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Top Six Reasons to Outsource HR

There are two key reasons why companies choose to outsource their HR departments: to standardize their processes and reduce costs. While these are key factors (which will be explored in this paper), they really only scratch the surface of why moving a company’s HR offsite is critical to improving productivity, efficiency and growth of small-to-medium sized enterprises and even large corporations.

Indeed, the interest in outsourcing the so-called “cost centre” has become amplified over the past decade, and earlier this year a study conducted by Sourcing Analytics, Inc., found that outsourcing reduces the overall costs of HR’s “transactional processing, management and time and attendance reporting” by an amount close to 40%. That’s time that can be directed toward activities that actually make money.

As more companies embrace globalization, their HR needs become more complex and demanding; this leads to increased costs, and more time is required to take care of employees. To address these needs, many firms have turned to PEOs to take advantage of their varied experiences and full toolkits designed to deliver results with reduced complexity and cost for the client. This has been a particularly attractive option for many large companies as well as SMEs and, as Deloitte’s 2011 Global Shared Services Survey found, the results have really spoken for themselves. “Cost reduction, controls, and process efficiency are the top three outcomes globally – and these results have remained consistent over the last few years,” an excerpt from the survey reads. “Many companies continue to work toward similar goals aligned with the future state they’ve envisioned for years.”

But it’s not only North America and Europe in which this trend toward finding external help is on the increase. One study found that across Australia, Hong Kong, China and Singapore the majority of HR executives at companies they polled said they consider HR outsourcing a solution to key challenges-in fact, more than 80% agreed with this statement. Half of respondents even said that these supposed “outsiders” improved employee retention.

And while lack of insider company knowledge is sometimes cited to be a reason why companies are skeptical that HR outsourcing will lead to positive changes, specialized knowledge of PEOs is now the most often cited benefit of HR outsourcing-67% of people identified this as an advantage, according to one Australian study conducted by Galaxy Research. “Outsourcing allows companies to free up resources to do more business, and can offer stability,” says Dan Lisac. He is Vice President of Client Relations at vpi, a leading Canadian workforce management services company, based in Mississauga, Ont. He notes that there is increasing evidence that the past decade’s advancements have proven once and for all that HR outsourcing helps companies increase their efficiency.

This white paper looks at some of the reasons why companies that seek to take full advantage of employee performance and use their top talent effectively embrace outsourcing. It will explore why the same is true for improving control of labor costs and decreasing roadblocks that impede performance. Because of the rapidly increasing complexity of managing an HR department and the challenges that come with competing on a global (or at least industry) stage, modern day companies need help taking care of recruiting, hiring, and managing benefits. The good news is that there are plenty of other reasons to choose a PEO.

In this paper, readers will find an overview of the six most pressing reasons to consider moving their HR department out-of-house and why others have benefited from doing so. Information in this paper comes from research studies, experienced professionals and case studies. The paper will also address the most common concerns about outsourcing as well as basic HR support models: professional employer organizations, business process outsourcing, and application service providers. With these tools, company executives and managers should feel confident to assess the needs of their own teams and may find areas that outsourcing a task (or department) maybe to everyone’s benefit. (Source:

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