Human Resource Outsourcing (HRO)

Human resource outsourcing (HRO) is when businesses hire external companies to manage their HR functions. Most businesses rarely outsource everything, they usually keep HR staff on site to communicate with employees in core business areas.

Functions covered by HRO

HR outsourcing can perform the following functions on behalf of the business:

  • Hiring employees

  • employee training

  • legal expertise

  • administration of health benefits plans, retirement plans, and workers’ compensation insurance.

  • payroll administration

  • employment tax handling and payment

  • HR risk management

Advantages of an HRO

  • HR outsourcing reduces the fixed cost of managing employees

  • human resource outsourcing firms are more efficient than hiring new workers as they already have the experience and are required to perform the full HR function on board

  • talent and infrastructure are already in place

  • businesses save money and time by hiring HR firms to manage their personnel functions

Studies have shown that on average, companies that make use of HRO have lower employee turnover and considerably lower administrative and hiring costs.

Learn about PEO services and human resources software for small business with XcelHr.