7 Types Of HR Outsourcing Services With Examples (A Guide)

Outsourcing can save companies $87,012 a year, and here’s the best part: you can get the same level of expertise as an in-house team without the hefty price tag. But it all comes down to selecting the right service to outsource and finding the ideal partner. A good place to start is by exploring the different types of HR outsourcing options.

To make things easier for you, we’ve put together a comprehensive guide on the 7 types of HR outsourcing. This guide will provide you with clear, straightforward information to help you choose the best service for your unique needs.

7 Core Types Of HR Outsourcing You Should Know

Here’s a quick overview of the 7 main HR outsourcing services:

HR Outsourcing Service	Core Functions Outsourced	Pros	Cons
Payroll Processing	Payroll calculation and distribution	Simplifies payroll management	Potential for data security breaches
Recruitment Process Outsourcing (RPO)	Candidate sourcing and screening	Streamlines hiring processes	Loss of direct control over recruitment
Benefits Administration	Benefits enrollment and management	Expertise in benefits compliance	Possible lack of customization
Training and Development	Training program design and delivery	Access to specialized training resources	Misalignment with company culture
Compliance Assistance	Ensuring regulatory compliance	Reduces legal risks	Dependency on outsourced knowledge
Employee Relations	Handling employee grievances and relations	Neutral third-party mediation	Loss of direct employee trust
Performance Management	Performance evaluation and feedback	Objective performance assessments	Potential for disconnect from company goals

1. Payroll Processing

Payroll processing outsourcing handles your salary calculations, tax deductions, and employee payments. This service helps you avoid costly errors and save time by managing payroll tasks externally. 

Functions outsourced include:

• Salary and wage calculation
• Tax withholding and filing
• Employee benefits administration
• Direct deposit processing
• Payroll reporting and compliance

Tesla 

Tesla designs and manufactures electric cars, including popular models like the Model S, Model 3, Model X, and Model Y. 

Tesla outsourced its payroll processing to ADP, which handled employee wages, tax deductions, and benefits administration. This partnership streamlined payroll operations with accuracy in tax compliance and reduced administrative workload across Tesla’s global locations. 

If you want to achieve similar results, partner with a trusted provider to ensure compliance, accuracy, and efficiency. At Genius, we source the top 1% of accountants and bookkeepers to manage your payroll with precision and full compliance. Our on-the-ground sourcing team carefully vets each professional to guarantee top-quality service. 

2. Recruitment Process Outsourcing (RPO)

Recruitment Process Outsourcing (RPO) is when you hire an external service provider to manage some or all aspects of your company’s recruitment functions. This service helps you find, assess, and onboard top talent efficiently while reducing the time and cost of hiring. 

 Functions outsourced here are:

• Sourcing and attracting candidates
• Resume screening and shortlisting
• Conducting interviews and assessments
• Managing job offers and negotiations
• Onboarding and integrating new hires

Coca Cola

Coca-Cola uses Recruitment Process Outsourcing (RPO) to streamline its hiring process. They partner with different RPO providers to attract top talent while reducing recruitment costs and focusing on core business operations.

Coca-Cola’s best practice for successful RPO implementation lies in its strong collaboration with its service providers. Maintain clear communication, set well-defined hiring goals, and leverage the RPO provider’s expertise in sourcing top talent for your needs.

3. Benefits Administration

Benefits administration outsourcing connects you with a third-party provider to manage your employee benefits like health insurance, retirement plans, and wellness programs. This service helps you reduce administrative burdens, ensure compliance with regulations, and offer competitive benefits packages. 

Functions outsourced include:

• Health and dental insurance management
• Retirement plan administration
• Wellness program coordination
• Employee benefits enrollment and tracking
• Compliance with benefits regulations and reporting

Google

To manage their employee benefits, Google outsources health insurance and retirement plan administration. They ensure compliance with regulations and provide a seamless experience for employees while reducing the complexity of handling benefits in-house.

Google regularly reviews and monitors performance metrics to ensure their outsourced benefits administration delivers value, compliance, and satisfaction. Follow this proactive approach to offer a competitive benefits package to your employees while maintaining efficiency.

4. Training & Development

Training and development outsourcing gives you access to external providers who are experts in designing and delivering employee training programs. This service helps you improve workforce skills and productivity while saving time and resources. Outsourcing training provides customized learning solutions that align with your business goals. 

Functions you can outsource are:

• Employee onboarding
• Skills development courses (leadership, technical expertise, or soft skills)
• Learning management systems (LMS) administration
• Compliance training
• Performance assessments

IBM

As a large organization with a diverse workforce, IBM outsources its training and development programs, particularly in leadership development, technical training, and employee upskilling.

IBM ensures full employee participation in outsourced training programs by integrating them into employees’ development plans and performance goals. Outsource training and development as a strategic way to align learning initiatives with career growth while offering incentives like certifications and promotions to encourage active participation. This approach enhances workforce skills and strengthens employee engagement and productivity. 

5. Compliance Assistance

Compliance assistance outsourcing is when you hire an external expert to monitor, audit, and implement compliance with legal and regulatory requirements. This service helps you avoid penalties, follow labor laws, and maintain industry-specific standards. 

