What is Human Resources Outsourcing?

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  • Written By: Ken Black
  • Edited By: Andrew Jones
  • Last Modified Date: 17 March 2018
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Human resources outsourcing is a service that companies can opt to pay for instead of hiring a full-time person, or multiple full-time positions, for the same purposes. For companies that do not need a full-time person for certain aspects of human resources, there may be a cost savings when compared to employing additional people. All or part of the human resources function can be outsourced, including financial matters, benefits, and even recruitment and hiring.

Financial matters make up the bulk of human resources outsourcing. Most commonly, benefits associated with retirement, such as a 401(k) plan, will be handled by an outside firm. A human resources specialist from such a firm may periodically visit with employees to explain plans and options. The specialist will also likely be available to individual employees in person, or over the phone to handle personal issues. Retirement funds are prime candidates for human resources outsourcing simply because the process involved in choosing the right fund for an individual can be very technical in nature. Many traditional human resources employees may not have the expertise in financial issues.


Insurance benefits may also be taken care of through human resources outsourcing. A company may hire an independent human resources consulting firm to inform them of various health plans, analyze a company's history of claims, and make recommendations relating to healthcare coverage. This will often give the company's administration more options than simply choosing from plans offered by one insurance provider. It will also encourage competition among insurance carriers, especially if the company employs large numbers of people.

Some other matters are also regularly left to human resources outsourcing, including recruitment and hiring. In some cases, a human resources consultant will be brought in to conduct interviews with particular candidates. This may be done in conjunction with another person from the company, who can provide some input on the technical specifications of the job. The two will often go over the pros and cons of each candidate after the interview. More commonly, this will be outsourced by using a temporary jobs company. These companies will provide workers on a temporary basis. Over time, that could become permanent.

Using human resources outsourcing for temporary positions can save a substantial amount of money. Companies will do this when they are only planning to have a position open for a short period of time, or when they want to see how an employee will work out before hiring. This saves the expense of filling out paperwork, filing tax information, putting them on the payroll, and offering benefits.



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