Fifty-seven percent of U.S. companies already outsource at least one HR function, recognizing that administrative compliance tasks consume leadership time without adding strategic value. The question is no longer whether to outsource but which functions to delegate based on your company’s stage and requirements.
Eighteen distinct HR functions can be outsourced to reduce costs, minimize compliance risk, and free leadership time for strategic priorities. Companies outsourcing HR functions report 20-50% cost savings compared to equivalent internal staffing, with positive ROI typically achieved within the first year of a well-structured outsourcing arrangement.
What You’ll Learn:
- Which administrative and compliance functions deliver the fastest ROI for companies at different growth stages
- The precise cost impact and transition timeline for each outsourceable HR function
- Strategic prioritization frameworks that help you sequence outsourcing decisions based on company size
- Critical functions requiring internal ownership to maintain culture and control
- Clear cost comparisons showing internal versus outsourced expenses across all 18 functions
The Complete List of 18 Outsourceable HR Functions
With 57% of U.S. companies already outsourcing at least one HR function, the question is no longer whether to outsource but which functions to delegate. These 18 functions break down into four categories: administrative, compliance, talent, and strategic support.
| HR Function | Cost Impact | Transition Timeline | Internal Involvement |
|---|---|---|---|
| Payroll Processing | 20-50% savings | 2-4 weeks | Low: Review and approve |
| Benefits Administration | 20-30% savings | 4-6 weeks | Low: Policy decisions only |
| Tax Filing and Compliance | Penalty avoidance: $2,500-$50,000 | 2-4 weeks | Minimal: Annual review |
| Workers Compensation | 15-25% savings | 2-3 weeks | Low: Claims oversight |
| HRIS Management | $15,000-$50,000 costs avoided | 4-8 weeks | Low: User management |
| Employee Onboarding | 20-30% savings | 3-5 weeks | Medium: Culture integration |
| Background Checks | 25-40% savings | 1-2 weeks | Low: Criteria setting |
| Time and Attendance | 20-30% savings | 2-4 weeks | Low: Exception approvals |
| HR Compliance Audits | $2,515 per FLSA penalty avoided | 4-6 weeks | Medium: Policy updates |
| Employee Handbook | 30-40% savings | 4-8 weeks | Medium: Content approval |
| Recruitment/Sourcing | Time-to-hire: 44 days average | 6-10 weeks | Medium: Final interviews |
| Training Administration | 25-35% savings | 6-12 weeks | Medium: Content direction |
| Performance Systems | 20-30% savings | 8-12 weeks | High: Goal setting |
| Employee Relations | 30-40% savings | 4-8 weeks | High: Case decisions |
| Compensation Benchmarking | 20-25% savings | 3-6 weeks | Medium: Strategy approval |
| HR Analytics | 25-35% savings | 6-10 weeks | Medium: KPI selection |
| Organizational Development | 30-40% savings | 8-16 weeks | High: Strategic direction |
| Executive Search | 60-80% nearshore savings | 8-14 weeks | High: Final selection |
Administrative Functions That Consume Leadership Time
Administrative HR tasks consume the most leadership time relative to their strategic value. These five functions form the foundation of most outsourcing arrangements.
Payroll Processing
Payroll Processing encompasses tax calculations and direct deposits. It handles wage garnishments and year-end W-2 preparation. Companies with over 50 employees have a 66% likelihood of outsourcing this function.
Benefits Administration
Benefits Administration manages open enrollment and carrier coordination. It includes COBRA administration and support for claims resolution.
HRIS Management
HRIS Management covers system maintenance and data integrity audits. Reporting configuration and user access management are handled through this function.
Time and Attendance Tracking
Time and Attendance Tracking involves schedule management and PTO accrual calculations. Overtime monitoring and absence pattern analysis protect against compliance violations.
Employee Records Management
Employee Records Management ensures personnel file maintenance and compliance with document retention requirements. I-9 storage and audit preparation are critical components.
