Efficiency, expense reduction and expertise lie behind the trend of hiring vendors to handle human resources functions. Outsourcing frees small business owners to concentrate on their business, control overhead costs, access the best in human resource information system technology, acquire compliance expertise and improve employee service. Payroll, benefits administration, recruitment and tasks related to risk management sit on the top of the list of HR functions commonly outsourced.


According to Missouri-based talent specialist Vandover, payroll remains the most popular HR function for outsourcing. Administration services performed by a contracted payroll provider could include payroll calculation, taxes, producing and delivering checks, direct deposit, envelope stuffing, automatic signatures and issuing W-2 forms. Outsourcing payroll helps avoid mistakes that can damage employee relations and incur tax penalties. The Internal Revenue Service advises selecting a provider that uses its Electronic Federal Tax Payment System, or EFTPS. With EFTPS, an employer can confirm provider payments.


The Society for Human Resource Management reports that companies commonly outsource aspects of their health care, pension and retirement plans. Vendor-run call centers and dedicated websites can field employee questions, handle program enrollment, process changes in participation status and track benefit history and eligibility. Work-life benefits such as employee child care make ideal candidates for outsourcing as do employee counseling and assistance programs. Other options offered include open enrollment and flexible spending account administration. Employers may turn to a benefits service provider for help obtaining better terms than they could negotiate on their own, thereby enabling them to offer workers a more attractive package. Options purchased individually or bundled make increasing workforce size without adding support staff more feasible.


With recruitment process outsourcing, or RPO, a professional recruiting firm handles talent searches, applicant tracking, screening, interviewing, background checks and compensation analysis on a project basis. RPO providers specialize by industry. Their expertise helps speed up searches for candidates with particular skill sets and broadens the talent pool needed to increase diversity. Some firms turn to RPO when they need to hire a large number of employees or face a narrow hiring window.

Compliance and Risk Management

Employment law imposes considerable record-keeping responsibility on HR. Staying current on legislation takes time; failure to meet mandates leads to penalties and exposes a company to litigation. For example, the Family and Medical Leave Act, or FMLA, represents a complex compliance issue requiring manpower resources not readily available in small firms, according to HRO Today magazine. HR World cites Everest Research Institute findings that more than 50 percent of HR outsourcing deals with compliance and regulatory issues. Outsourcing claims management allows HR to tap administration support and legal expertise. Among the tasks outsourcing targets to lessen risk are workers compensation, unemployment compensation, drug-free workplace and safety programs and complaint handling.


Nearly 75 percent of companies used a relocation service in 2011, according to Atlas Van Lines' 2012 Corporate Relocation Survey. Assisting transferred and new employees with house hunting, spousal employment, school enrollment and other aspects of moving plays an important role in the success or failure of a job assignment. Cost-of-living and cultural orientation come into play with foreign national employment. Outsourcing brings a level of expertise and attention to each move that HR may lack and can simplify expense administration.