HR functions can easily consume a day per week according to a whitepaper published by Oasis, a Paychex company. I’m sure that is part of the reason why you’re considering outsourcing HR. The good news is there are plenty of companies to help you with HR outsourcing.
We looked into the different HR services available to help you narrow down the choices for your HR outsourcing. We took into consideration the HR service providers’ offerings, reviews, and pricing to establish which ones are the best.
We’ll share the HR services that are offered, the pros and cons of HR outsourcing, our process for reviewing the HR outsourcing company options, and which ones we think you’ll like most.
Which HR Tasks Can Be Outsourced?
Almost any HR task can be outsourced. That doesn’t mean you should but that if you want to there are plenty of options available.
The tasks can include payroll, accounting, staffing, legal compliance, and more. The following is a more extensive list of the tasks small businesses may want when considering HR outsourcing:
- HR Consulting
- Benefits Administration
- Time Tracking
- Insurance Services
- Performance Management
- Payroll Administration
- Client Management
- Policy Compliance Management
- Unemployment Claims
- Policy Development
- Staff Training and Coaching
- Labor Law Compliance
- Employee Termination
- Audit and Wage-Claim Assistance
- Talent Management
The Society for Human Resource Management groups providers of HR services in five categories:
- SaaS Providers
- Business Process Outsourcing
- Single Source Outsourcing
- Shared Services
- Professional Employer Organizations
Let’s look at each of them to help you decide which type of company you should be looking for while outsourcing human resources.
Software-as-a-Service providers simplify the administration of human resources through automation. Some examples of this type of provider are:
- BambooHR – Primarily concerned with hiring, compensation, and analyzing performance. Includes payroll as an additional service.
- Deputy – Scheduling, time tracking, and labor law compliance. Has a free edition.
- Gusto – Gusto was PC Mag’s 2021 Best HR software payroll selection, but they have software to help with other processes as well.
These are great if you just want to simplify your processes and improve your documentation. You’ll still have to be involved, but it will be easier with the right software.
Business Process Outsourcing
This is outsourcing a single task like payroll to a company like Paychex. A scenario like this is perfect if all you need is help with paying people, but it might not be as good if you need benefits managed, help to defend unemployment claims, and other tasks.
Single Source Outsourcing
If you want all your HR tasks to be handled by one of the HR outsourcing companies, this is the type of outsourcing you’ll want. They handle everything, but the employees are still yours.
Single source outsourcing is a great strategy for a company that is big enough to have multiple employees, but too small to have a dedicated HR person.
You probably won’t need a shared services provider unless you own multiple companies with lots of employees or want to provide it as part of the package when selling franchises.
Conglomerates, like Berkshire Hathaway, might use this strategy to handle their payroll requirements even though the employees being paid would be from multiple different companies.
They can save on admin costs by sharing the costs across the organizations, but the shared services company is part of the parent organization.
Professional Employer Organizations
When I first started writing this post, I thought a professional employer organization was a temp agency or staffing agency. In most cases, this is not the case.
A PEO is a full-service HR firm. They provide all the HR administration for payroll, time tracking, benefits, policies, insurance, and more.
This is the most hands-off approach a business owner can take to HR services. You’ll only need to handle HR tasks when there are changes or if a new employee is having challenges with onboarding.
What are the benefits of HR Outsourcing For Small Businesses?
Outsourcing human resources management can have several benefits for small businesses including:
- Better compliance with federal, state, and local regulations.
- Increased growth of the business
- Potentially reduced cost of administrative services
- Ability to offer better benefits.
Keep reading to learn how HR outsourcing helps you comply with regulations.
Outsourced HR helps small businesses comply with regulations
According to PWC Global, over-regulation was the primary threat cited by CEOs before the pandemic, but in their most recent survey, they found that cybersecurity risks and the pandemic are higher risks, despite over-regulation risks rising to 42%.
Given most small business owners don’t have the time or funds to keep up-to-date with the latest regulations, it is best to outsource HR so that we know our human resources are being managed by skilled HR professionals.
Increased growth of the business
As I told you earlier the average small business owner spends 8 to 10 hours a week on HR tasks like payroll.
That’s up to 17% of their workweek that they aren’t focused on growing their business. If you hire an HR services provider to handle your administrative tasks, you can focus on booking more jobs.
Outsourced HR reduces the cost of administrative services
Somebody has to focus on the administrative tasks that fall under HR. Your options are:
- Hire internal HR staff
- Outsourced human resources
According to the Bureau of Labor Statistics, an HR manager makes around $70k/year on the low end, and the median pay is over $120k.
