The Best HR Outsourcing Companies of 2024

There are many functions for HR to fulfill, such as recruiting and onboarding, benefits administration, time tracking, payroll and tax administration, performance management and employee development. While these can be managed by an internal team member or department, you also have the option to outsource HR. This involves hiring a third-party HR outsourcing service to manage some or all of these functions for you. This can be especially advantageous if you don’t have the time or resources to manage certain HR functions on your own.

The cost of HRO services varies widely. Most providers charge based on one of two models: by the individual service provided, or by a subscription plan that includes a bundle of features and/or services.

For small and midsize businesses, base costs typically range from $8 to $50 per employee per month. Of the services we reviewed, Zenefits had the lowest per-employee price, with plans starting at $8 per employee per month. Many of the HRO providers we reviewed offer custom pricing at all levels, so the cost depends on your service selections and company size.

Consider your business’s needs before you purchase a bundled subscription plan — you don’t want to pay for services you don’t need.

Other Add-on Costs

If you need what many HRO providers consider add-on services, expect your monthly costs to increase. The pricing of add-on services is also influenced by the size of your business, whether you have multiple locations and the complexity of your organization.

Examples of add-ons include time tracking, recruitment services and advanced reporting features. When you compare plans, pay close attention to add-ons, because what one vendor considers an add-on may be a standard part of another HRO vendor’s basic service bundle.

Implementation Fees

In addition to subscription and add-on costs, you may also encounter one-time implementation fees, which can range from $200 to $3,000. Some HRO providers don’t charge setup or implementation fees, so consider these fees when you’re shopping around and factor them into your cost comparisons.

For small and midsize businesses, there are many advantages of a strong HRO partnership. An HRO provider tracks, reviews and informs your business of changes in HR trends, laws and best practices. It also allows your team to focus on business operations instead of compliance.

A good HRO service provides the following benefits:

• Saved time and resources: The first thing many businesses realize when they hire an HRO provider is the available time that their in-house personnel get back. For small business owners who have been trying to manage HR functions themselves or with a small team, the ability to rededicate these resources to operations that drive return on investment is a powerful benefit.
• Comprehensive HR services: When you hire an HRO service, your business gains access to experienced professionals who know how to handle HR responsibilities efficiently. This level of expertise is invaluable to small businesses that may not have an HR expert on staff already.
• Expertise: Your HRO provider’s knowledge and HR practices are shaped by expertise and an ongoing study of the HR landscape. The best HRO companies are adaptable and up to date on current and evolving HR trends and regulations.
• Diversity, equity and inclusion (DE&I) training and development: Diversity training is an increasingly important focus area for businesses. A good HRO company can provide training and development assistance that can help a small company effectively create a DE&I program that fosters employee engagement. Companies with more engaged employees are more productive, and HR plays a major role in employee engagement.
• Employee handbook updates: Figuring out whether your company’s employee handbook is up to date can be a hassle. If you outsource this time-consuming task to an HRO company, your handbook will always comply with current federal and state laws and regulations.
• Recruitment and onboarding guidance: Recruitment and onboarding are not only labor intensive but also easy to get wrong. Recruiting and hiring the wrong person is a costly mistake. Well-equipped HRO providers can help with these processes or, at the very least, provide templates, policy samples and guidance to get these important tasks right.

Recruitment is a common HR function that HROs can help with. Source: ADP

Selecting the right HRO does not have to be an overwhelming task. Aside from getting to know what services a provider offers (which can be difficult if all you are doing is visiting provider websites), you must assess its reputation for customer service and product customization.

Most HRO companies want your contact information before they share any useful information about their services and their costs. We recommend that you take the following steps during your search process:

1. Research HRO options.

Start by researching different HRO providers. Work to create a short list of HRO companies that have the features and support your business currently needs. Each HRO provider has its own strengths. Often, you can customize their HRO service packages so that you pay only for what you need. So, when you compare options, be sure to focus on the core functions you specifically need in an HRO service. We highly recommend talking to other business owners within your industry to see which HROs are held in high regard and which ones to avoid.

2. Ask the HRO service for a demonstration of its platform.

While HRO companies offer a lot of hands-on services, including consulting from expert advisors, a solid tech platform is also important. Sign up for demos with several providers to find a platform that you find user-friendly and that offers the tools you need. Don’t forget to ask about mobile app offerings for employees and administrators. Besides giving you a thorough demonstration of their platforms, many HRO companies offer a free trial of their software, so take some for a spin to see what you like best.

3. Compare price quotes.

Many HRO providers offer custom pricing based on the HR functions your organization wishes to outsource, so you’ll need to obtain quotes from each vendor. You can often get a quote when you meet with the sales team for a demo or by completing a quote form on the vendor’s website. Then, you can compare the pricing and the included services to find out which vendor offers the best value for your money.

4. Find customer references.

If you have selected an HRO provider that you are excited about, do not proceed further until the company provides at least three customer references that you can contact to learn about their experiences with the HRO provider.

