Human resources office team sitting in a row.

Outsourcing HR: Everything Business Leaders Need to Know

No matter what your organizational goals are, you can’t succeed without a solid team. With the advent of remote work and an increasingly geographically distributed employee base, building and maintaining a solid team is only becoming more complex.

Your team is foundational to your success. And if you want to give your team the tools to be successful, it’s vital you prioritize strategic, thoughtful HR programs.

Take, for instance, a small nonprofit dedicated to providing educational opportunities in underserved communities. Due to funding restrictions, the organization struggles to compensate employees competitively. As a result, it faces chronic employee turnover.

Each departure is devastating. Critical programs grind to a halt as institutional knowledge walks out the door, leaving vulnerable students in the lurch.

Without an effective HR department, the nonprofit finds itself entangled in a web of compliance issues. A former employee files a wrongful termination lawsuit, draining precious resources away from the mission. Simultaneously, a payroll error leads to hefty fines from the labor department, further straining an already-tight budget.

The constant churn and legal troubles severely tarnish the nonprofit's reputation. Donors grow apprehensive about contributing, major grants are lost, and it becomes nearly impossible to attract passionate, qualified educators to join the cause.

Ultimately, the lack of HR leadership and its cascading effects force the nonprofit to make agonizing cutbacks — shuttering afterschool programs, reducing tutoring services and even closing community learning centers. The very communities they aimed to uplift through education now find themselves abandoned with dwindling resources and fading hope.

In this worst-case scenario, the absence of a strong HR function doesn't just hinder the nonprofit's operations; it threatens to dismantle years of progress.

Whatever industry you serve, HR is a necessary and strategic solution for businesses that want to scale. However, building your internal HR team can be a challenge. After all, you need solid HR in place already to recruit effectively.

That’s why many businesses choose to outsource HR, at least in part. By leveraging external expertise, companies can address their unique HR pain points more quickly so leaders can focus on what they do best: growing their organization.

But if you’ve never outsourced HR before, it’s difficult to know what to expect. Of course, you might have worked with a payroll company or used some HR technology. But that’s not the trusted HR leadership you need to build a culture that really resonates with your employees.

This guide was created to equip business leaders like yourself with essential insights into the nuances of strategically outsourcing your HR needs. We’ll explore the types of outsourcing available, the types of tasks that can be outsourced, the pros and cons of HR outsourcing, and more.

Our hope is that by the time you’re through reading, you’ll have a much better picture of the outsourced HR solutions available to you and can start thinking through how your organization might leverage them.

James Moore: A Trusted HR Outsourcing Partner

Founded 60 years ago in 1964, James Moore honors the legacy of its founder and namesake, James “Jim” F. Moore, through a continued dedication to service and excellence. In Jim’s words, “Service is the sole purpose of our existence.”

The expert HR consultants at James Moore know that on top of everything a leader has on their plate, managing human resources can sometimes feel like a chore. But with our expertise, you won’t have to worry about it.

James Moore’s HR advisors can help you:

  • Provide additional resources to your in-house HR department
  • Establish a new team, including establishing HR policy and navigating compliance
  • Fill knowledge gaps with targeted, specialized expertise as needed

Julie Kniseley, President of James Moore HR Solutions, has over 30 years of experience across the human resources management world, including HR compliance, benefits and compensation, recruitment, employee and labor relations, training and development and HR policy.

Together, she and the rest of the James Moore HR Solutions team provide expert HR leadership to clients from a diverse range of industries as they build and optimize their HR infrastructure.

Why Outsource HR?

For many businesses, an outsourced approach to HR makes far more sense than building everything out for an internal team.

Not convinced? Consider the following scenario.

You’re leading a company lucky enough to have an HR superstar. This individual has expertise in recruiting talent, helping employees grow, staying compliant and maintaining an engaged, productive workforce. And they’ve managed it all mostly independently.

Then your HR rockstar retires. And now you’re left to try filling their shoes while also leading your organization.

It’s a lot to handle. And you suddenly realize that you don’t know as much about HR as you thought. You’re not just signing paychecks and filling out paperwork. You’re also keeping the organization compliant, managing employee relations, benefits, recruitment and more.

On top of that, you already have responsibilities of your own — which are not HR — to consider.

