HR outsourcing

The Average Cost of HR Outsourcing: A Price Guide

Over the years, human resources (HR) outsourcing has grown tremendously, with the industry now valued at $32.8 billion in 2020. That figure will grow to $45.8 billion by 2027.

It’s easy to see why more businesses are outsourcing HR. The ever-changing landscape of employment law and the increasing complexity of benefit plans make HR a challenge for even the most experienced business owner.

HR outsourcing allows you to work with seasoned experts who help make everything easier for you. Besides, working with an outside company is usually cheaper than hiring full-time staff, whether you’re outsourcing social media, IT, or human resources.

But exactly what is HR outsourcing, and what are the costs associated with this move? How can you keep HR outsourcing costs affordable? Keep reading to learn more.

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What Is HR Outsourcing?

HR outsourcing refers to the practice of hiring an external company to manage HR functions. These functions can include everything from employee recruitment and onboarding to benefits administration and performance management.

How Much Does HR Outsourcing Typically Cost?

On average, HR outsourcing costs between $45 per month and well over $1,500 per month. A good estimate is around $129 per month per employee. However, the actual cost will vary depending on the size of your company and the scope of services you require.

To get a more accurate estimate of HR outsourcing costs for your business, consider the following factors:

Company Size

For small businesses, the cost of HR outsourcing is typically lower as there are fewer employees and thus less paperwork.

Medium-sized businesses may see a slightly higher cost as there are more employees and more complex HR needs. Large businesses may have the highest costs, as they often have the most employees and the most complex HR needs.

However, even large businesses can save money by outsourcing HR, as it can free up time and resources that can be better spent elsewhere. Besides, partnering with experts in the HR industry guarantees that you’ll recover your initial investment over time.

Services Required

The cost of HR outsourcing services can vary significantly based on the scope of the services you’re looking to get. If you only need a few basic HR services, such as payroll and benefits administration, you can expect to pay less. On the other hand, if you need comprehensive HR support, including recruitment, training, and employee relations.

The good news is that there are many HR outsourcing companies that can tailor their services to meet your specific needs. As a result, you can get the support you need without breaking the bank. These companies also offer a variety of pricing models to help ensure that all clients are catered for.

Contract Length

The length of your HR outsourcing contract will have a direct impact on the overall cost. A longer contract will typically result in a lower per-month cost, but it also means you're locked in for a longer period of time.

On the other hand, a shorter contract may cost more per month, but it gives you the flexibility to switch providers if you're not happy with the service. Ultimately, the decision of how long to contract for should come down to your specific needs and HR budget.

If you're looking for the most cost-effective solution, a longer contract is usually the way to go. But if flexibility is more important to you, a shorter contract may be the better choice.

Location

Any business owner will tell you that one of the most important factors in determining the success of their company is location. The same is true when it comes to HR outsourcing. Depending on where your company is located, the cost of HR outsourcing can vary significantly.

For example, companies in large cities tend to pay more for HR outsourcing than those in smaller towns. This is because there are simply more options available in larger cities, and companies have to compete for the best talent.

In addition, the cost of living in a big city is usually higher, which means that HR outsourcing firms also have to charge more to cover their own expenses.

How Can You Reduce the Cost of HR Outsourcing?

There are a few ways you can reduce the cost of HR outsourcing without compromising quality. Here are some of them.

Try a Pay-As-You-Go Model

Some HR outsourcing companies offer a pay-as-you-go model, which allows you to only pay for the services you use. This can be a cost-effective way to outsource HR, especially if you only need occasional help.

Shop Around

Don't just go with the first HR outsourcing company you find. Get quotes from multiple providers to ensure you're getting the best price.

Consider an Annual Contract

Annual contracts tend to be more expensive than shorter-term contracts. However, they may offer discounts for extended service.

Negotiate the Cost

Don't be afraid to negotiate with your HR outsourcing company. If you're happy with their services, they may be willing to give you a lower price.

Outsourcing HR Can Help Elevate Your Company

The cost of HR outsourcing can vary depending on the size and scope of your company’s needs and the quality of the outsourcing provider you choose. But armed with this information, you should be able to get a good idea of what to expect when budgeting for outsourced HR services.

Would you like to compare the prices of outsourcing many of your business needs? Visit our page today and get all the information you need.