. For instance, software to automate compensation planning can be used by even HR novices to replace a need for expertise in that area and keeping control of comp planning in-house. Or, you might consider paying for additional training and HR certifications for your staff.

The first step is admitting you need help

Companies often turn to professional employer organizations for at least some of their HR needs. Outsourcing your HR services has pros and cons. You do potentially lose the personal element that many HR departments are excellent at providing. Additionally, any time you bring in an outside vendor to provide services, there can be a significant lag time before things are running smoothly, meaning you understand their services and how they work and they understand your needs and how you work. Even after the groundwork is established, your professional employer organization liaison is not there day to day and may not be able to proactively determine what your next step should be or what could be improved upon.

From an employee perspective, they could feel that calling a toll-free number to discuss their FMLA leave rather than making a trip to the other side of the building to talk to the HR department is impersonal and cold. However, if processes are streamlined and its actually less of a pain than the traditional way, they may prefer outsourcing.

The pros of outsourcing HR service are numerous. In all the areas that your HR staff couldn’t have possibly been expertly skilled in, your vendor will be. You may go through a professional employer organization that is all-encompassing, or you may choose to go the a la carte route, picking and choosing separate vendors for separate services or even just for select services where your HR department is lacking the most.

Know what you’re getting

As with any other service you are going to outsource, you’ve got to know your vendor. Ask questions, get references and do your homework. While choosing the wrong vendor could just be a lesson learned, such as hiring an inadequate firm to oversee your learning and development, it could potentially mean legal trouble and hefty fines if for example, your records-management company isn’t in compliance.


Many people, including myself, tend to favor a structure that takes the best of both worlds and blends them. Where your HR department is overwhelmed or under skilled, a professional employment organization can fill in the holes. You keep the personal and easily accessible HR department that’s just down the hall, but you still have expert services where your company needs it most.


Does your company outsource some or all of their HR services? Sound off and let us know what your take on this subject is.

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