The Best HR Outsourcing Services of 2019

Human resources is the backbone of many small businesses. Recruiting and managing employees, administering health benefits, and ensuring a productive and effective office environment are critical for small business owners to ensure their business runs effectively and efficiently. While many enterprise-level companies have built-out HR departments, it's often difficult for small businesses to get the support they need. Budget and resource constraints can make developing an HR strategy and implementing it nearly impossible.

HR outsourcing is the answer. Human resource outsourcing (HRO) services take the burden of managing HR off a business's shoulders for a fraction of the cost of hiring a full-time HR director. They are also useful for companies that have an in-house HR department; an HRO can help alleviate the workload placed on a company's overburdened HR department by handling recruiting, hiring, training, payroll and benefits administration. 

Check out our recommendations for HR outsourcing firms below, including our best picks for different business use cases.

Over the years, the role of human resource professionals has evolved from record-keepers to an essential component of a business's executive team. Besides coordinating employee activities, HR departments provide conflict resolution and training, help with budget management, and they ensure companies comply with employment laws and regulations.

HR departments are responsible for maintaining the security and privacy of employee data, including compensation and personal matters. This department must also ensure your company's compliance with federal regulations surrounding healthcare, 401(k) plans and the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).

Another critical function of HR is to ensure your company complies with legal hiring practices, especially when hiring noncitizens. Immigration compliance at both the state and federal level is a complicated process that your HR staff may not have expertise in. If your company hires immigrants, it is important to find an HR outsourcing service that is well versed in the law and has previous experience with the process. This helps protect your company against unintended violations of immigration law, which can be extremely costly.

Many companies forgo hiring an HR staff during the early years of the business. However, this is risky. When you do not have a human resources manager, your company is vulnerable to a host of potential legal issues. For example, employees do not have a neutral party to discuss issues with, nor is there a specialist to ensure that your hiring paperwork is appropriately completed. You can't afford not to invest in human resources. An HRO can help you meet all your company's human resources needs, even if you're on a limited budget.

HR outsourcing services typically follow one of two pricing models:

• A fixed monthly per-employee fee, or;
• A percentage of each employee's monthly pretax salary

Regardless of which model an HRO uses, your total costs will vary depending on the number of employees you have, the state where your business operates and the specific services you need.

The pricing model of HROs differs from that of professional employer organizations (PEOs), which are companies that provide similar services but under a co-employment model. (There are more details on PEOs below.)

Pricing with both HROs and PEOs can be flexible, depending on which provider you're working with. You'll likely have to sign a contract, but some companies let you pay for services a la carte so you can enroll in exactly the services that you need. Others provide flexible bundles to help you get a comprehensive set of services.

A full-service HRO is a good option if you own a small company and cannot yet afford to hire HR personnel. It provides the resources that an in-house HR staff can offer without the expense that comes with hiring a team. A full-service HRO is also advantageous if you have workers in different parts of the U.S. or world. HROs are knowledgeable about global, as well as federal and state laws, and will work with your company to ensure it is in compliance.

When companies skimp on HR, they put the business and their employees at risk. A full-service HRO helps you appropriately manage day-to-day HR tasks like reporting misconduct and ensuring workplace safety compliance. These services also work closely with your payroll team to handle compensation. In addition to day-to-day tasks, you can enroll in services like recruiting and employee training.

Partial outsourcing is recommended for companies that have an in-house HR staff but need extra help. For example, perhaps you have an HR representative who handles hiring and ensures that your employment paperwork is correctly filed, but suppose you need help with employee development. Many HROs offer employee training programs. If you do not have the resources or desire to hire a full-time training specialist, you can outsource this service to an HR company.

The most common trainings that HROs provide include software and processes training, though other options are available. The best HR outsourcing service will work with you one on one to determine the training programs that are best suited for your company's employees.

Other common partial outsourcing services include payroll outsourcing, employee screenings and background checks, employee recruitment, and immigration compliance.

Many HROs give you the option of selecting a full-service package or the specific services your business currently needs. It should, however, have expertise in employment compliance to insulate your company from penalties or lawsuits.

Each of the HRO services we evaluated offer comprehensive packages to assist your company with its HR needs so you can focus on other tasks pertinent to your business.

During your research, you may have come across another term ‒ professional employer organizations. While many of the companies we reviewed offer both HR outsourcing and PEO services, they are not the same thing.

The main difference between an HRO and PEO service is the legal employment arrangement. When you outsource your HR functions, you are still the employer of record for your staff members, and you retain full control of your business operations and data. With a PEO, the company you hire acts as a co-employer and is responsible for all HR responsibilities, including hiring and firing, employee training, tax and compliance obligations, and more.

Which option is best for my business?

Whether you use an HRO or a PEO depends on your business's needs. If you need help with a few basic administrative tasks like payroll and benefits management, an HRO might be your best option. If, on the other hand, you'd rather have an expert shoulder the full legal and financial responsibilities of employing staff members, hire a PEO.

If you are interested in learning more about PEOs and the companies we recommend, visit our best picks page.

The HR outsourcing services industry will continue to grow rapidly in 2020. The industry is already growing by double digits year over year, taking advantage of a business environment where big corporations face challenges from smaller, more nimble companies. Technological developments and changes in the business landscape have enabled small, disruptive startups to take down giants and carve out significant market share of their own in virtually every industry. HR outsourcing is a key tool in keeping companies small and agile while still effectively managing their employees.  

The continued development of the so-called gig economy is also driving the industry's growth. As more companies turn to independent contractors for labor instead of salaried employees, HR services have become even more crucial. Operating in this environment creates new challenges for in-house HR departments, challenges that HR outsourcing services are often better suited to managing. 

Business.com strives to research and review companies fairly and objectively. For our review of HR outsourcing services, we began with 30 companies. After analyzing each company, we pared our list down to 19 services. From this list, we researched various aspects of the services each company offers, including benefits administration, employee recruiting, payroll management and employee training.

From these 19 companies, we reduced our list to eight companies. We then delved into further research of each company before arriving at our best picks.