Skip to content

Outsourcing HR Functions: Benefits, Risks, and Options

For many business owners, outsourcing HR functions can seem like a wise investment that frees up time for their in-house HR team. With the growing trends that focus on employee benefits and boosting culture initiatives, these HR services can help large and small businesses alike keep their finger on the pulse of changing regulations and employee benefits trends. 

However, adding more communication channels to critical people management processes can pose a few issues, namely placing the control of your business in someone else's hands. What if we told you there was another way to create efficiency without reducing your hands-on ability? 

We want to provide a well-rounded picture of all that's involved when outsourcing HR functions while also opening your mind to exploring other possibilities. This article will discuss what HR outsourcing is, the benefits and risks, and a more modern solution to consider.

What Is HR outsourcing?

Outsourcing HR functions is when an organization hires a third-party HR professional to fulfill HR tasks on behalf of the company. 

Human resources outsourcing (HRO) is often a better fit for larger-sized businesses with a higher number of employees. In contrast, professional employer organizations (PEO) can be a cost-effective option for small companies with less than 200 full-time employees. PEOs will co-employ the new employees and consolidate costs like taxes and payroll processing into one fee, making it easier to manage and budget for smaller companies.

The services delegated to an external HR employee are often less focused on strategic performance management and more on specialized processes and compliance.

Here are a few examples of popularly outsourced HR services:

  • Staffing: includes many aspects of the hiring process like background checks, benefits enrollment, and light training (like walking a new hire through the employee handbook)
  • Payroll processing and filing payroll taxes
  • Employee management: efficiency and individual performance as it relates to larger organizational goals
  • Onboarding for benefits packages 

Should I Consider Outsourcing HR Functions?

Outsourcing HR functions: entrepreneur having a virtual meeting

The idea is that handing over these time-consuming processes provides your in-house HR manager more time to focus on employee relations and employee performance. There's a bit more involved than meets the eye, which is why we've outlined the potential benefits and risks next:

Benefits of Outsourcing HR Processes

  1. Reduced administrative tasks for internal HR staff: If your team is at capacity and feeling overworked, outsourcing can help support HR needs.
  2. Specialized HR experts at the ready: For busier periods, HR consulting can buffer the workload without adding headcount to your existing internal team.
  3. Streamlined compliance with labor laws and employment law: It can help for specialized HR consultants to review policies and ensure that paperwork is compliant as an effective risk management practice.

Risks of Outsourcing HR Functions

  1.  Outsourcing HR functions means less control: The human resources team is considered the heart of an organization. They handle deeply personal aspects of your employee's livelihood; handing off that responsibility can create vulnerability.
  2. You're also outsourcing company culture: When you outsource human resource management, you affect the company culture. Sometimes that's a good thing, but not always. Losing your team to poorly organized culture shifts is disappointing and expensive, especially when it's something you can opt to have more control over.
  3. It takes time to find the right service provider: The external employee will operate as an extension of your team, so finding someone who aligns with company values, mission, and culture is challenging in itself. Even when you've found the right person, the onboarding is often more time-consuming than planned.
  4. Longer communication lines slow things down: The external party actively partaking in essential aspects of your business is also likely to manage multiple other clients. Competing priorities can delay response times. This juggling can put a cog in your business' wheels during busy periods for the HRO.
  5. The outsourcing provider will still require HR support: The argument made for outsourcing HR functions is that it saves time. That said, without complete access to your human resources information system, it can require your HR team to jump in and provide support. Or worse, it can lead to information gaps during critical processes and cause delays.

Support the HR Team With Automation Tools

It may seem like a lot is riding on the decision to outsource HR functions, and truthfully, a lot is. It will take time for the HRO to get up-to-speed on your internal processes, and until then, they will continue to rely on your HR department.

Luckily, there is the opportunity for a mid-step that can provide relief to backlogged HR teams improve team-wide communication and internal security without adding more cooks to the kitchen, and that's with automation support.

Pulpstream vs. Human Resources Outsourcing

Pulpstream doesn't require much training or onboarding with its easy-to-use no-code interface and can support the existing team without outsourcing HR functions. Here’s how:

  • Logic-driven workflows notify team members at crucial stages of talent onboarding and offboarding — Pulpstream flags missing documents which means an end to frustrating delays.
  • Remote access to critical documents means the appropriate parties have access to what they need when they need it without clumsy, error-prone manual processes.
  • Accessible data that's protected and secure with cloud-based systems means process initiation and completion can happen even while in offline mode.
  • Boost your bottom line by replacing hefty HR consulting fees with consistent reporting that's more manageable. With Pulpstream, you can track critical trends in-app rather than rely on the data from outside the organization with HROs.

These are just a handful of ways Pulpstream can enhance HR processes from hiring to training and compliance.

More Companies Are Investing in Automation

Woman wearing a headset while working

According to Techjury, more than half of businesses (61%) migrated processes to the cloud in 2020, and it looks like 70% of companies plan for bigger budgets dedicated to these technologies. 

Why are more companies investing in cloud-based automation?

  • Enhanced employee-centric operations by cutting back on office administrative tasks
  • A modernized approach and streamlined workflows that benefit the organization from top to bottom
  • Empowered team members who can make decisions more effectively with comprehensive reporting
  • Move with the times by keeping logs of important employee feedback that can inform on and forecast better business practices

Consider reducing manual processes rather than outsourcing HR functions as the first step to increasing efficiency. Less time wasted filing, seeking crucial documents, or waiting for said documents to arrive through the communication chain empowers team members to work faster and better serve the team. 

Not only does automation improve day-to-day business effectiveness, but it ensures the flexibility and control of your business remains squarely in your hands and at your fingertips.

Pulpstream: A Smart Alternative to Outsourcing HR Functions

Outsourcing HR functions: Pulpstream website

Automation provides a better way to create efficiency without reducing your hands-on ability.

Empower your business and unlock your HR team's full potential with Pulpstream's intuitive support. It's a frictionless platform that takes the company into the future, where access to everything you need is in one place. This accessibility opens the gateway to more collaborative, comprehensive, and compliant HR processes.

It's not just a faster, more controlled way to manage sensitive data; the no-code workflow makes it easy too. Take the first step with a demo to see Pulpstream in action.