Meanwhile, you can have all your human resources functions handled by HR specialists at full-service HR companies for between $35-$220/employee/mo.
At the high end, that means you’d need 27 employees before you start paying as much for an HR company as you would have an internal HR specialist making $70k/year. You’d need over 500 employees to justify an HR manager, multiple specialists, and the HR infrastructure.
By adopting HR outsourcing, reduce costs and save the money you would have spent on an HR employee., or invest it in the growth of your business or you can use it to offer better payroll benefits.
Let’s consider benefits packages.
Ability to offer better benefits
You probably know plenty of people who were “living the high life on unemployment benefits” during the pandemic. Meanwhile, some companies were struggling to find employees. That suggests they lack talent management skills.
Talent management is focused on finding and keeping skilled, healthy, and happy employees. There is a lot that goes into talent management, but benefits are a huge part of it.
According to the IBM Institute of Business Value, the top 9 reasons employees look for other work involve payroll benefits, work-life balance, or pay.
This isn’t the place for me to go on a lecture about our civic duty as business owners, but if you aren’t finding quality employees, use the savings from human resources outsourcing to invest in employee benefits, health insurance, and employee assistance programs.
They’ll thank you, they’ll serve the customers better, company culture will improve, and along with it your revenue. Don’t believe me? Check out these case studies involving HR. One included letting employees sell vacation days, which lowered the companies expenses.
Now that you know how outsourcing HR solutions can benefit the company, let’s look at some of the reasons why you might not want to outsource HR tasks.
The cons of HR outsourcing
Hiring an HR outsourcing service might save you money, increase revenue and profits, and even give you a chance to increase employee benefits, but outsourcing HR services also come with some risks that are not there with an in-house HR team.
- HR services do things their way
- You might pay for HR tasks you don’t need.
- Outsourcing staff gives you less control of the hiring process
- HR companies have consistently poor communication reviews
HR services do things their way
As business owners, we want things done our way. With an in-house HR team, HR functions are going to be managed the way you want. With an HR outsourcing service, the HR professionals are going to perform HR functions based on the rules of the service provider.
You might pay for HR tasks you don’t need.
Most small business owners aren’t well-versed in subjects like risk management, benefits administration, HR software, performance management, and other areas that a dedicated HR professional knows well.
Even after reading numerous blog posts, you’ll only be partially prepared for an intelligent discussion.
An HR outsourcing provider may only offer full-service human resources services that come with extra HR functions you don’t need, or you might subscribe to HR software thinking it’s what you want and it isn’t.
Either way, the HR solutions aren’t exactly what you want and you are probably paying extra for them.
Questions to ask when talking to HR service companies
When hiring an HR outsourcing company, make sure to talk to multiple human resource professionals and ask them questions like:
- Does your payroll service include time tracking apps to help collect employees’ hours and reimbursable expenses?
- Does your HR technology easily integrate with my current HR systems?
- Is workers’ compensation included in your full-service HR package?
- What will I need to do to make sure your HR systems and HR department can handle my payroll in the future without me being actively involved?
- If I have HR-related compliance requests, what process do we have to go through?
Outsourcing HR staff gives you less control of the hiring process
Before you outsource human resource management to a staffing company, you need to make sure that you have well-defined processes in place for what is considered an acceptable hire.
Otherwise, they may send you someone who triggers a workers’ compensation claim on the first day.
In companies that have safety requirements or handle sensitive data, this can be a serious concern.
HR companies have consistently poor communication reviews
When dealing with aspects such as benefits administration, risk management, payroll processing, and health insurance, you would not expect communication to be the most common complaint about outsourced HR, but almost every HR outsourcing provider has between 1-10% of their reviews citing bad communication.
As you consider which Human Resources Professionals to hire for your HR outsourcing firm, it probably makes sense to ask about their communications and HR support standards, so that you can find one that provides the level of support you desire for your outsourced HR.
Reviewing HR Outsourcing Services
When you outsource HR you’ll have to decide whether you want HR outsourcing services that handle everything such as a PEO, a SaaS company for outsourcing HR documentation, or a company that offers a variety of HR outsourcing services so that you can build as you grow.
Our review used several different methods to establish which HR outsourcing service is the best HR outsourcing company. The process we used was as follows:
- Gathered a list of the 16 companies that have been reviewed by top-ranking blogs.
- Reviewed each company’s website and compared it to the 15 services typically offered by HR outsourcing companies (If they offer the service, they get a 100. If unsure, or no, they get a 0).
- Compared the number of plans they offered with a maximum of 10, then multiplied by 10 get scores ranging from 10-100.
