More often than not, the decision to outsource human resources (HR) is met with hesitation. Some people swear by it, others are convinced it’s too risky, too expensive, or simply not worth it unless you’ve got hundreds of staff. The reality is different. Outsourcing HR has become a smart, cost-effective way for businesses of all sizes to stay compliant, manage people well, and free up valuable time.
But myths hang around, and they stop a lot of owners from even looking at the option. Let’s set the record straight.
What is HR Outsourcing?
At its core, outsourcing HR just means partnering with specialists to take on some or all of your HR responsibilities. That could be payroll, workplace compliance, superannuation, safety, recruitment, onboarding, performance reviews, or handling staff disputes.
For some companies, outsourcing fills the gaps; they’ve got a basic admin person but need extra help with compliance or payroll. For others, it replaces the need to hire a full-time HR manager altogether.
Here are the top 5 myths about HR outsourcing, debunked.
Myth 1: HR Outsourcing is Only for Large Companies
Fact: Smaller and mid-sized businesses often need it more.
A large company usually has its own HR department, compliance officers, and the budget to cover mistakes. Small and mid-sized businesses typically don’t. But the obligations remain the same.
For example, consider a 15-person civil engineering firm. They don’t need a full-time HR manager, but they do need someone to ensure payroll is accurate, workplace safety is compliant, and employment contracts meet federal and state labor standards. Outsourcing gives them access to that expertise without the cost of a permanent hire.
Myth 2: HR Outsourcing is Costly
Fact: It actually saves money in the long run.
Hiring in-house staff comes with more than just wages. There’s health insurance, paid leave, workers’ comp, payroll software, ongoing training, and office space. For many businesses, outsourcing costs far less than even a single HR manager’s salary.
And then there are the hidden costs of mistakes. A labor law violation or payroll error can lead to fines, back pay claims, or even lawsuits. Fixing those can run into tens of thousands of dollars. Outsourcing helps reduce that risk.
Plenty of business owners who once thought outsourcing was “too expensive” eventually realize it’s actually more cost-effective than trying to patch things together internally.
Myth 3: HR Outsourcing Compromises Data Security
Fact: Data is usually safer with a professional provider.
Understandably, a lot of people worry about handing over sensitive employee data. But outsourcing companies are bound by strict privacy laws and invest heavily in security, far more than most small businesses can. Encrypted payroll systems, restricted access, and compliance with American data standards are standard practice.
Compare that to payroll records stored on one office computer or emailed back and forth between staff. In many cases, outsourcing tightens data security rather than weakening it.
Myth 4: HR Outsourcing Means Dealing with Faceless Entities
Fact: Good outsourcing feels like an extension of your team.
A common fear is that you’ll get stuck in a call center queue, having to explain your business from scratch every time you need help. That might have been true years ago with some providers, but the industry has evolved.
Today, most reputable firms assign you a dedicated contact or small team who learn your business, understand your industry, and become your go-to resource for advice. A construction company wants someone who understands safety regulations and trade classifications. A law firm wants someone who knows the nuances of professional services.
HR outsourcing is all about building a relationship with specialists who know their field.
Myth 5: HR Outsourcing Results in Negative Tax & Legal Implications
Fact: It prevents them.
Far from creating risk, HR outsourcing helps reduce it. Providers stay on top of every workplace law change, benefits requirement, and industry regulation update. Their job is to keep you compliant. They also understand the tax implications that come with payroll and employee benefits. Instead of worrying about what you might be missing, you get peace of mind knowing someone else is staying ahead of it.
What Kind of HR Services Can You Outsource?
As a business owner, you can outsource almost any aspect of your HR needs, including but not limited to:
- Payroll administration
- Employee benefits administration
- Recruitment and onboarding
- Employee training and development
- Compliance and risk management
- HR strategy & analytics
- Employee relations and workplace investigation
- Performance management…and more
Why Do Organisations Choose to Outsource HR?
In Deloitte’s 2022 Global Outsourcing Survey, 57% of executives said their companies rely on external providers for HR services. The reasons are usually quite straightforward.
- Owners and managers want the timer back to spend time on projects, clients, and growth, not tangled up in admin.
- Access to specialists without paying for a full HR department.
- Compliance and payroll are handled correctly, avoiding fines or disputes.
- Improved scalability, with support that grows with the business, instead of rushing to hire when things get busy.
- Better staff experience through clearer systems for payroll, onboarding, and workplace support makes for happier employees.
Outsource Your HR with ProSource Solutions
For more than 25 years, ProSource Solutions has partnered with businesses across industries, including construction, real estate, law, engineering, finance, and more, to enhance the employee experience.
As your dedicated co-employer, we provide comprehensive HR services that allow you to focus on growing your business while we handle the complexities of modern workforce management.
Request a meeting today to learn how our HR solutions can support your success.
