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How to Tell It’s Time to Outsource Your HR Functions

Updated: Jun 21, 2023

How to Tell It’s Time to Outsource Your HR Functions
How to Tell It’s Time to Outsource Your HR Functions

As your company grows and evolves, so do the human resource needs of the organization. While small businesses may be able to manage their HR functions in-house, mid-sized and larger companies often find it necessary to outsource these functions to a third-party HR provider. But how do you know when it's time to outsource your HR functions?

In this article, we'll explore some of the signs that it's time to consider outsourcing.

1. Lack of HR Expertise

One of the most compelling reasons to outsource HR is a lack of in-house expertise. As your company grows, you may find that your HR team is struggling to keep up with the demands of managing a larger workforce. By outsourcing, you can tap into the expertise of HR professionals who have the knowledge and experience to handle a wide range of HR functions, from recruitment and onboarding to employee relations and compliance.

Outsourcing your HR functions can also provide you with access to advanced HR technologies and tools that you may not be able to afford. This can include HR software for managing employee data and performance, benefits administration software, time-tracking tools, payroll software, and compliance-tracking tools. These technologies can help streamline your HR operations and make them more efficient and effective.

2. Compliance Concerns

Employment laws and regulations are constantly evolving, and it can be challenging, particularly for small businesses that do not have a dedicated HR team, to stay up-to-date with the latest changes. Regardless of the size of your business, dealing with noncompliance can lead to costly penalties and legal fees, not to mention damage to your company's reputation. When compliance issues become a challenge to manage, it could be a clear indication that outsourcing your HR functions is necessary.

An experienced HR outsourcing firm can help ensure that your business stays compliant with all applicable laws and regulations, reducing the risk of costly municipal fines, state penalties, or legal action. HR outsourcing providers can also provide you with access to compliance expertise and resources. They can help you understand complex regulations and provide guidance on how to stay compliant. In addition, they may provide you with compliance-related training and tools to help you manage compliance risks more effectively.

3. Time Constraints

Small business owners likely wear many hats and have limited time to devote to HR functions. However, HR is a critical part of any business, and neglecting it can lead to compliance risks, employee dissatisfaction and ultimately impact the success of your business.

If you're struggling to find time to manage your HR functions, it's a sign that you need to outsource your HR functions. By outsourcing your HR functions to an experienced HR outsourcing provider, you can free up time to focus on other critical aspects of your business, such as sales and marketing, product development, and customer service.

An HR outsourcing provider can handle a wide range of HR functions, including recruitment and staffing, payroll processing, employee benefits administration, compliance management, and employee relations. By delegating these tasks to an experienced HR professional, you can focus on other critical aspects of your business.

4. Limited Resources

Small businesses often have limited resources, including budgets and staff. Managing HR functions in-house can be a drain on these resources, as it requires a dedicated team to handle various tasks, such as recruiting, hiring, training, benefits administration, and payroll.

If you discover that you don't have the resources to manage your HR functions effectively, it's a sign that you need to outsource your HR. Outsourcing your HR functions ultimately allows you to allocate more resources to core business activities like product development, customer service, and sales and marketing.

5. High Turnover Rates

High employee turnover can be a significant challenge for businesses, both in terms of cost and productivity. Turnover can be caused by a variety of factors, including poor management, lack of employee engagement, inadequate compensation and benefits, and inadequate training and development. High turnover rates can be a sign that your HR functions are not meeting the needs of your employees. By outsourcing HR, you can work with professionals who have the expertise to create effective retention strategies, including employee engagement programs, training and development initiatives, and career advancement opportunities.

Partnering with an HR outsourcing provider can also help you stay up-to-date with the latest HR trends and best practices related to employee retention. An experienced HR outsourcing provider can help you benchmark your retention efforts against industry standards and provide guidance on how to improve your retention rates.

6. Inefficiencies and Inconsistencies

HR functions are critical to the success of any company, as they manage employee-related processes, such as recruitment, onboarding, performance management, and payroll. If these processes are not efficient, they can lead to significant problems and negatively impact your organization's overall performance.

For instance, a delay in hiring due to a slow recruitment process could result in missed business opportunities. Also, inconsistent application of policies can create confusion and frustration among employees. If one employee is given a different set of benefits than another employee who has the same job title and amount of experience, it can create a perception of favoritism.

If your organization is experiencing these challenges, then it may be time for you to outsource your HR functions to an experienced HR outsourcing provider. They can help manage inefficiencies within your HR processes and ensure that policies are consistently implemented across your organization.


Outsourcing HR is a smart move for companies that are struggling to manage their HR functions in-house. It can help streamline processes, ensure consistent policy implementation, provide access to expertise, and overcome resource limitations. However, it's important to carefully evaluate potential HR outsourcing providers to ensure they are a good fit for your organization's needs and culture.

If you're considering outsourcing your HR functions, FIC Human Resource Partners is a great option for you, regardless of the size of your business. Our Nuance Workforce Solutions offer your organization excellent HR support and assist you in selecting the most appropriate employee benefits to foster a supportive work environment for your staff. Contact us today to learn more.



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