Managing your HR functions poorly could cause your company to:

  • Lose top talent to competitors
  • Struggle to fill vacancies
  • Damage employee engagement and satisfaction
  • Decline in productivity

Sometimes, organizations only understand just how important their HR function is to their business once they experience these negative consequences or fall victim to an undiagnosed HR issue. But all it takes is one mistake to escalate a seemingly simple scenario into a potential crisis. Do you really want to wait for that crisis to arrive before acting?

Say, for example, several employees come into conflict with one another. If the situation is not handled correctly, it could grow into an even bigger problem, like a discrimination or harassment complaint. By this time, it might be too late to bring in an experienced HR representative to mediate and protect the organization from liability.

Considering all this, it’s clear that good human resources management is a strategic necessity that protects your company from risk while also positioning you to grow.

So why outsource HR instead of handling things in-house?

Of course, you could instead recruit an in-house HR lead or an entire team. But recruitment is difficult and time-consuming, especially when your HR functions are lacking in the first place. And even if you already have a team, it’s likely they’re overworked and under-resourced. They might manage the day-to-day work just fine but lack the strategic vision or leadership experience to transform HR into a real value driver for your organization.

You could use a tool to automate your HR functions. However, technology lacks the necessary human insight. So even after investing in the right tool, you might end up hiring or outsourcing regardless. And let’s be clear, while many technology platforms promise human support, most of the time you’re getting an entry-level employee trying to solve your issue from a book of customer service scripts — not a proven HR leader.

Outsourcing your HR has all kinds of benefits. It allows you to bring experienced HR leaders on board more quickly, scale your HR functions to your needs, and save on costs at the same time. This way, you can enjoy the benefits of a fully-staffed HR department without stretching your resources thin.

HR Outsourcing: An Overview of the Different Options

When building out your organization’s HR functions, you have a few different paths forward.

Do you commit to recruiting an in-house team, outsource, or use some combination of the two?

There isn’t a clear-cut answer. Each of these options has unique benefits and drawbacks, depending on the solution you choose and the needs of your organization.

Once you decide to outsource, you still have more options to consider. For example, you could enlist a professional employer organization (PEO), adopt a technical solution or outsource to experienced HR consultants. In reality, there’s often no one-size-fits-all solution. Instead, you’ll have to build a team of HR resources that makes the most sense for your organization.

Below, we’ll explore each option to help you make the best choice for your team.

Hiring In-House HR Teams

The first option to expand your company’s human resources capabilities is to hire in house.

An in-house HR team could be as small as one person — say, an HR director who runs the department by herself. It could also be a large department consisting of multiple teams, such as talent acquisition, learning and development, compensation and benefits, employee relations and HR operations.

Maintaining an in-house HR department can be expensive between recruitment, compensation and benefits. The larger your team, the more resources you’ll need to commit to maintaining it. And if the team is too small, it will quickly become overwhelmed by the often time-consuming day-to-day tasks of running an HR department without help.

In-house HR teams may also lack the necessary expertise or experience. For example, nonprofit organizations face unique legal and regulatory challenges not shared by other industries. If your in-house HR team has never worked for a nonprofit before, it may be unable to effectively address those unique challenges. The same applies to every industry, essentially shrinking the pool of HR talent.

Even if they have the right background and experience, your new HR hires may still lack essential skills or qualities. For example, they may lack the strategic foresight for long-term planning. Or perhaps they’ve spent their career managing payroll and have little experience in employee relations. Both of these issues can be corrected with time and resources, but they nevertheless present a challenge for companies.

Finally, in-house human resources may suffer from perceptions of bias — specifically, toward company leadership over the welfare of individual employees. If this happens, HR may find it difficult to fulfill its mediator role effectively.

Why an In-House HR Team Isn’t Enough

In-house HR teams are limited by the resources a company can provide them. And when they need to support an entire company, leaders may find themselves choosing between a fully resourced HR team and other critical business needs.

