“I knew something had to change when I found myself working on payroll issues at 11 PM while my strategic plan collected dust,” confesses Mark, an HR director at a mid-sized healthcare company. “My team was drowning in paperwork. Meanwhile, the stuff that could actually move our company forward sat untouched.”
Mark—like all HR leaders we profile on the Corban blog—is a fictional composite. But his experience is far from made up: a shocking 45% of businesses admit they spend nearly a full workday every week just handling HR administrative tasks. That’s time not spent on talent development, culture-building, or strategic planning.
In this guide, we’ll walk through outsourced HR services, help you recognize when it’s time to consider this approach and provide practical guidance for selecting the right partner.
Section 1: When to Consider Outsourcing HR Functions
Lisa stared at the notice from the Department of Labor with a sinking feeling. Her company had expanded into three new states last year, and somehow, they’d missed a critical filing deadline. Now, they were facing potential penalties that would wipe out her department’s cost savings for the entire quarter.
“I thought we had this covered,” she told her CEO later that day. “But keeping up with regulations in seven states is like trying to drink from a fire hose.”
Lisa’s situation represents just one of the warning signs that it might be time to explore HR outsourcing—common triggers that might be plaguing you, too.
When Compliance Keeps You Up at Night
For multi-state employers, it’s becoming nearly impossible to manage compliance internally without specialized expertise. Each state has its own employment laws, paid leave requirements, and reporting deadlines. Missing just one can be costly.
“We were confident in our California compliance,” shares Alex, an operations director. “Then we hired three people in New York and realized we were completely unprepared for the differences.” His company now works with an HR outsourcing partner with dedicated compliance specialists in every state where they operate.
When Your HR Team Can’t Get to “Important” Work
“We hired our HR director for her talent management expertise,” explains David, a CEO at a technology company. “But six months in, she was spending most of her time on benefits administration and payroll problems.”
This common scenario reveals a critical misalignment—your most valuable HR professionals are being consumed by transactional work instead of transformational initiatives.
When Growth Outpaces Your HR Infrastructure
“Our business doubled in size over 18 months,” recalls Sarah, an HR leader at a manufacturing company. “Suddenly, I was drowning in onboarding paperwork while trying to hire two more HR coordinators just to keep up with basic administration.”
Growth transitions often expose the limitations of current HR approaches. What worked perfectly for 100 employees becomes unmanageable at 250.
When Technology Gaps Create Friction
Jamie, an IT director, noticed something alarming in their help desk tickets: HR-related technology complaints had tripled in six months. “Our employees were frustrated that they couldn’t access benefits information or request time off from their phones. Our legacy systems just couldn’t deliver the experience they expected.”
Modern employees expect consumer-grade technology experiences. When your HR systems fall short, it affects everything from recruitment to retention.
When the Numbers Don’t Add Up
Manny, a CFO at a professional services firm, conducted a detailed analysis of their true HR costs and made a surprising discovery. “When I factored in technology, training, compliance penalties, and the opportunity cost of delayed strategic initiatives, I realized we were spending much more on HR administration than an outsourced solution would cost.”
This financial reality check often provides the final push toward outsourcing, but the decision to explore outsourced HR services ultimately comes down to a simple question: Is your current approach giving you the best return on your human capital investment? When the answer is no, it’s time to consider a new path forward.
Section 3: Core Functions That Benefit From Outsourced HR Services
Not all HR functions deliver equal value when outsourced. Understanding which areas typically yield the highest returns helps leaders make targeted decisions rather than taking an all-or-nothing approach. The most commonly outsourced functions reflect areas where specialized knowledge, economies of scale, and technology investments create measurable advantages.
Payroll Management Services
Payroll administration consistently ranks among the most frequently outsourced HR functions, with between 37 and 58% of companies choosing this approach, according to one statistic. The reasons are compelling—payroll requires meticulous attention to detail, carries significant compliance requirements, and represents an ongoing operational burden that rarely contributes to differentiation.
A comprehensive payroll outsourcing solution provides:
- Accurate and on-time delivery of payroll
- Tax deposit and tax form administration
- Integration with timesheets and attendance systems
- Management and tracking of paid time off (PTO) and leave
- Cloud-based interface for total transparency
- Dedicated onboarding support
Companies that outsource payroll typically report significant cost savings over managing these functions internally while eliminating redundant approval processes and reducing compliance risks, especially for businesses with employees across multiple states.
Benefits Administration
Benefits administration presents another prime opportunity, particularly given its growing complexity. Managing relationships with multiple insurance carriers, reconciling bills, handling employee questions, and ensuring compliance with regulations like HIPAA, ERISA, and ACA demands technical proficiency.
- An effective outsourced benefits administration partner provides:
- A dedicated team to manage your benefits admin plan
- Custom toll-free employee support lines
- Management of data and system programming
- Bill reconciliation for each carrier
- Eligibility checks and ongoing compliance
- Smooth ongoing and open enrollment support
- Benefits package comparison and design
This approach helps control benefit costs, creates a better employee experience, reduces regulatory and compliance risks, and frees up internal resources for strategic initiatives. With employee benefits typically representing the second highest cost behind payroll, optimizing this function delivers substantial value.
HR Support Services
HR administrative tasks and compliance management create particular challenges for growing businesses, especially those operating across multiple states. Outsourced HR providers with multi-state expertise bring systematic approaches to monitoring regulatory changes, implementing appropriate policies, and conducting regular compliance reviews.