You can outsource these functions:

• Monitoring changes in labor laws and regulations
• Conducting internal audits to ensure compliance
• Policy development and updates
• Evaluating potential compliance risks
• Providing employee training on legal and regulatory requirements

Walmart

As a company operating on such a large scale, Walmart outsources compliance assistance, particularly in areas like labor law compliance, health and safety regulations, and environmental standards.

Walmart ensures that they stay up to date with constantly changing regulations across various markets. This has helped the company avoid costly fines, improve internal processes, and maintain a strong reputation for adhering to legal requirements.

Walmart assigns internal compliance teams to oversee outsourced provider’s work for accountability and alignment with the company’s standards. Adopt a similar approach when you outsource, and set up regular check-ins and performance metrics. This maintains your control and transparency with outsourced partners, ensuring compliance across all areas.

6. Employee Relations

Employee relations outsourcing providers manage your workplace relationships, conflict resolution, and employee engagement. This helps you address employee grievances and improve communication within your workplace for a positive work environment. 

Here’s what you can outsource:

• Conflict resolution
• Employee grievance handling
• Employee engagement programs
• Workplace investigations
• Policy and procedure development

Chevron

With a diverse and widespread workforce, Chevron outsources its employee conflict resolution, employee engagement programs, and workplace investigations.

Chevron works closely with its external provider. They set clear expectations, define measurable outcomes, and ensure regular communication and reporting on case resolutions. They conduct follow-up surveys with employees involved in conflicts to assess satisfaction and effectiveness. 

For your business, clearly define the outcomes you expect from your partner and maintain regular communication to stay informed of their progress. Conduct quarterly evaluations and gather employee feedback to ensure your provider aligns with your company’s values.

7. Performance Management

Performance management outsourcing manages your employee performance reviews, goal setting, and feedback processes. This lets you track and improve employee productivity while maintaining a structured approach to performance evaluations. It also helps establish unbiased assessments and the implementation of best practices. 

The key functions you can outsource include:

• Performance reviews
• Goal setting and tracking
• Feedback systems
• Employee productivity analysis
• Training on performance tools

Unilever

Unilever outsources parts of its performance management like designing performance review systems, conducting employee evaluations, and providing coaching for underperforming employees.

Unilever ensures the effectiveness of its outsourced performance management by integrating the external provider into its internal processes. Aside from this, you can regularly review performance metrics and work on continuous improvements to keep the system responsive to changing needs and employee feedback. 

How To Choose The Right HR Outsourcing Partner

Follow these steps to find the best HR outsourcing partner for your business needs:

Step 1: Identify Where You Need HR Help

Assess your current HR processes and pinpoint inefficiencies or areas where your team struggles. When you know exactly what you need help with – whether it’s payroll, recruiting, or compliance – you can select a partner with the right skills and services to solve those problems. This ensures you get the most value and support for your business.

Here are 5 easy ways to start looking at what’s not working well in your current HR setup:

1. Check your payroll process. Are there frequent errors, or does payroll take too much time to complete? Look for issues in accuracy and efficiency.
2. Review employee turnover rates. High turnover may signal problems with recruiting, onboarding, or employee satisfaction that need to be addressed.
3. Look at compliance tasks. Are you keeping up with labor laws and regulations, or have you faced any penalties? 
4. Ask your employees if they feel supported and if HR processes are meeting their needs. This can highlight problem areas.
5. Monitor recruitment efficiency. If hiring takes too long or doesn’t attract the right talent, you need help with your recruiting strategy.

Step 2: Assess the Provider’s Expertise & Industry Experience

Take a close look at the provider’s expertise and industry experience. This helps you spot any gaps in their ability to tackle your specific HR challenges. It also shows you how they’ve adapted their services in real-world situations, so you know you’re getting more than just theory—you’re getting proven solutions that fit your business needs.

Here’s how you can assess your provider’s expertise and experience:

1. Look for companies in your industry that the provider has worked with to ensure they understand your specific needs
2. Request case studies of how they successfully handled similar HR challenges to see if they can deliver results.
3. Verify that the provider holds relevant HR certifications, which indicate their knowledge and commitment to industry standards.
4. Look at how long they’ve been in the HR outsourcing business and check their track record with other clients.

Step 3: Evaluate Technological Capabilities That Align With Your Needs

A provider with modern tools can automate tasks to save your business time and reduce human errors. Additionally, having technology that integrates with your existing systems ensures smooth communication and better workflow management. 

Check for the following technological capabilities: 

1. Payroll automation software: Automate salary processing, tax calculations, and direct deposits to streamline payroll management. 
2. Applicant tracking systems (ATS): Manage the entire recruitment process, from job postings to candidate onboarding.
3. HR management software (HRMS): Centralize employee data, track performance, and manage benefits in one place.
4. Employee self-service portals: Let employees manage their own personal information, benefits, and payslips online.
5. Compliance tracking tools: Track and manage labor laws and regulatory updates to keep businesses compliant.

