“I was approving payroll at 8 PM on a Friday. Meanwhile, our talent management strategy collected dust on my desk,” admits Maria, an HR director at a growing healthcare provider. “My team was drowning in administrative tasks that kept us from the strategic work we were hired to do. That’s when I realized something had to change… and I started looking for an HR outsourcing partner.”
Maria (like other names in this article) is a composite based on Corban OneSource customers, but her situation might sound familiar. The HR outsourcing market is growing from $18.65 billion in 2023 to a projected $31.14 billion by 2030, suggesting that more organizations are recognizing the value of partnering with HR experts to handle time-consuming administrative tasks.
But choosing an outsourcing company isn’t a decision that can be made lightly. The wrong choice can lead to compliance issues, employee dissatisfaction, and costly mistakes. The right one—just ask Maria—can set you free.
This guide walks you through seven questions you should be asking before you choose an HR outsourcing partner. Read on so you can make an informed decision that fits your needs and goals, and experience the power of outsourcing for yourself.
1. What Services Do You Offer, and How Do They Align with Our Needs?
Not all HR outsourcing companies are created equal. Some offer comprehensive solutions. Others specialize in specific areas like benefits administration, payroll services, or support. Understanding your partner’s services and whether they meet your needs is the first step.
According to recent data, benefits administration (54%) and payroll processing (53%) are the most commonly outsourced HR functions. This makes sense—these tasks are time-consuming but add little strategic value when done internally.
“We thought we needed to outsource everything,” says Robert, CFO of a 300-employee manufacturing company. “But after looking at our internal strengths and pain points, we realized our biggest needs were in multi-state compliance and benefits administration. Finding a partner who specialized in those areas saved us money and gave us better results.”
Here’s what to think about when you’re looking at HR outsourcing services:
- Which HR functions take up the most time but add the least value?
- Where does your internal team need specialized help?
- Which services would provide the most relief?
- Do you want a full solution or just targeted support for specific functions?
A good HR outsourcing partner will try to understand your challenges before they recommend a service package. Be careful with providers who push a standard solution without exploring your needs.
2. What Experience Do You Have in Our Industry?
Industry knowledge can make or break an HR outsourcing relationship, because every industry has its own challenges, compliance requirements, and talent needs. A partner familiar with your space will understand these nuances. (Translation: you’ll need to spend less time training them.)
Here’s the secret. Companies that do the work to evaluate and choose HR outsourcing partners based on their experience report higher satisfaction with their outsourcing relationships.
That satisfaction, in turn, translates into real business outcomes: 78% of businesses say outsourcing HR functions has improved their overall business performance.
Consider Sarah, an HR leader at a multi-state healthcare organization: “Our previous HR outsourcing company had extensive experience with manufacturing clients but almost none in healthcare. We spent the first six months educating them about HIPAA requirements and wage rules. As you can imagine, when we switched to a partner with healthcare expertise, the difference was like night and day. They even brought things to the table that we hadn’t even thought about.”
Remember, industry expertise goes beyond knowing regulations. Ask for case studies and references from companies like yours, and find out how they stay current with industry trends.
3. What Is Your Pricing Structure, and What Value Can We Expect?
While cost shouldn’t be the only consideration, understanding pricing structure is key to evaluating the overall value proposition. HR outsourcing partnerships can deliver significant cost savings, but only when the pricing structure aligns with your organization’s needs.
Most HR outsourcing services use one of three pricing models:
- Per-employee pricing: A flat fee per employee per month
- Tiered pricing: Rates that decrease as employee count increases
- A la carte pricing: Charges based on specific services utilized
“When we first looked into HR outsourcing we were focused solely on the bottom-line cost,” says Thomas, CEO of a technology company. “What we didn’t consider was the value of reduced compliance risk, or the time our leadership team got back for strategic initiatives. The money we’re spending on outsourced HR support has delivered at least a 3x return when we consider all factors.”
Beyond the basic fee structure, ask what services are included in the base price and what additional costs look like. Are there contract minimums and terms?
Above all, keep in mind that the lowest price doesn’t always mean the best value. Companies that outsource their HR functions experience an average 26% reduction in HR related costs, leading to a 22% increase in overall organizational efficiency. That’s worth much more than a slightly lower monthly fee.
4. What Level of Service Can We Expect?
The SLA you set with your HR outsourcing partner can impact your client experience and your employees’ satisfaction. Support models can vary widely, from self-service portals with almost zero human interaction to dedicated HR professionals who function as an extension of your team.
“We learned the hard way that not all service models are created equal,” says Jennifer, operations director at a non-profit organization. “Our first HR outsourcing company had an impressive platform, but support was limited. When we had tricky questions or delicate issues, we couldn’t get the help we needed. We switched to a partner that keeps it human.”
