6 Questions to Ask When Evaluating HR Outsourcing Companies

What is an HR outsourcing company?

An HR outsourcing company, sometimes referred to as an HRO company or PEO (professional employer organization), specializes in providing comprehensive human resource services to organizations that choose to outsource those functions. These services often include HR management, payroll administration, recruitment, HR consulting, benefits administration, compliance support, HR technology, employee training initiatives, and more. By partnering with an HRO company, businesses can focus on their core operations and strategic goals, while their HR partner handles all of the complex and time-consuming HR responsibilities.

HRO companies are a great option for any size company, but they are particularly beneficial for small to medium-sized businesses that might lack the time, resources, and internal capabilities to handle HR duties effectively. An HR outsourcing company like G&A Partners can help your business:

• Access better, more affordable benefits
• Maintain legal compliance
• Grow and scale efficiently
• Attract (and retain) the best talent
• Keep your employees safe

When you partner with a PEO like G&A, you’re gaining access to expert services and advanced HR technologies without the overhead of maintaining those resources in-house. At G&A, our experts also work diligently to stay up-to-date with current best practices and regulatory requirements, helping the companies we support stay compliant all applicable laws, so they can mitigate the risk of legal issues and any associated fines or penalties.

How to choose an HR outsourcing company

When choosing an HR outsourcing company, begin by clearly defining your company’s needs and goals, as well as what you hope to achieve by partnering with an HR firm. This will guide you in your decision-making process and help you identify a service provider that can become a trusted partner.

Here are some key factors to consider when selecting an HR outsourcing company:

• Budget: Before you start your search, determine how much you are willing to invest in outsourcing your HR functions. This will help narrow down your options to companies that offer services within your price range. Don’t forget to consider the ROI on that investment, however. The National Association of Professional Employer Organizations found in their survey of companies that use HR outsourcing that their annual return on investment was 27.2%. And that was just the cost savings—this doesn’t factor in benefits derived from improving your ability to attract, motivate, and retain employees and enabling you to focus on your core business.
• Types of Services and Support Offered: Take a good look at the HR areas you need help with. Do you need payroll administration, compliance help, employee training, or benefits management? Are you lacking support in one area or do you need help in multiple categories? Look for a provider that specializes in providing the services you need in the way you need them. Consider the level of flexibility as well—if you’re only looking for help with one function, like payroll processing, some HR outsourcing companies may not be the right fit. However, if you’re in need of more comprehensive HR services and support, a partner like G&A can make a transformative difference in how your business operates.
  
• Level of Client Service: Your business deserves an HR outsourcing company that’s as invested in your success as you are. Look for a provider that is quick to respond, able to create a customized plan to fit your needs, and that takes a proactive approach when solving issues.
  
• Reputation: Don’t skip this homework. HR is complicated, and reputation matters. Look up reviews, talk to your network about their experiences, and don’t hesitate to ask potential vendors for references. Real-world feedback is vital for assessing the reliability and effectiveness of an HRO.
  
• Ability to Integrate with Your Team: Consider your current setup. Do you already have an HR person or team that needs support, or do you need someone to step in and help with all HR responsibilities? Ask the providers you’re interested in about how they can integrate with your existing HR team or your company at large.
  
• Technology and Tools: In today’s digital age, the technology an HR company uses can make a big difference. Check that they have modern tools that can integrate with your tech stack, simplifying processes and ensuring smooth data handling.
  
• Compliance and Legal Expertise: The landscape of employment laws and regulations is constantly evolving and staying on top of it all – especially for small and mid-sized companies with limited resources – can be a real struggle. An HR partner that is well-versed in current compliance matters can help you proactively adjust to new laws and stay on top of existing ones – so you can avoid fines and penalties related to noncompliance. In your search, look for a vendor who has deep expertise in HR compliance and navigating legal issues.

6 Questions to Ask Before Choosing an HR Outsourcing Company

In addition to the list above, these are six important questions to ask HR outsourcing providers during your selection process:

1. What HR outsourcing services does your company offer?

The best HR outsourcing companies offer a wide range of services tailored to your business needs. At G&A Partners, for example, we offer customized and flexible solutions from payroll administration to HR assistance. We also work with each client to create scalable service offerings that meet the needs of their organization today and have the flexibility to adapt accordingly as their business grows.

Support from a PEO like G&A can include:

• Payroll administration in reliable, timely fashion and handled by seasoned specialists so you can get back to focusing on the big picture.
• Health insurance and benefits administration so you can give your employees access to affordable Fortune-500 level health insurance and benefits, with benefits administration support from dedicated industry experts.
• HR technology that saves you time, increases productivity, and avoids potentially costly errors.
• HR management that covers everything from creating employee handbooks to onboarding/offboarding and more.
• HR consulting to help you with performance management, business readiness, and more.
• Recruitment process outsourcing that provides you with a pipeline of vetted talent so you can quickly fill a new or existing position.
• Outsourced accounting that gives you access to the expertise, tools, and financial guidance of a robust accounting department for a fraction of the cost.

