The HR Consultants are proud to help create places where your people love to work, and we offer a wide choice of HR outsourcing services.

HR outsourcing offers a range of flexible solutions for companies keen to streamline their operations and focus on core business activities.

Let’s break down the various types of HR outsourcing, offering insights into how it could be the key to your performance management and unlocking your company’s full potential.

What is Human Resources (HR) Outsourcing?

Human Resources (HR) outsourcing is a strategy where businesses entrust external specialists with their HR functions. This practice encompasses a range of HR services, from payroll processing to recruitment and employee training.

In other words, outsourcing HR means you can focus on your day-to-day business.

The HR Consultants offer a range of HR outsourcing services, from a provider who you can trust. These include retained support, HR documentation, recruitment and training.

But what does HR outsourcing aim to achieve?

The essence of HR outsourcing lies in its ability to transform a traditional business model into a streamlined, innovative powerhouse where HR functions are handled by experts, leading to the best possible resource management and workforce planning.

 

Table of Contents

Top Types of HR Outsourcing

1. Business Process Outsourcing (BPO)

3. Administrative Services Organisation (ASO) Outsourcing

3. Professional Employer Organisation (PEO) Outsourcing

Key HR Functions

Software-as-a-service (SaaS) provider

Recruitment

Payroll Services

HR Outsourcing VS HR Consultancy Services

HR Outsourcing for Small Business Owners

Looking to Outsource your HR?

 

Top Types of HR Outsourcing

This all sounds great, but how do you know what type of HR services your company needs? We will cut through the jargon to help you understand each type of HR outsourcing.

Human Resource outsourcing has evolved into several distinct forms, each offering unique advantages and disadvantages to your company. Among these, 3 Types of HR Outsourcing stand out: BPO (Business Process Outsourcing), ASO (Administrative Services Organisation) and PEO (Professional Employer Organisation).

BPO redefines efficiency by transferring entire HR processes to third-party experts, while ASO offers a more tailored approach to handling administrative HR tasks. Finally, PEO enters into co-employment arrangements, shouldering a significant share of employer responsibilities and liabilities.

Each of these HR outsourcing models serves a strategic role, paving the way for businesses to reach their full potential.

Different types of HR Outsourcing

 

1. Business Process Outsourcing (BPO)

Business Process Outsourcing (BPO) in HR refers to the practice of hiring an external service provider to manage various human resources functions. These tasks can range from payroll processing, benefits administration, incentive management, employee relations, recruitment, and compliance management, to employee training.

The strategic advantage of BPO HR service outsourcing lies in its potential to reduce operational costs, leverage HR software technology, and tap into a pool of expertise that might not be available internally.

This allows businesses to focus on core strategic initiatives while ensuring that their own HR service operations are handled by professionals, often resulting in increased efficiency and improved HR service delivery.

While getting experts on board sounds like what every business dreams of, Deloitte, a leader in business consultancy, recognises the risks of entering into BPO and HR function outsourcing.

“Business Process Outsourcing (BPO) is like getting married – two parties decide to start a shared future together. BPO is a complex project but it is worth having a close look at this opportunity.  An organisation considering BPO needs to assess this opportunity carefully and find the right partner. If your organisation is considering BPO, you should first assess internally if BPO is really the right solution for your organisation and secondly, identify the right BPO service provider.”

2. Administrative Services Organisation (ASO) Outsourcing

Administrative Services Organisation (ASO) Outsourcing is a model where companies outsource their HR administrative tasks while retaining control over the employment and management of their workforce.

Unlike PEOs, where there is a co-employment arrangement, an ASO allows businesses to outsource administrative HR functions, such as payroll processing, tax compliance, and employee benefits administration, without sharing employee responsibilities.

This approach enables companies to benefit from the expertise of HR professionals and sophisticated HR information systems technology without ceding control of their entire HR function and strategy.

One notable issue with ASO and outsourcing providers is the absence of the risk-sharing benefit that comes with a PEO arrangement. Since there’s no co-employment relationship, businesses retain all employer-related risks and responsibilities, including compliance with employment laws and regulations.

This means while they gain support in administrative tasks, the ultimate responsibility and liability for HR legalities rests solely with the company. This aspect requires businesses to stay vigilant and informed about their HR departments’ policies and legal changes, potentially adding complexity to their operations.

3. Professional Employer Organisation (PEO) Outsourcing

Professional Employer Organisation (PEO) Outsourcing represents a co-employment model where businesses partner with a PEO firm to outsource their own human resources and resource functions. This arrangement differs significantly from Administrative Services Organisation (ASO) and Business Process Outsourcing (BPO) models, primarily in terms of employment responsibilities and risk sharing.

What are the differences?

Unlike ASO, where companies retain full employer responsibilities while the outsourcing service provider does only basic HR functions and tasks, a PEO becomes the co-employer of your staff, sharing legal responsibilities and often providing more comprehensive HR services, including employee benefits administration, compliance management, and workers’ compensation.

Comparatively, while BPO focuses on transferring specific business processes or functions to third-party providers, including HR personnel, a PEO offers a more integrated approach, effectively becoming an extension of the client’s business.

This means that while BPO and ASO services might be more transactional or even business function-specific, PEO outsourcing envelops a broader spectrum of HR-related responsibilities. This comprehensive approach helps businesses navigate the complex landscape of employment laws and regulations more effectively but requires a deeper level of partnership and trust between the business and the outsourcing provider.

Co-employment requires a level of trust

 

Key HR Functions

Now that you know about the different HR outsourcing types, we can talk about some of the important services they provide.