Customer references should meet the following criteria:

• They are in your industry.
• They have roughly the same number of employees.
• They have been a customer of the HRO for at least two years.
• They have documented and up-to-date processes, policies and systems. Inquire about how they remain current on best practices regarding employment, payroll, leave laws and other regulatory issues.

Although HROs and PEOs both involve outsourcing HR functions to a third party, they have a few key differences.

For example, HROs allow companies to maintain control over their employees and systems and access administrative benefits through HR services third-party outsourcing. HRO services are typically a la carte or customizable.

On the other hand, PEOs directly employ the client’s employees. PEOs typically offer their HR services as a bundled package, and they require you to use their payroll service.

As with most things in business, whether HR outsourcing or in-house HR is better will depend on your business needs. Each option has its own benefits and disadvantages.

HR outsourcing is ideal for employers who need additional third-party assistance with one or more HR functions. If you are willing to give up some control of certain HR processes for expert assistance, this may be the right option for you. If you are a small business in need of help with all of your HR processes, you may consider outsourcing to a PEO specifically.

Hiring an in-house HR department can be expensive but valuable to those who can afford it. No one will know or understand your company and its culture better than in-house staff. This option also allows you to keep all of your HR data and processes in house as well.

Outsourcing and in-house HR don’t have to be mutually exclusive. Some companies benefit from outsourcing certain HR functions while also having in-house HR professionals manage others.

Gusto users can manage payroll and HR for employees and contractors. Source: Gusto

Once you’ve chosen an HR outsourcing service, contact the company for an initial consultation. Although implementation can vary based on your provider and service plan, a representative will typically help you get set up. You will need to add employee information into the platform. Certain functions will offer self-service capabilities for employees to enter their own details, taking the administrative burden off of you or your in-house HR staff.

If you are able to customize the platform, this is the time to set up customizations, automation workflows and permission settings. This can take additional implementation time up front but can be essential in creating efficient and secure HR processes.

When the platform is all set up and customized, it can be helpful to give your employees a training course on how to use it. Explain what features are available to them and how the platform or service will be used going forward.

If you are interested in learning about more top-rated HR outsourcing providers, some alternative solutions are worth considering include BambooHR, WorkSight by G&A Partners and Gusto.

BambooHR is a comprehensive HR provider that includes many of the services and tools needed to manage your workforce, such as recruiting, document management, time-off management, approvals and workflows, organization charts, performance management, and hiring and onboarding solutions. You can also add services for payroll, employee benefits administration and time tracking. Read our BambooHR review to learn more.

G&A Partners’ WorkSight is a secure and robust online HR platform that can automate many common HR tasks for small businesses. WorkSight stands out most in employee training and development. With a large library of training resources and customizable performance management and professional development offerings, WorkSight is an excellent choice for small businesses that want to improve employee productivity and performance.

Gusto is best known for its payroll platform, but it can also be used to outsource a wide range of HR tasks, including employee onboarding. Gusto supports the hiring process with seamless job postings and personalized offer letters through the new-hire onboarding and training process. Businesses can get advice from Gusto’s team of HR experts; certified HR professionals are available by phone or email to walk employers through HR questions and complex processes. Read our Gusto review to learn more.

At Business News Daily, our team of small business human resource experts has been researching and testing HR outsourcing services for years, comparing some of the leading solutions across nearly 125 key metrics. We considered 20 HRO service providers and closely reviewed and tested 11 of them before selecting our five best picks above.

Below are the factors we considered when determining our best picks. Each is weighted according to how much the criteria typically influences business owners’ buying decisions.

• Pricing (30%): We considered not just the base cost of the service but also the minimum employee requirements, bundled vs. a la carte options, per-user fees, contract lengths, and add-on costs to determine which provide the most value per dollar.
  
• Features (25%): We particularly evaluated each HRO’s tech dashboard and tested administrative HR tools, benefits management capabilities, payroll processing and tax administration,  legal compliance and risk mitigation, and employee training and development features. We also considered PEO and EOR service options, as well as integrations for connecting each platform to other popular business software.
• Usability (20%): We paid close attention to the ease with which the HRO platform could be set up, how intuitive we found the navigation and use of key features, and the training and informational resources available to new users. We also considered whether the HRO service offered a responsive mobile app or mobile browser for employees and HR administrators.
• Customer Support (15%): We examined the ease with which customers can contact the team when in need of help. We reviewed customer feedback to determine how well the customer service team meets the needs of existing customers.
• Expert Insight (10%): Our product reviews are conducted by software and industry experts who are deeply familiar with HR outsourcing services. Given their institutional knowledge of different platforms and firsthand experiences using these programs, we take their judgment into account when determining our best picks.

In addition to scoring each HRO we reviewed based on these criteria, we also determined the best use case scenarios for each. No two businesses are exactly alike, so we put ourselves in the shoes of different types of small business owners to identify the best HR outsourcing services for a variety of needs.

To learn more about how we review and test human resource products and services for small businesses, read about our editorial process here.