The A-Zs of Hiring Glossary

Human Resource Outsourcing (HRO)

What is Human Resource Outsourcing (HRO)?

Human Resource Outsourcing (HRO) is the practice of hiring an external company to handle some or all of the HR functions of an organization. This can include tasks such as payroll processing, benefits administration, talent acquisition, training and development, and compliance with labor laws and regulations.

By outsourcing HR functions, companies can often save time and money, as well as gain access to specialized expertise and technology. This can be particularly beneficial for small or mid-sized businesses that may not have the resources or expertise to manage HR functions in-house.

However, it is important for companies to carefully evaluate potential HRO providers to ensure that they have the necessary expertise, experience, and technology to effectively manage HR functions on behalf of the organization.

Why do companies opt for Human Resource Outsourcing (HRO)?

Companies opt for Human Resource Outsourcing (HRO) for various reasons. One of the main reasons is to reduce costs associated with managing HR functions in-house. Outsourcing HR functions can also help companies to access specialized expertise and technology that they may not have in-house. Additionally, outsourcing HR functions can allow companies to focus on their core business activities and strategic priorities.

What are some common HR functions that are outsourced?

Some common HR functions that are outsourced include payroll processing, benefits administration, recruitment and staffing, employee training and development, and compliance and regulatory reporting. Companies may also outsource other HR functions such as performance management, employee relations, and HR analytics.

Dos And Donts for Human Resource Outsourcing (HRO)


  • Do identify your business needs and goals before choosing an HRO provider.
  • Do investigate the background and reputation of potential HRO providers.
  • Do establish clear communication channels with your HRO provider to ensure a smooth working relationship.
  • Do make sure your HRO provider complies with all relevant laws and regulations.
  • Do regularly review the performance of your HRO provider to ensure they are meeting your needs and expectations.


  • Don’t choose an HRO provider solely based on cost. Consider the quality of service and the provider’s reputation.
  • Don’t assume that all HRO providers offer the same services. Make sure you understand the specific services offered by your chosen provider.
  • Don’t neglect to establish clear expectations and performance metrics with your HRO provider.
  • Don’t overlook the importance of maintaining good communication and collaboration with your HRO provider.
  • Don’t forget to regularly review the contract and service level agreements with your HRO provider to ensure they are meeting their obligations.
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