Software-as-a-service (SaaS) provider

SaaS providers offer cloud-based services, enabling businesses to access and manage HR functions efficiently without extensive hardware infrastructure. This model facilitates streamlined operations, offering scalable solutions to meet the dynamic needs of organisations.

A prime example of SaaS that is used by a range of industries is Google Docs. This platform exemplifies the strengths of cloud-based technology, allowing users to create, edit, and share documents in real-time from anywhere in the world. Google Docs showcases the flexibility and collaborative potential inherent in SaaS solutions, making it an invaluable tool for managing documents and enhancing productivity.

Recruitment

Recruitment is a critical HR function, often outsourced to streamline the hiring process and access a broader talent pool. The HR Consultants is ready to help you boost your talent acquisition.

Outsourcing HR services for recruitment allows HR teams to leverage specialist expertise, ensuring the selection of candidates who best fit the organisational culture and skill requirements.

Within recruitment, Business Process Outsourcing (BPO), Administrative Services Organisation (ASO), Professional Employer Organisation (PEO, and Administrative Services Organisation (ASO), represent a different approach to HR outsourcing. Each of these outsourcing models offers distinct advantages for recruitment in HR, from reducing administrative burden to enhancing operational efficiency and tapping into global talent acquisition markets.

Payroll Services

Engaging a service provider to manage payroll operations allows businesses to streamline one of the most complex and time-consuming HR services. This delegation not only ensures accuracy and compliance with taxation and employment laws but also frees up the HR team to focus on more strategic tasks.

Opting for an HR outsourcing model for payroll services means entrusting these critical operations to specialists who bring a wealth of experience and up-to-date knowledge of best practices.

Furthermore, the collaboration between a company’s HR professionals and the selected service provider facilitates a seamless integration of payroll services into existing HR processes. This partnership is instrumental in identifying and implementing improvements in payroll management, thereby enhancing overall HR performance. Nowadays, SaaS providers are a common choice for this.

A Case Study

The importance of HR outsourcing for payroll cannot be underestimated, particularly in developing countries. Frustrated by the slow-moving processes in Guyana, Richard Langford came up with a solution called PeoplePay.

“It is now used to pay more than 8000 people from 20 companies, including 3 major utility companies in Guyana.”

Solutions such as these are not limited to payroll services, but given the complex nature of different tax systems and the increasingly globalised economy, this mode of HR outsourcing seems set to grow.

HR Outsourcing VS HR Consultancy Services

HR outsourcing involves delegating entire HR functions or processes to an external service provider.

In contrast, HR consultancy provides expert advice and strategic guidance on specific HR processes and issues. The consultancy approach is more about augmenting the strategic capacity of the HR function professional employer organisation rather than replacing or managing its day-to-day operations.

Ultimately, while HR outsourcing provides valuable operational support and flexible solutions that can improve efficiency, HR consultancy services empower businesses with the strategic insight and capabilities needed to understand the complexities of modern HR management.

If you’re unsure about what type of HR support you need, The HR Consultants is a flexible, bespoke HR service, offering HR assistance that makes sense for your company.

HR Outsourcing for Small Business Owners

Are you a small business? Rest assured, we cater to you too. HR outsourcing for small businesses offers a strategic pathway to managing the complex web of human resources tasks without needing a large in-house HR department. For small business owners, delivering HR and services—from payroll and compliance to recruitment and employee benefits—can be a daunting task.

Tailored to meet the unique challenges faced by small businesses, HR outsourcing ensures that even the smallest entities can enjoy comprehensive HR services that were once the preserve of larger corporations.

Looking to Outsource your HR?

We are a trusted HR service provider who seeks to help all kinds of businesses in the UK. We stay in tune with the latest trends and legalities to give you peace of mind.

What sets us apart is the range of HR outsourcing services we provide, alongside our clear, jargon-free advice.

The HR Consultants

We can be as involved as you want us to be. Whether you want to outsource a range of processes or just get some friendly expert advice, we’ve got you covered.

No matter the size of your business, The HR Consultants offer a set of straightforward HR outsourcing solutions, including project support outsourcing, recruitment, and retained support functions.

We want to create a place where you love to work.

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Try an ad-hoc No Strings HR Consultancy, where we aim to answer your inquiries within an hour.

Get a free quote today.

Frequently Asked Questions (FAQs)

Let’s address some questions you may have about different types of HR outsourcing.

What are HR outsourcing services?

HR outsourcing services involve contracting external providers to manage specific human resources functions. By outsourcing HR tasks, businesses can streamline operations, access specialised expertise, and enhance efficiency, allowing them to focus on core activities. These human resource outsourcing services encompass payroll services, recruitment, training, and employee benefits management, among others.

What types of HR functions are most typically outsourced?

The types of HR functions most typically outsourced include payroll processing, employee benefits management, recruitment and selection, performance management, training and development, and compliance with employment laws. Outsourcing these HR tasks allows businesses to leverage specialised expertise and focus on core operations.

What are the HR outsourcing trends?

Current trends in outsourcing human resource management include a focus on strategic partnership, technological integration, and an emphasis on flexibility and scalability. Businesses are increasingly outsourcing human resource functions to enhance efficiency and gain access to advanced HR technologies, thereby improving employee experience and operational effectiveness.

What is the difference between HR consulting and HR outsourcing?

HR consulting involves expert advice on specific HR areas, whereas HR outsourcing entails delegating entire human resource functions to an external service provider only. Consulting on human resources often focuses on strategic guidance, while human resource outsourcing offers practical execution of HR tasks, thus allowing companies to streamline operations, provide cost savings and concentrate on core business activities.