That can spell disaster for an HR team that’s already spread too thin. Supporting your existing HR department with an outsourced HR solution offers the best of both worlds, unlocking benefits such as:

  • Access to specialized expertise: HR includes many specialized disciplines, such as recruitment, compensation, benefits, compliance, training, etc. Due to the resources needed to recruit experts and provide the latest in-depth training, an outsourced solution that provides these insights on a fractional basis is often the best way for organizations to access the expertise they need.
  • Cost effective approach: Maintaining a well-rounded, fully-resourced in-house HR team can be cost-prohibitive, especially for smaller businesses. Outsourcing grants companies access to the expertise they need on a part-time basis.
  • Access to latest technology and best practices: It can be difficult for in-house teams to budget the latest technology or find time to learn about the latest industry best practices. Since outsourced HR providers are fully dedicated to HR, they are better able to guide your investments in cutting-edge HR technology, tools and training.
  • Scalability and flexibility: In-house HR teams are typically limited by the resources they have, making it difficult to scale during periods of rapid growth or downsizing. Outsourced HR providers can easily scale resources up or down as needed.
  • Compliance and risk mitigation: Keeping up with constantly evolving labor laws, regulations, and compliance requirements requires significant time and resources. Outsourced providers have the specialized compliance knowledge required to ensure your organization can effectively mitigate legal risks.
  • Focus on core business: By outsourcing HR functions, companies can redirect their in-house resources and efforts toward business goals and driving revenue.

By partnering with an outsourced HR team, companies can mitigate these challenges, saving resources and positioning their in-house teams for success through much-needed support.

Professional Employer Organizations (PEOs)

Some organizations that lack internal HR functions may outsource to a professional employer organization (PEO). A PEO acts as the employer of record and handles tasks such as payroll processing, benefits administration, compliance management, risk management and other HR-related responsibilities.

Because the PEO acts as an employer of record and shares some risk with the organization, they have more say over HR decisions and processes than one might expect, resulting in organizations having less freedom and control over their strategies.

Similarly, PEOs tend to offer standardized services, meaning you likely won’t be able to customize your package or choose your benefits providers. A common example is employee benefits. PEOs may have relationships with specific insurance providers and stipulate that you offer these plans to your employees.

Finally, while some organizations save money by adopting a PEO, others may find it costly. This is because PEOs often price their services based on the number of employees they will need to serve — so the larger your team grows, the more expensive the PEO will become.

Filling the Gaps: A PEO & an Outsourced HR Solution

If you’re working with a PEO, an HR outsourcing partner like James Moore could fill in the gaps and elevate your overall HR functions, benefiting not only your employees but also your company as a whole.

Here’s how:

  • Streamlined HR through complementary services: PEOs often handle transactional HR tasks like payroll, benefits administration and compliance. But they may fall short in more strategic functions like talent management, employee development, and HR policy. By combining the two, companies can build a more well-rounded HR function.
  • Scalability and cost savings: PEOs often price their services based on the number of employees served–meaning that once your company grows, so will the costs associated with the PEO. A partner like James Moore HR Solutions provides strategic guidance to scale your team in a cost-efficient way.
  • Filling experience gaps: While PEOs may offer expertise in specific areas (like payroll or benefits management), a consulting partner like James Moore could fill gaps in expertise–for example, offering more long-term strategic planning skills or preparing employee handbooks.

In short, by supplementing your PEO with the strategic insights of an outsourced HR consulting partner like James Moore HR Solutions, you can maximize the impact of your already-outsourced HR.

HR Technology

HR technology refers to any of a number of tools designed to enhance or even fulfill HR functions. While many of these tools were created for use by HR professionals, some providers also offer automation services to supplement the team.

Many such HR technology tools bill themselves as one-stop shops. In other words, instead of being a simple payroll tool, it claims to accommodate the entire scope of an HR department’s processes. These types of subscriptions might connect you with an HR specialist as part of your deal.

But in many instances, the support you’ll receive often isn’t at the level you require. If you call with an issue, it’s unlikely you’ll be talking to someone who knows your business. Instead, you’ll be talking to a call center employee trained to follow certain scripts.

And even if you do adopt a “one-stop shop” HR tool, your team will need sufficient training on how to use it effectively. This training can drive up costs for the organization. And if the technology doesn’t live up to its promises (as is so often the case), your team could end up making costly errors.

These tools can also be technically complex to implement, especially if you need to integrate them with the systems your company already uses. If this integration is mishandled, you could introduce delays and security risks and incur additional expenses to resolve these issues.

For something as complex as HR, this cookie-cutter approach doesn’t cut it. But let’s be clear: We’re not saying HR technologies don’t have a role to play. Of course they do! Tasks like payroll would be impossible without HR technology. But they shouldn’t be the only solution your team relies on.

HR Technology & Human Expertise: The Perfect Match

While the latest HR technology can be difficult to implement and onboard, outsourcing to a consulting partner like James Moore HR Solutions can help you do it more effectively.

