HRO, or human resource outsourcing, is an arrangement in which a third-party administers HR on behalf of another business, allowing it to focus more attention on growth-related objectives. Options range from basic HR services and help desks to partnerships with professional employer organizations (PEO) that provide a combination of strategic planning and day-to-day administrative support.
What services does HRO typically offer?
HR outsourcing companies generally have dedicated service teams that deliver day-to-day support in the following areas:
- Payroll and tax administration
- Employee training and development
- Policy creation and workplace safety
- Recruitment and onboarding
- Benefits administration
- Compliance and risk management
Why should a business consider HRO?
Businesses that outsource HR may experience a return on investment (ROI) in six key areas:
With full-service payroll, employers can take advantage of the best people, processes and technology without having to invest in a bigger in-house team.
HRO providers typically manage multiple HR systems from a centralized platform, which means data is more accurate and easier to access.
Aided by their outsourcing partner, employers may be able to offer their employees better benefits, thereby improving engagement and attracting new talent.
HRO professionals know the regulatory landscape and can help manage liabilities, such as workplace safety, changes in tax laws, leaves of absence and employee relations issues.
Leaving payroll and HR to experts gives employers the opportunity to focus more of their time on bigger picture initiatives that move their business forward.
How to choose an HRO provider
When they’re in the market for an HRO, employers generally ask the following questions to determine if a provider is a good fit:
- What services are needed?
Some businesses may only require help in one specific area, like payroll, while others may need a full suite of HR services.
- Does the HRO provider have a track record of success?
Feedback from current and previous customers, as well as third-party reviews, provide a window into how well a provider delivers on its promises.
- What is the estimated cost?
Provider fees vary, but most charge by the number of employees and how many services are required.
- What expertise does the client service team have?
Ideally, a provider’s client support team should include experts in benefits, payroll, HR, and risk and safety, and have credentials in industry-standard programs.
- How will business be conducted?
Depending on individual needs and preferences, the HRO provider may either offer web-based support or will come on site.
- Does the customer service meet expectations?
Providers that are responsive and answer questions in detail during the evaluation process are generally more likely to provide quality customer service later.
Frequently asked questions about HRO
What is the role of HRO?
The role of HRO is to help businesses with their human resource responsibilities. Outsourcing may also lead to cost control though economies of scale and improved regulatory compliance.
What is HRO payroll?
HRO payroll is when a third-party provider handles all aspects of payroll, including paying employees and depositing and filing taxes, on behalf of a client business. This type of arrangement is also known as full-service payroll.
What is selective outsourcing?
Selective outsourcing or business process outsourcing (BPO) is a type of HRO that allows employers to choose which HR functions to outsource and which to maintain themselves. This flexibility makes HRO ideal for business owners who need help with HR, but also want to keep some measure of control.
This guide is intended to be used as a starting point in analyzing HR outsourcing. It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.