Step 4: Review Service Level Agreements (SLAs) & Contract Terms Thoroughly

SLAs outline the specific services, timelines, and quality benchmarks, so both parties are clear on deliverables. Thoroughly review these terms to protect your business from potential disputes and hold the provider accountable to the agreed-upon performance metrics. This way, you can avoid misunderstandings and ensure the provider meets your business needs.

These are the terms you need to check:

1. Verify the contract clearly lists all HR services, like payroll processing, recruitment, or compliance, and defines any limitations or exclusions.
2. Look for measurable standards like processing payroll within 24 hours or filling job vacancies within 30 days.
3. Make sure the agreement specifies consequences if deadlines aren’t met, like fee reductions or service credits for unmet performance targets.
4. Confirm the contract’s length (usually a one-year term), renewal conditions, and how to terminate the contract if services are unsatisfactory, with clear notice periods and exit fees.
5. Check that there are strong protections in place for handling sensitive information, including compliance with data privacy regulations like GDPR or HIPAA, and procedures for data breaches.

Step 5: Conduct Reference Checks & Gather Client Testimonials

References and testimonials let you learn from the experiences of other clients and analyze the provider’s strengths and weaknesses. This process helps ensure that the provider delivers on their promises and has a proven track record in similar industries or services. This way, you can minimize risks by validating the provider’s credibility and service quality.

Here’s how to do it:

1. Ask the provider for a list of clients, especially those in similar industries or with similar service needs.
2. Reach out to the references and ask about their experience. Focus on areas like service reliability, communication, and problem-solving.
3. Inquire about the provider’s response times, quality of work, and challenges they faced during the partnership.
4. Look for reviews on third-party sites like Google, Trustpilot, or industry-specific forums to get unbiased feedback.
5. If the provider offers case studies, confirm the results by speaking with the client to see if the claims are accurate.

Step 6: Consider Cultural Fit & Effective Communication Channels

A provider that shares similar values and understands your company culture can integrate into your company’s day-to-day operations and align with your team’s working style. Clear and reliable communication channels resolve issues quickly, keep projects on track, and maintain a strong working relationship. Together, these factors minimize disruptions and ensure long-term success.

You can ask these questions to ensure cultural fit & clear communication with your provider:

1. How do you align your services with a client’s company culture and values?
2. What are your preferred communication methods (email, phone, video calls), and how often will we be in touch?
3. How do you handle urgent issues or requests?
4. Can you provide examples of how you adapted to a client’s specific work culture or industry?
5. What steps do you take for smooth collaboration between your team and ours?

Step 7: Negotiate Pricing & Flexibility to Ensure Alignment

Clearly discuss pricing to avoid hidden costs or misunderstandings later. Choosing services that can adjust as your company grows or changes means you won’t be stuck with rigid terms. 

Make sure you’re on the same page about costs and flexibility so you get the most out of the partnership and the provider can keep up with your needs as they change.

Here’s a script for negotiating pricing and ensuring flexibility with your provider:

1. Start with clarity on your needs

“We’re looking for HR services that can handle our current workload and scale as we grow. Can you walk us through how your pricing structure adapts to changing needs?”

2. Address pricing expectations

“We want to ensure transparency in pricing. Are there any additional fees beyond the base rate for specific services or support? Can you provide a breakdown of all costs?”

3. Request flexibility in terms

“As our business evolves, we may need to adjust the services we’re using. Do you offer flexible packages or a pay-as-you-go option that allows us to modify the scope of work without penalties?”

4. Propose a compromise

If the price or terms seem rigid, suggest: ”Would it be possible to revisit this in 6 months and adjust the contract based on our needs and usage patterns?”

5. Confirm agreement

“Before we move forward, please confirm if this agreement allows us to scale up or down and that all costs are clearly outlined to avoid any surprises.”

Conclusion

Outsourcing is a strategic decision that benefits your business, especially when operating on a tight budget. If you’re ready to start your outsourcing journey, identify the types of HR outsourcing that make the most sense. List your HR challenges and see which services can address them.

If you’re looking for top-tier HR expertise, Genius offers A+ talent from the Philippines and Latin America. We carefully vet our candidates and use local sourcing to find the best fit for you. We even provide free interviews to make sure you find the perfect match. Fill out this form now to get started.

FAQs

What are the 4 types and 5 main areas of HR?

The 4 main types of HR are recruitment, employee relations, compensation and benefits, and compliance. The 5 main areas of HR include recruitment and staffing, employee relations, training and development, compensation and benefits, and compliance and safety.

What is outsourced HR called?

Outsourced HR is referred to as HR outsourcing (HRO). It involves hiring external providers to handle specific HR functions like payroll, recruitment, or compliance.

What are the HR issues in outsourcing?

The main HR issues in outsourcing are misalignment with company culture, communication challenges, loss of control over certain HR functions, risks related to data security, and ensuring compliance with local labor laws.

What is the difference between HR consulting and HR outsourcing?

HR consulting provides expert advice and strategic guidance on specific HR issues to help businesses improve their internal HR processes. HR outsourcing, on the other hand, delegates specific HR functions to an external provider who manages these tasks on behalf of the business.