- As long as the website did not have a major issue, they got an extra 100 points for their website. CPE HR (given a zero for broken links) and G&A Partners (80 because there wasn’t additional information where I wanted it) were the only ones penalized.
- Then I compared reviews on Capterra and Trust Pilot and took whichever had more reviews. I used the calculation, (# of reviews* stars given)/100=Score from 0-100. This step is for purpose of giving extra weight to ones with more reviews.
- Multiplied average stars by 20 to get a score from zero to 100. This step was to reward the strength of reviews.
- Added all scores up and divided by 19 to create a score that will range between 0 and 100.
The HR companies with the highest scores were the ones that are ranked as the best HR outsourcing companies. Let’s get to the content you’ve been waiting for.
The Best Small Business HR Outsourcing Companies & Services
If you just want the summary, take a look at the table below. The best HR outsourcing organization is ADP, the giant in the industry. Rounding out the top 5 best HR outsourcing firms were:
Let’s take a look at each to see why.
ADP is the top-ranked company
ADP is the most well-known of the human resources outsourcing providers. To achieve that status they have to be skilled at what they do and make great business decisions too. Our score reflects that with a 98.4, ADP is the best HR outsourcing firm.
HR tasks ADP offers:
ADP manages every task we listed as important to HR. If you want to eliminate administrative tasks and focus on your core business, most HR outsourcing services can’t compare.
What makes ADP the best HR outsourcing organization:
ADP has been the leader in human resources. Outsource with ADP if you want a trusted leader in the field. It’s the largest company. It clearly states how it manages each HR function, has the most reviews on Capterra, and has the budget to build phenomenal HR tech.
If HR outsourcing means hiring one company to do it all this is the company for you.
What is ADP the best at?
According to users, the payroll and benefits administration modules are the most useful, but some people found the user interface where employees access the system to request PTO difficult to use. Fortunately, users found ADP’s dedicated support staff helpful in solving most problems.
If you use ADP and find the HR technology challenging to use, create walkthroughs for your employees because HR outsourcing important aspects like PTO needs to be easy to use. If too many employees have trouble with something like PTO, it could cause retention issues.
ADP Features, Pricing, and Reviews:
ADP has a ton of features that can be beneficial for any size of business. They also have the most tiers of offerings making it easy for their HR support to grow with the needs of your business.
They have 5,285 reviews on Capterra with a 4.4-star rating. Almost everyone who reviewed ADP uses the outsourcing payroll service and rates it one of the best HR outsourcing services.
One user even mentioned they switched from Paychex to ADP because Paychex had some issues with tax documents.
Paychex comes in at number 2
Like ADP, Paychex offers almost anything you want from a human resource outsourcing service. They are best known for managing paychecks, but they offer several different plans and a PEO.
At the time of writing (Mid-November 2021), Paychex also has a special going for small businesses with less than ten employees.
Their score was 92.8.
HR tasks Paychex offers:
Paychex manages every task we listed as important to HR. If you want to eliminate administrative tasks and focus on your core business, you should compare the quotes from Paychex and ADP.
As a business owner, you hope HR outsourcing reduces costs, so shop around for the best balance of service, features, and price.
What makes Paychex one of the best HR outsourcing organizations
The variety of Paychex offerings combined with frequent mentions of cost savings over other companies makes Paychex one of the best HR outsourcing services. As a PEO, they offer 3 tiers of payroll and their professional employer organization package.
What is Paychex the best at?
Payroll is what Paychex is the best at, but be careful when selecting the plan. If you have subcontractors, make sure you mention it because the payroll requirements are different.
The payroll is supposedly really easy to use as long as you don’t have custom use cases that the company doesn’t support.
Paychex Features, Pricing, and Reviews:
Paychex offers most of the features that any size of business would need. They have three tiers of offerings for their payroll, making it easier to find a level that works for your small business.
If you are utilizing their professional employer organization, you can expect some tech issues because they are in the middle of HR software updates to transition from legacy systems to cloud systems.
Small businesses may find the time during transition frustrating, but the benefits of a cloud service provider far outweigh keeping everything on your own servers.
Paychex has a 4.1 rating over 1,081 reviews. Almost everyone who reviewed Paychex uses the outsourcing payroll service and rates it one of the best HR outsourcing services, but they don’t love their benefits administration as much.
The following review adequately captures the pros and cons of Paychex:
The third best HR outsourcing service is Gusto
Gusto is a newer entrant to the HR services provider list. They were founded in 2012 as Zen Payroll but changed their name to Gusto when it added benefits in 2015.