2. How much does HR outsourcing with your company cost?

The real value of HR outsourcing often comes from the potential savings in other areas, like the reduced need for internal HR staff, lower risk of compliance issues, and more competitive employee benefits packages. It’s worth noting that while the up-front costs may initially seem high, the long-term savings and efficiency gains can more than justify the investment.

The cost of HR outsourcing does vary based on multiple factors, like the number of employees, the complexity of your business operations, and the scope of services you require. But most HR outsourcing services charge in one of two ways:

• Either as a percentage of total payroll, or
• As a flat per-employee-per-year (PEPY) fee.

In both of these cases, the exact price or rate will often depend on which preset bundle of services you select, and most HROs can break your prospective package down so you can clearly see which services are included.

3. What experience does your HR outsourcing company have and what is your reputation in the market?

Look for a provider with a solid track record of success and strong client testimonials that reflect their commitment to client service and their level of expertise. It’s also a good idea to consider if the company has worked in your industry and if they can scale with your business as your needs evolve.

4. What HR technology does your company provide?

Technology plays a critical role in the efficiency and effectiveness of HR services. Before you narrow down your choices, consider if you are looking for a simple solution like software with an AI chatbot or if you need technology backed by more comprehensive expertise, services and support.

G&A’s WorkSight HR management platform, for example, gives you hands-on tools to manage each stage of today’s evolving employee lifecycle, from recruiting and onboarding to time tracking and benefits enrollment. Our integrated, secure HR software platform includes (but is not limited to):

• Single sign-on (SSO) access to best-in-class HR software solutions
• User-friendly employee and manager self-service features
• The ability to set manager security access based on client preferences
• Payroll software with 24/7 access to on-demand reports that reveal valuable workforce insights
• Intuitive workflows for day-to-day human resources functions
• State-of-the-art technology designed to protect and secure sensitive employee and business data

5. What type of client service does your company provide?

An HR outsourcing company that is committed to a high level of client service will assign a dedicated client advocate to your account. This person acts as your point of contact and is responsible for understanding your business needs and ensuring your HR services are delivered effectively.

During your evaluation, ask about the levels of training available to help your in-house team understand and integrate with the HR services you’ll receive. One way you can evaluate a provider’s level of client service is to ask about their Net Promoter Score. At G&A, our dedication to customer success is clear: with an average NPS score of 68 in 2022, our customer service ranks best in class and is 2x higher than that of the HR outsourcing industry.

6. Can I retain my current benefits with a PEO?

If you have existing employee benefits that you’re satisfied with, be sure to ask if the provider you’re considering offers the option to “carve out” those benefits. This allows you to keep your current plans while still outsourcing other HR functions. At G&A, we work with our clients to find the right fit. They can switch to our affordable, Fortune 500-level plan options but it’s not a requirement. The choice is yours.

Is outsourcing HR a good idea?

The importance of HR outsourcing for your organization will depend on your unique needs, but for most small and mid-sized companies, outsourcing provides a variety of benefits. Whether you need a complete HR solution or some additional help for your existing HR team, the ability to free up time and optimize your operational efficiency can be a game changer for your business.

Another major benefit of outsourcing HR functions is scalability. Unlike an internal HR team, where the costs remain fixed regardless of your company size, a PEO can adapt to your business needs. This means if you have to downsize, your HR costs will decrease accordingly since most PEOs charge based on scale.

For companies navigating an unpredictable economy, employing an HR outsourcing company for your small business can offer a layer of financial predictability and security. Your costs adjust dynamically as you grow or contract, making it more manageable to administer important HR functions no matter what stage your company is in.

And lastly, if you find yourself juggling multiple outsourcing providers, consolidating your needs with a single PEO can help streamline operations and costs.

Can I outsource my HR department?

Outsourcing your HR department is entirely possible. In fact, many companies choose to partner with top HR outsourcing companies like G&A to handle all, or the majority of their human resources needs.

Doing so also gives you access to a wealth of HR expertise—from managing complex payroll systems and ensuring compliance with labor laws to the administration of employee benefits programs. This level of expertise can be transformative, especially for businesses that lack the resources to manage these responsibilities internally.

If you already have an HR team in place, outsourcing gives you the ability to redirect your existing staff to focus on more strategic, high-impact areas like talent management, employee engagement, and strategic planning. This can rejuvenate your team’s role within the company, turning their focus towards driving internal growth and enhancing workplace culture.

And don’t forget about flexibility—outsourcing your HR functions means your HR support can scale up or down depending on your current needs. This adaptability is cost-effective and can save you a lot of hassle during times of change.