When evaluating service and support, ask:
- Will we be assigned a dedicated account manager or HR professional?
- What are your response times for urgent problems?
- How can we get support (phone, email, chat, in-person)?
- How do you handle after-hours emergencies?
- What if service expectations aren’t met?
A good model should give you flexible, accessible HR support that changes with your company’s needs, so you can get timely help with sensitive matters that can’t wait for scheduled check-ins.
5. What Technology and Infrastructure Do You Use?
Your HR outsourcing partner’s tech can streamline processes, improve accuracy, and provide valuable analytics, which is probably why 68% of organizations cite access to technology as a key benefit of outsourcing HR.
Michael, an IT director who played a role in choosing an HR partner, says: “At first, we underestimated the importance of integration. Our existing HRIS didn’t communicate well with our partner’s systems and caused duplicate data entry. When it came time to do it again, we prioritized a partner whose technology integrated seamlessly with our existing infrastructure.”
Evaluating an HR partner’s technology? Consider:
- User experience for administrators and employees
- Mobile accessibility for managers and staff
- Reporting and analytics features
- Data security
- Reliability and uptime
- Development plans and update frequency
A good technology platform should simplify HR administration while providing insights that inform strategic decision-making. It should also grow with you, without needing to be significantly reconfigured.
6. How Do You Ensure Compliance and Manage Risk?
Getting through the maze of employment laws and regulations is a big challenge for any company. Non-compliance can result in costly penalties, legal trouble, and even reputational damage, so it’s no surprise that compliance is on many companies’ minds when they’re outsourcing HR. Fortunately, 91% of small businesses using outsourced HR services reported improved regulatory compliance after partnering with HR specialists.
“Compliance was our number one reason for moving to an HR outsourcing partner,” says David, owner of a business with employees in six states. “Each state had different requirements for everything from paid leave to sexual harassment training, and our in-house team couldn’t keep up. Our HR company monitors regulatory changes across all our locations and implements whatever changes are necessary. It’s perfect.”
When you’re looking at a partner’s compliance capabilities, ask questions like these:
- How do you stay current with federal, state, and local regulations?
- What specific compliance areas do you specialize in? (ACA, FLSA, FMLA, etc.)
- How do you handle multi-state compliance?
- How will you help us maintain proper documentation for audit purposes?
- Have you helped clients through audits or investigations?
- What compliance training can you provide?
Ask potential partners to give you examples of how they’ve helped organizations like yours. Their answers will give you a clue about how they solve problems.
7. How Flexible Will You Be as Our Business Changes?
Businesses rarely stay static, and anything can change your HR needs.
“When we first partnered with an HR outsourcing company, we had 85 employees in two states,” says Amanda, COO of a technology startup. “Three years later, we had 350 employees in 12 states and two countries. Our partner scaled their services to match our growth. They brought on international compliance expertise and expanded their benefits administration work. Without that flexibility, we would have outgrown the relationship and had to switch providers.”
In other words, flexibility is important, so make sure to ask about:
- Minimum contract terms and commitment periods
- Your partner’s process for adding or removing services
- Support for growth in other countries
- Scalability as your headcount grows or shrinks
- Their ability to adapt to industry-specific changes
- Exit terms if the partnership doesn’t meet expectations
The right HR outsourcing partner should view your relationship as a long-term partnership that will evolve with your business. You might even expect them to suggest service adjustments that align with your changing needs.
Pay special attention to contracts that include minimum employee counts, multi-year commitments, or expensive early termination fees. While some commitment is reasonable, excessive restrictions can stifle the very flexibility you need.
The Takeaway: Putting it All Together
Choosing the right HR outsourcing company means considering multiple factors, from service offerings and industry expertise to technology and flexibility. The seven questions we’ve explored provide a framework to evaluate potential partners against your specific needs and goals.
Remember, the ideal partner should enable your internal HR team to focus on strategic initiatives that drive business success. Companies that outsource HR functions report just cost savings, improved regulatory compliance, reduced turnover, and increased efficiency, so it’s important to get it right.
Look beyond your immediate needs and consider how the relationship will evolve over time. The right partner will grow with your business, adapting their services while maintaining quality. Ask them these seven questions, and you’ll be ready to choose a partner that will benefit your business in the long term.
And, frankly, we’d be remiss if we didn’t mention that if you need an HR outsourcing partner who gets you, we’re here. Corban OneSource provides customized HR solutions for businesses with 75-6,000 employees. Our US-based team of HR professionals delivers local service for payroll, benefits administration, HR compliance, and more. Get in touch today to see how we can help you reduce risk and focus on growth.