Gusto is a prolific software development team that collaborates with accountants and HR professionals to create software that serves their needs better. Last year they added 20 new features and have released even more this year.
Their score was 92.32.
HR tasks Gusto offers:
The only HR service Gusto doesn’t currently offer is business insurance. That is the primary reason that Gusto isn’t the number one ranked company for outsourcing HR. Other than that, they’ve got you covered. I would expect they’ll eventually add that service as well.
What makes Gusto one of the best HR outsourcing organizations:
Honestly, I haven’t found anything I don’t like. Their video walkthroughs are easy to follow. Their system is intuitive. Gusto builds software that works.
That being said, I am a Gusto Partner. They are offering a $100 Visa gift card to any new clients who sign up for payroll services with my referral link, which can cover the first month of the Core package with up to 10 employees.
What is Gusto the best at?
The aspect I like best about Gusto is the payroll at $6/mo per independent contractor. Almost everyone I work with, I pay as an independent contractor because they are temporary services so this feature is great for me.
Gusto Features, Pricing, and Reviews:
As I mentioned before the primary feature that I’d like to see added is more insurance options (general liability, professional liability, and cybersecurity insurance specifically). Other than that they offer everything you need for HR and continue to build additional features.
Pricing falls into 4 categories with a base $/mo and a $/employee/mo pricing strategy.
Complete: $39/mo+$12/employee/mo. Adds time-tracking and advanced employee management functions
Concierge: $149/mo+$12/employee/mo. Adds dedicated professional HR support team with unlimited calls and HR policy center.
Select: Customized for businesses with 25+ employees.
Check out the full list of features.
Gusto has a 4.7 rating over 3,121 reviews on Capterra, making it the second most reviewed software on the list. It even has a review from an employment lawyer that has been using it for 2 years, refers her clients to them, and has not found an error in legal compliance the whole time.
Insperity takes 4th Place
Insperity has been around for 30 years but was originally called Administaff. They changed their name because they were often mistaken for a temp agency, which they are not. They are based in Houston but have over 70 offices nationwide.
Their score was 91.8.
HR services Insperity offers:
Like most of the Top 5, Insperity offers all the HR functions on our list. All but five of the HR services are only offered in their PEO offering. They also only have two levels for their services: 5 to 149 employees or 150 to 5000 employees.
The way they structure their services, plus their lack of reviews, were what harmed Insperity’s score despite coming in at 91.8/100. I’m sure they are a quality HR outsourcing service, but the lack of reviews on commonly used sites leads me to question their marketing.
What is Insperity the best at?
The main differentiator between Insperity and other HR outsourcing providers is their recruiting.
They offer fixed-price recruiting whether you are hiring an accountant or a CFO. They also don’t collect the final payment for recruiting a candidate until the employee has cleared the 90 days benchmark.
Insperity Features, Pricing, and Reviews:
Features are similar to all the other companies, but the locations all over the country would be a differentiating factor if you prefer to work with local HR companies.
Like most PEOs, Insperity is not very open about its pricing. Consumer Affairs states that they charge by the employee, not a percent of payroll.
Consumer Affairs is also the only place I could find a meaningful number of reviews for Insperity’s services.
Given they have been sued multiple times for being biased in their reviews, I did include Consumer Affairs reviews in the ranking. Insperity still landed in the top 5 best HR outsourcing businesses.
Zenefits rounds out the top 5 HR service businesses
Zenefits is another of the HR technology companies that focus on SaaS providing built for today’s business world.
They used to be partnered with Gusto, but as Gusto moved into the benefits offerings they gradually parted ways. As of 2019, they are competitors with both offering similar services and not integrating.
Their score was 90.1
HR services Zenefits offers:
Like most of the Top 5, Zenefits offers most of the HR functions on our list. There was a lack of clarity on their website about insurance offerings, which harmed their score nominally.
They have three tiers of services for full-service HR, are offering a free year of payroll, and have 3 add-ons to choose from if you desire them. It’s fairly competitive with other offerings and has a decent price point.
What is Zenefits the best at?
They are best at health insurance and benefits administration. I was able to jump right on and find insurance for $355/mo for an individual with no deductible. The pricing goes down to $237/mo for an individual when you increase the deductible to a max of $9,000.
This is a great opportunity to show your employees you care about their health. If you split the cost of the insurance between you and the employee, you are helping them get a no-deductible plan at around $45/week per employee.
That makes it easy for them to take care of health issues when they have them.
Zenefit Features, Pricing, and Reviews:
Features are similar to all the other companies. The primary difference is their openness about healthcare benefits and other pricing.