Compliance Functions That Transfer Risk
Compliance errors carry significant financial risk. FLSA penalties alone reached $2,515 per offense in 2025. Outsourcing these functions transfers both the workload and the expertise burden.
| Compliance Function | Risk Reduced | Key Benefits |
|---|---|---|
| Regulatory Compliance Monitoring | FLSA, ACA, FMLA violations | Federal, state, local law tracking |
| Workers Compensation | Premium increases, claim denials | Claims filing, carrier negotiations |
| Unemployment Claims | Improper payments, hearing losses | Response prep, documentation |
| I-9 and E-Verify | ICE audit penalties | Form verification, re-verification |
| OSHA Compliance | Safety violations, fines | Incident reporting, inspections |
Talent Functions That Accelerate Growth
Recruitment and onboarding functions benefit from outsourcing when volume or specialized expertise justifies the investment. The average time-to-hire globally is 44 days.
| Function | How It Accelerates Growth |
|---|---|
| Recruitment and Sourcing | Manages job posting and candidate screening. Interview scheduling and offer letter preparation streamline the hiring process. |
| Background Checks and Screening | Verify criminal history and employment. Education confirmation and drug testing coordination protect against bad hires. |
| Onboarding Coordination | Handles new hire paperwork and equipment provisioning. Training scheduling and check-in coordination ensure successful integration. |
| Training Administration | Manages LMS platforms and tracks compliance training. Certification monitoring and effectiveness reporting develop your workforce. |
Strategic Support Functions Requiring Collaboration
These functions require more internal collaboration but still benefit from external expertise. They deliver specialized knowledge without full-time hire commitments.
Compensation Benchmarking
Compensation Benchmarking provides market salary data and pay equity analysis. Compensation structure recommendations maintain competitive positioning.
Performance Management Systems
Performance Management Systems configure platforms and administer review cycles. Goal tracking and reporting keep teams aligned.
Employee Relations Support
Employee Relations Support offers policy interpretation and documentation review. Investigation support and termination preparation reduce legal risk.
HR Policy Development
HR Policy Development creates handbooks and updates policies. Multi-state compliance reviews and best-practice recommendations keep organizations current.
Prioritization Framework by Company Stage
The functions that deliver the fastest ROI at 50 employees differ significantly from those at 250 employees. This framework sequences your outsourcing decisions based on the current company size.
| Company Size | Priority Functions | Primary Benefits | ROI Timeline |
|---|---|---|---|
| 50-100 employees | Payroll, Benefits, Compliance | Risk reduction, time recovery | 8-12 months |
| 100-250 employees | Add Recruitment, HRIS, Workers Comp | Scale efficiency, expertise access | 10-14 months |
| 250-500 employees | Add Compensation, Performance, Employee Relations | Strategic focus, data quality | 12-18 months |
Cost Comparison: Internal Versus Outsourced
Companies outsourcing HR functions report 20-50% cost savings compared to equivalent internal staffing. The cost case strengthens as company size increases. Even 50-employee companies typically see positive ROI within the first year of a well-structured outsourcing arrangement.
| Cost Component | Internal HR Manager | Outsourced Functions |
|---|---|---|
| Base Salary | $65,000-$85,000 | Varies by function bundle |
| Benefits (30%) | $19,500-$25,500 | Included in the service fee |
| Software/Tools | $5,000-$15,000 annually | Included in the service fee |
| Training/Development | $2,000-$5,000 annually | Provider absorbs |
| Turnover Risk | 50-200% of salary | Continuity guaranteed |
| Total Annual Cost | $91,500-$130,500 | $45,000-$65,000 |
What to Keep In-House
Not every HR function should be outsourced. The strategic approach is to outsource the execution while retaining the decision authority.
Final Hiring Decisions
Final Hiring Decisions must remain with internal leaders who understand team dynamics. While external providers source candidates, hiring managers should meet every finalist.
Performance Evaluations
Performance Evaluations require manager-employee conversations. These discussions shape careers and require an organizational context that external parties lack.
Culture Development
Culture Development cannot be delegated. External providers can administer surveys, but they cannot define values or build relationships that create culture.
Strategic Workforce Planning
Strategic Workforce Planning requires a business context that external providers cannot possess. Outsource data analysis, but keep planning decisions with leadership.
Sensitive Employee Relations
Sensitive Employee Relations benefit from external guidance on the process. However, actual conversations should remain internal so employees hear difficult news from someone they know.
Making Your Outsourcing Decision
The decision to outsource is about strategically allocating resources. External partners handle execution and compliance while your team focuses on culture, strategy, and employee experience.
Before outsourcing any function, confirm you retain authority over final hiring decisions and performance ratings. Maintain control of compensation adjustments and termination decisions.
If you have identified functions worth exploring further, a consultative conversation can help you assess which approach aligns with your company’s stage. Discover how HR outsourcing can support your organization and explore customized solutions for your specific requirements.