Article
Top 7 factors to consider when outsourcing HR and payroll services
March 6, 2025 · Authored by Gillian Florentine, Deanna Kempinski
When considering outsourcing your human resources (HR) and payroll functions for your growing business or organization, there are several key factors you should evaluate to ensure you make the best decision for your company. Here are the top seven factors to consider:
1. Provider type evaluation
When evaluating the types of providers, it's essential to understand the differences between professional employer organizations (PEOs) and traditional HR consulting firms. PEOs offer comprehensive benefit plans and take on responsibilities like payroll, taxes and compliance. However, they also involve co-employment, meaning that the PEO jointly employs your staff. On the other hand, traditional HR consulting firms, like Baker Tilly Vantagen, provide similar HR and payroll services without co-employing any of your workers. This means that you retain all ownership of your employees with the added benefits of trusted advisors and outsourced HR and payroll services.
2. Technology provided
The technology offered by a provider can significantly impact the efficiency of your HR functions. Evaluate the technology offered by the outsourced service and determine which outsourced tasks might best align with the vendor’s service level agreements (SLAs). Ideally, the providers offer the necessary tools to streamline and automate your systems and manage your HR and payroll functions efficiently.
3. Depth of knowledge and experience
An outsourced service provider can bring a wealth of knowledge and experience to your organization at a fraction of the cost of maintaining an in-house team. They can act as a neutral party when resolving employee-related conflicts and issues, provide specialized knowledge in HR and payroll, and ensure compliance with employment laws and regulations.
4. Risk mitigation and data management
Outsourcing HR can help mitigate risks by developing a comprehensive risk management plan and protecting employee data. With a dedicated team, there is always someone available to step in when needed, ensuring continuity and compliance. Providers often have specialized skills and tools to manage risks associated with managing and retaining your workforce, as well as hiring and training new talent.