They could help you:

  • Access the best HR technology for you: There’s no shortage of HR tools to choose from, and understanding what your business needs (and when it needs it) can be challenging. Outsourced HR professionals have significant experience advising businesses at all growth stages and can counsel organizations on the most appropriate tools for their unique situation.
  • Implement technology and onboard your team: Outsourced HR providers have access to the latest technology and expertise in using and implementing it. As such, they’re uniquely positioned to guide you through the implementation process, avoiding technical headaches. Once the technology is ready, they can provide in-depth training to help your team become fluent in these new processes.
  • Streamline processes and automation: Outsourced HR consultants can use their expertise to help you maximize the impact of your suite of tools by streamlining your current processes, automating time-consuming tasks and improving your team’s overall efficiency.
  • Ensure technological compliance: Outsourced HR partners like James Moore HR Solutions are skilled in evaluating and ensuring HR compliance. As such, they can guide the implementation of HR technology and evaluate current systems, ensuring that sensitive employee data is handled in a safe and compliant way.

In summary, outsourcing to an expert firm like James Moore HR Solutions can grant your team access to the latest technology, implement it more effectively, build effective processes and stay compliant.

Outsourced HR Consultants

Outsourcing to HR consultants allows businesses to access specialized HR expertise more cost effectively. Still, the nature of the engagement can vary considerably depending on the service provider and the needs of the organization.

Here’s how your options break down:

  • Individual HR consultants: Because it’s only one person, these engagements are typically for a specific project with an end date. While they may have experience, individual consultants lack the resources of larger firms and might lack the distinct experience for certain projects.
  • Small HR consulting firms: Similar to individual consultants, these engagements are often specific in nature. They also often lack the depth of resources of a more comprehensive team and may be limited in how much they can take on on the organization’s behalf as a result.
  • Comprehensive outsourced HR: This is where James Moore fits. These teams, with a large roster of experienced consultants and the resources of a firmly established organization, can accommodate both small-scale projects and comprehensive outsourcing engagements with ease.

Comprehensive HR consulting services like James Moore HR Solutions provide a great deal of flexibility, allowing organizations to tailor their engagement to the services they need. It’s the very opposite of a one-size-fits-all approach; it’s a made-to-measure HR solution built for the needs of your business.

For example, Company A needs guidance on establishing its HR department effectively from the ground up. Meanwhile, Company B needs leadership from a fractional chief HR officer (CHRO). And Company C wants to offload some of its day-to-day HR functions to relieve the pressure on its in-house team.

A team like James Moore could accommodate all of these requests.

HR consultants also bring a fresh, unbiased perspective, enabling them to analyze your current systems and strategies, identify risks and inefficiencies your organization may be blind to, and make more effective recommendations.

What Types of HR Tasks Can Be Outsourced to an HR Consultant?

If you’re considering outsourcing to an HR consulting firm, it’s crucial to understand which tasks they can most effectively take over from your organization. This largely depends on the consulting firm in question. For example, a well-established firm with more resources and expertise (such as James Moore) can take on a much more comprehensive array of tasks than a solo consultant or a smaller team could.

Here are a few examples of tasks an organization could likely outsource.

Developing Effective and Compliant Employee Handbooks and HR Policies

Due to their strategic insights, HR consultants are adept at crafting comprehensive employee handbooks and HR policies. They can also ensure these resources are helpful and compliant with federal, state and industry laws, regulations and standards.

Working together with the organization, a consultant can tailor these assets to the organization's unique needs and culture. This helps set the organization up for success later if it chooses to move away from outsourcing its human resources.

For example, maintaining a strong corporate image is crucial in the professional services sector. Working with an experienced HR consultant to create well-defined HR policies and procedures can help that organization:

  • Align with industry standards and regulatory requirements
  • Ensure a consistent and productive internal culture
  • Enable teams to more effectively represent the company

Boosting Employee Relations and Culture

To retain and engage employees, an organization must build a vibrant organizational culture and nurture employee relations with intention.

Imagine a manufacturing company grappling with morale issues on the shop floor. If this scenario continues, it could impact productivity and cause employees to leave. An HR consultant could identify the underlying employee engagement issues, implement targeted interventions to mitigate them, and help the manufacturer rebuild trust and employee satisfaction.