Comprehensive HR support services include:
- Compliance with federal, state, and local requirements
- Progressive discipline and performance management
- Risk assessment and mitigation
- Employee handbook development
- Job descriptions, onboarding, and offboarding
- Management of unemployment processes
- Assistance with FMLA, FLSA, and ADA compliance, and more
This proactive approach reduces the risk of costly violations while eliminating the need to maintain specialized compliance proficiency in-house.
Professional Employer Organization (PEO) Transition Services
For companies with 75-6,000 employees that have outgrown the PEO model, specialized transition services help ensure a smooth exit to a more suitable HR outsourcing arrangement. This specialized service addresses challenges unique to PEO transitions, including:
- Applying for state income tax and unemployment tax numbers
- Understanding and implementing multi-state compliance requirements
- Setting up appropriate HR information systems
- Ensuring continuity of benefits and payroll
- Establishing proper employment documentation
Companies transitioning from PEOs often experience cost reductions while gaining greater transparency, control, and customization of their HR functions.
When evaluating which functions to outsource, consider both the administrative intensity and the business impact of each area. The most effective approach often involves a customized solution that allows you to outsource specific modules based on your organization’s unique needs while maintaining strategic control. This targeted approach allows internal HR professionals to focus where they can create unique value for your organization, while getting specialized expertise for complex administrative functions.
Section 4: Finding the Right HR Outsourcing Provider
“We went with the biggest name in the industry,” sighs Rachel, an operations VP at a healthcare company. “Six months later, we couldn’t get anyone on the phone when we had problems. We learned the hard way that bigger isn’t always better.”
Rachel’s experience is all too common. Choosing an HR outsourcing provider based on name recognition or the lowest price often leads to painful regrets. Having guided dozens of companies through this decision, here’s what truly matters when selecting a partner.
Look Beyond the Sales Pitch
Start by getting crystal clear on your specific needs. Different providers have different strengths. A provider perfect for a 5,000-employee multinational might be a disaster for a 200-employee regional business. One company’s ideal partner might be another’s worst nightmare.
Size Matters (But Not How You Think)
The match between your company size and the provider’s typical client profile is crucial. If you have 300 employees, you’ll likely get lost in the shuffle with a provider focused on Fortune 500 companies. Conversely, a provider specializing in companies with fewer than 100 employees might lack the sophistication you need.
Ask potential providers: “What size companies make up the majority of your client base?” Then, request case studies from organizations similar to yours. Corban OneSource, for example, specializes in supporting businesses with 75-6,000 employees—a sweet spot where they can provide enterprise-level capabilities with personalized service.
The Human Element
“I only realized how important culture fit was after we made the wrong choice,” admits Tom, an HR director who endured a painful year with a provider whose approach clashed with his company’s values. “Their formal, procedure-heavy approach drove our managers crazy.”
Your HR outsourcing provider becomes an extension of your team. Their staff will interact with your employees on sensitive matters like benefits and payroll. Your provider’s communication style, responsiveness, and problem-solving approach will directly impact how your employees perceive HR services.
Industry Knowledge: Nice-to-Have or Must-Have?
For some functions like payroll, deep industry expertise might be less crucial. However, for comprehensive HR outsourcing, industry knowledge can make or break the relationship.
“Our previous provider had zero experience with healthcare regulations,” explains Jennifer, an HR leader at a multi-state medical practice. “We essentially paid them to learn our industry.”
The Technology Test-Drive
Never select a provider without thoroughly testing their technology platform. Flashy demos rarely reveal how systems handle real-world complexities.
Create test scenarios relevant to your business:
- How would the system handle an employee working in multiple states?
- Can managers easily approve time off requests from mobile devices?
- How are benefits changes processed during life events?
- What reports can we generate without additional fees?
One retail company discovered too late that their provider’s system couldn’t handle their commission structure—a limitation that cost thousands in manual workarounds.
Trust Your Instincts (But Verify)
Sometimes, the intangibles matter most. Does the provider seem genuinely interested in understanding your business? Do they ask thoughtful questions about your challenges? Do they pressure you with artificial deadlines or genuinely educate you on options?
The most successful HR outsourcing relationships feel like partnerships rather than vendor transactions. Trust your instincts when something feels off, but verify with reference checks.
When calling references, go beyond generic questions. Ask about specific challenges they’ve faced and how the provider responded. The way providers handle problems often reveals more than how they perform when everything’s running smoothly.
By taking time to thoroughly evaluate potential partners against these criteria, you’ll dramatically increase your chances of finding an HR outsourcing provider that delivers lasting value.
The Takeaway
“It’s not just about the money we saved,” reflects Patricia, CHRO at a multi-state retail operation. “It’s about what we’ve accomplished since our HR team stopped drowning in administrative quicksand.”
Patricia’s team now runs leadership development programs that have cut management turnover by nearly a third. They’ve implemented an employee engagement initiative that boosted retention in key roles. And they’ve become genuine business partners to operations leaders—all within 18 months of transitioning to outsourced HR services.
Her finance counterpart, Robert, has a different but equally positive perspective: “The cost reduction got my attention initially. But the risk mitigation alone would have justified the investment. We haven’t had a single compliance penalty since implementation.”
These complementary viewpoints capture the dual promise of outsourced HR services. For HR leaders, they offer liberation from administrative burdens and a path to strategic relevance. And for financial executives, they deliver measurable cost advantages, risk reduction, and a more predictable HR cost structure.
The statistics reinforce these experiences: companies typically reduce HR operational costs by 20-40% by outsourcing. But the numbers only tell part of the story. The most significant benefits often emerge in the months after implementation, as internal HR teams redirect their energy toward initiatives that directly impact business performance.
As Patricia puts it: “For years, I argued that HR deserved a seat at the strategic table. Outsourcing finally gave us the time to earn it.”
