What is HR Outsourcing?

HR outsourcing is the process of trusting a third-party HR company with your entire HR function or a part of it. The third-party HR outsourcing services provider comes with the expertise, resources, and technology required for the job.  Why do companies outsource HR? There could be several reasons – you want to free your internal HR team of some responsibilities, you want to make them focus on other important aspects, or you want a team that specialises in several aspects of human resources to work in tandem with your in-house HR team for better results. This is why it is important to research well and take the time to hire the right HR outsourcing partner for your business.

Types of HR Outsourcing

Outsourcing HR is in no way an easy feat that many think it is. However, if you find the right outsourcing partner that works as an extension to your internal HR department and understands your unique HR management challenges, the process will be seamless and mutually beneficial to both parties.

So what are the types of HR outsourcing options available for you to choose from? Commonly used HR outsourcing models include human resource organisation (HRO) HRO, professional employer organisation (PEO), and administrative services organisation (ASOL). Let us now see how they are different:

  • Administrative Services Organization (ASO): An administrative services organisation or ASO helps a business in handling all its supervisory tasks. ASO outsourcing requires businesses to actively participate in the process of sharing the necessary information related to HR administration with the HR specialists they have hired. An ASO is somewhat similar to a PEO in terms of the services it offers. But unlike PEO HR outsourcing firms, ASOs don’t assume the role of employers of record.
  • Human Resources Organisation (HRO): Human resource organisations or HROs are HR outsourcing companies that offer services to help you manage your HR function so that you have more time for your business’s strategic initiatives. These HR outsourcing firms help you find a way out of having to manage HR operations yourself. Make sure that the HRO you choose to work with aligns itself with your human resources objectives.
  • Professional Employer Organization (PEO): Professional employer organisations or PEOs handle the administration of several human resource tasks or processes, including payroll processing and health insurance, amongst others. PEO outsourcing is the right choice for businesses that are open to working on a co-employment basis with an HR outsourcing company. In PEO outsourcing, the PEO assumes the status of the employer of record and takes on the responsibility of managing several HR processes, such as payroll processing, employee health insurance, tax compliance, and others.

Benefits of HR Outsourcing for Large Size Businesses

Benefits of outsourcing HR outweigh the associated costs. HR outsourcing provides businesses with an opportunity to focus more on their core business functions while keeping track of their HR function. This is one of the key benefits of outsourcing HR functions. It has been often seen that managing HR functions isn’t a task that you can juggle with other responsibilities while making sure that you maintain efficiency in handling all those tasks. That is why it is always better to hand over the HR function to an HR outsourcing company that knows the job well and doesn’t have distractions as you do. Listed below are a few advantages of HR outsourcing:

  • Flexibility: This is one of the biggest benefits of hiring an HR outsourcing firm to manage the HR function on your behalf. You can ask your outsourcing partner for particular HR outsourcing services you require at a particular time and then add or remove based on your requirements. the process is seamless and mutually beneficial to both parties.
  • Overall development: The performance of an employee is directly related to the growth and development of an organisation.These firms offer HR outsourcing services that include tracking employee performance and suggesting training for those who need to improve.
  • Cost-effective: If you hire an HR outsourcing company, you will be able to optimise the cost by outsourcing certain, administrative and time consuming functions to HR specialists rather than having your in-house team look into these matters. Therefore, tasks like payrolling, calculating benefits etc become more cost effective.
  • Efficient: Hiring HR outsourcing services is the best way to ensure greater efficiency in different human resources processes. By working with HR outsourcing firms, you will be able to manage payroll, administration, compliance, and other HR functions in a better way. Plus, you will have more time to focus on strategic, business associated HR tasks which simply cannot be outsourced.
  • Risk management: You need to keep yourself updated with the changes in technologies, methodologies, and laws in HR that are taking place a little too frequently these days. However, you don’t have the time to do so. That is where an HR outsourcing company comes into the picture. It helps you be compliant and adhere to necessary guidelines, standards, and laws.


Hiring an HR outsourcing provider is the best decision you will make when it comes to the management of your HR function. HR outsourcing can significantly help you improve your core business tasks and focus on employees better.