Employee Development, Recruiting & Retention

HR consultants can help organizations attract top talent, develop employees and reduce turnover in a variety of ways. They can help create more attractive compensation and benefits packages, develop employee development programs, and recommend strategies to improve recruitment.

For example, a nonprofit organization struggles to attract skilled talent with limited resources to compensate them. An HR consultant familiar with the nonprofit landscape could help create targeted language to attract candidates who are passionate about the nonprofit’s mission. They may also help the nonprofit find ways to offer different forms of compensation and create professional development pathways for their employees.

Fractional HR Leadership

Suppose a company needs help building and optimizing its HR functions from the ground up. Or perhaps their current HR function is understaffed and needs additional executive-level support. In that case, an outsourced HR team can act as a fractional CHRO. In this capacity, the consultant could lend their expertise in strategic planning, build new HR systems and help to develop internal HR leadership.

Overall, businesses can leverage their expertise strategically by outsourcing HR tasks to a consultant. By focusing on issues where an HR consultant can have the most significant impact, businesses lay a foundation for growth.

Looking for a deeper dive? Read this article next: 8 HR Tasks That Can Be Outsourced

What Are the Benefits of Outsourcing HR?

Whether you’re establishing a brand new HR department or want to leverage a consultant’s specialized expertise to grow an established team, outsourcing your HR to a partner like James Moore could deliver a multitude of benefits, such as:

  • Removing roadblocks to ensure employee requests are handled promptly
  • Objective guidance on topics important to teams, such as compensation, benefits and development opportunities
  • Developing clearer and more employee-friendly HR policies
  • Increasing HR teams’ bandwidth, so that they can spend more time fostering positive relationships with employees

On the employer’s side, outsourcing HR functions can yield significant cost savings by eliminating the overhead costs of maintaining an in-house HR department. Fractional HR leadership is not only more affordable, but it can also assist companies in risk management and compliance with all relevant federal, state and local employment laws and regulations. That’s because working with an outsourced HR leader provides businesses with access to executive-level insights they cannot afford on a full-time basis.

Finally, because these services are tailored and flexible, organizations can find an option that satisfies their unique needs and challenges. When those needs evolve, they can adjust as needed — including upsizing or downsizing — without unnecessarily impacting an internal team.

All in all, outsourcing HR services to a trusted partner like James Moore can help you improve your employees’ satisfaction, attract talent and more, all while leaving you the bandwidth to focus on leading your organization.

How Outsourcing HR Helped One Company Build a Stronger Workforce

What is the worst time to lose your HR director? Probably right before open enrollment. One company learned this the hard way. While they still had in-house HR staff to take care of many everyday functions, nobody else in the organization had the expertise to handle benefits negotiations or long-term planning.

Because open enrollment was right around the corner, the team needed help fast. Specifically, they needed an experienced, knowledgeable leader in place as soon as possible to ensure all benefits were in place for the team and all long-term HR initiatives progressed as planned.

That’s where James Moore entered the picture. With a skilled consultant to step into the role of outsourced HR director, open enrollment went off without a hitch.

They also saw several other benefits. Because they had an expert in place leading the HR team, they were able to:

  • Create a succession plan to hire and transition to a full-time HR director
  • Reduce their recruiting time-to-hire from two months to thirty days
  • Boost new-hire employee retention by approximately 50%
  • Build a new review program to identify and uplift top performers

Overall, by outsourcing to a trusted HR consultant from James Moore, they transformed an unexpected setback into notable forward progress.

James Moore: Putting the Human in Human Resources

Whether you’re a fast-growing startup or well-established company, for-profit or nonprofit, managing your HR can be a difficult undertaking — especially if you didn’t intend to step into that role in the first place. Human resources is a complex field, handling everything from benefits negotiations and employee development to long-term strategy and compliance.

Outsourcing HR services to a trusted advisor like those at James Moore can help you foster a positive organizational culture, build a more strategic HR program, improve recruitment, reduce turnover and more.

Choosing the right package — with the right services, expertise, and price point — is key.

James Moore’s HR subscription packages were created to help you find the perfect balance of services to help your team grow steadily. Whether you need an on-call expert to fill in as needed, a fractional leader to guide your newly established HR department, a full-service solution, or something more tailored to you, James Moore has you covered.

To learn more about James Moore’s HR Subscription Packages, contact an advisor today.