Zenefit has 3 tiers of pricing:
- Essentials: $10/mo/employee
- Growth: $18/mo/employee
- Zen: $27/mo/employee
Then they have add-ons that range from $10/mo/employee up to the cost of health insurance. For more details check out their pricing page.
On Capterra, Zenefits has 781 ratings with an average of 4.2 stars, which is good. Trust Pilot has a 4.7 star average with 153 reviews, but I am hesitant to fully trust the reviews because the majority of them are marked as redirected from their website.
While this is a great strategy, it was a rarity during the research and there was a review claiming they were paying for reviews. If healthcare is your most important factor in outsourcing services, they are probably the best option. Otherwise, I’d go with another provider.
Let’s look at the rest of the list.
The rest of the list
The rest of the list was rounded out with:
- G&A Partners – With a score of 88.4, G&A Partners offers all the services as a PEO or mix and match. Lack of reviews on common review sites harmed their rating. If you work in construction or other safety fields they might be best. They also carry the liability for HR decisions, which is great for risk management.
- CoAdvantage PEO – With a score of 88.4, CoAdvantage is another PEO that appears to offer all the services, but some were hinted at more than specifically covered. They also didn’t have any ratings, but a nice referral program.
- TriNet – TriNet Scored an 85 due to an average of 2.7 stars on 97 ratings, poor disclosure of whether they offer services separately, and only offering some types of insurance. One of the things I liked about TriNet is they claim that when the SSI cap is reached, you pay less. They don’t charge more when wages go up though.
- Oasis Advantage – At a score of 84.7, Oasis Advantage has the 8th best outsourcing services. They are a subsidiary of Paychex so I would just go with Paychex. Once again, ratings were missing and you have to request a quote.-
- Engage PEO – At a score of 84.7, Engage is another PEO without ratings on common sites. They were middle of the pack when it comes to their options as they primarily offer PEO services with 6 optional benefit plans.
- Workday – Workday scored an 80.3 with demerits due to lack of insurance, lack of clarity on whether they consult, and numerous reviews saying that people will not work for companies that use Workday. They came in 9th cause their overall ratings are a 4.5, but you have to take care of your employees. Trust Pilot Capterra
- BambooHR – Bamboo is primarily focused on the hiring process and payments. That’s why it received a score of 73.5. It has great reviews though.
- Bambee – Bambee is a consultant to make sure you follow legal procedures. At $99/mo it is a reasonable price and has great reviews, but you can get this included in other packages. Best if you just want someone to consult with you so you can expand your skills. Their total score was 73.2
- CPEhr – I honestly don’t even want to give you their link because they annoyed me. They have no reviews, they have broken links, and places where there isn’t a link that there should be. They scored a 68.4
- Accenture HR – I feel like Accenture HR scored way lower than it should (36.1), but that’s because it is specialized in analytics. If you want better data to manage your HR, use them. You’ll need your team or another service though.
I think it makes sense to mention that HR technology can be difficult to compare without actually testing each. While I am capable of considering the pros and cons, looking for aspects I find concerning and comparing features on paper, that is not a replacement for hands-on using the system.
I would suggest finding an HR consultant who has worked with multiple of the systems you like and getting them to help you establish your needs, goals, budget, and which of the major providers would work best for you. If you don’t know an HR consultant, I have provided info on freelancers below.
Upwork has numerous skilled freelancers that can help you decide on the HR outsourcing firm you want to hire. Check out their Top 27 HR consultants.
HR tasks they will take:
Varies by freelancer.
What makes HR freelancers great:
Many freelancers will work on smaller projects than larger companies. They are often independent or HR professionals looking to make some money on the side by performing HR consulting, but they may not be able to offer full-service outsourcing for your HR department.
What are HR freelancers the best at?
Hiring an independent professional helps you consider how to outsource HR. They can help you decide which HR outsourcing services make the most sense for your small business.
Freelancers are also great for filling in gaps in your existing HR department. Unfortunately, they don’t come with an HR team most of the time.
Features, Pricing, and Reviews:
Upwork has freelancers for everything. This HR outsourcing service helps you hire HR professionals for short-term and long-term gigs at rates between $35-200/HR and the top-rated HR consultants have between 4.8-5 star reviews on up to 55 projects.
We hope you find an HR outsourcing company that fits your needs and will grow with your business.
When you select one, we would love to know which one you selected and why. Please leave a comment below letting us know what functions you choose to outsource, which company you chose, and why. As time goes on we’ll alter these rankings based on your feedback.