Benefits of Outsourcing HR

Eric Mochnacz
September 9, 2021

As you plan for your business to grow, it’s not uncommon for business owners to take a strategic look at workforce planning and consider a balance of hiring internal resources and outsourcing certain business functions.  In my consulting experience, small businesses will commonly outsource IT to a managed service provider because they aren’t at the size where they need a complex IT infrastructure; they need someone who can manage simple help desk requests, solve common software issues and turn emails on and off when needed.  Similarly, a small business may not need full-time internal HR support but can be supported through outsourcing their HR function to a trusted consulting partner.  Throughout this blog, we’ll discuss the benefits of outsourcing your HR to a strategic HR consulting firm like Red Clover.

Functions of HR That Can Be Outsourced

Depending on your business’s needs and your understanding of what HR can accomplish, there are firms out there that can offer specialized HR support with a specific focus.  For example, you may be trying to find a firm with expertise in payroll and benefits administration.  On the other hand, if you’re looking to build out your HR function so your business can scale or want to find a trusted partner to run your entire HR function, you’ll want to vet HR consulting firms that have qualified staff with experience in managing every aspect of the employee lifecycle.  

In the latter case, these are some of the functions you can consider outsourcing –


Amidst the “Great Resignation” and a very competitive job market, it is incredibly difficult for a business owner to focus on running the business while also cultivating a talent pipeline.  So, outsourcing your recruiting to skilled HR practitioners makes sense.  They can overhaul your recruitment and interview process to keep pace with a fast-paced, candidate-centric job market.  Additionally, they can integrate proven HR trends into your processes, like Behavioral Interviewing and DISC Assessments, to help your business attract the right people for your open positions.  Red Clover partners with businesses of all sizes by helping them develop solid, scalable recruiting practices while leveraging our LinkedIn Recruiter licenses to allow clients access to some of the most qualified job seekers.  And unlike recruitment firms, we offer this as part of our consulting engagements and we don’t charge a 20% commission for every new hire we welcome to your organization. 

Performance Management and Compensation Structures

Too often, performance management is treated as a once-a-year event with annual performance reviews, rather than an ongoing discussion between an employee and their manager.  And since employers often connect end of year performance reviews with raises and bonuses, employees don’t focus on the feedback (positive or negative), but rather on how their work over the past year will be reflected in their future paycheck.  Not to mention a number of companies still insist on scoring their employees’ performance on an arbitrary Likert scale.  Rather than engaging the employee in meaningful dialogue, the employee focuses on a “Meets Expectations” 3 when they feel they earned at least a 4 for exceeding expectations.  It’s time to change this archaic practice, and outsourced HR can bring a fresh approach to performance management.  They can create performance management materials that encourage ongoing engagement and dialogue between a manager and their direct reports.  The conversations focus on performance development, with guidelines for discussing contribution to business goals, alignment with core values, and goals for future success.  Additionally, skilled outsourced HR practitioners can train managers in this meaningful pivot, and offer guidance on providing continuous performance development opportunities.  

Additionally, the right outsourced HR professionals can develop appropriate compensation structures and communication rhythms to help companies and managers separate performance discussions from compensation decisions.  Although they are linked, they aren’t one in the same.  The goal is to help employees understand how their actions contributed to the business, what good is supposed to look like, and how their performance connects with the company’s compensation decisions.

Organizational Restructuring

As a business owner, you may begin to realize that something in your organization needs to change.  At the inception of your business, it’s possible your workforce plan made sense, but now as you grow rapidly, your company structure just isn’t working anymore.  You find you want to create a management level and promote internally to build that level, some positions you created no longer serve a business purpose, or you have a number of underperformers who are keeping the business from elevating itself.  No matter what the issue, a strategic approach to change is essential, and skilled outsourced HR can help you navigate essential change and communicate the change with your people every step of the way.  And if your restructuring does result in terminations, your outsourced HR partner can guarantee compliance with state and federal employment laws and partner with appropriate law partners to complete a risk assessment and mitigate the risk associated with restructuring.

5 Benefits of Outsourcing HR

1. Increased Free Time

As a business owner, you only have so many hours in the day.  If you’re a startup founder, you may be trying to own every aspect of running your business, but after a while, that becomes untenable.  And even if you’re a skilled business owner, it doesn’t translate to being knowledgeable in human resources management.  By outsourcing your HR function to the pros, you free up your time to get back to running your business.  

2. It’s Cost-Effective

As already mentioned, outsourcing recruitment to a consulting firm for process revitalization is more cost effective than working with a recruiting firm that requires a percentage fee for each new person they hire.  Outsourced recruiting is often an extension of HR process overhaul, so the price is baked into the overall engagement cost.  Outsourcing HR, rather than making an internal hire, saves your company the cost on payroll tax and benefits costs.  Also, a consulting firm can assign numerous subject matter experts to your account, so you may get three different expertise levels for less than the price of one internal hire.

3. Better Benefits for Employees

We’re not just talking medical, dental, and vision here.  Outsourced HR can bring fresh perspectives to the employee experience you offer as a company.  Yes, comprehensive benefits are one of the many factors that make a company desirable to work for, but how employees feel about going into work each day is equally important.  We’ve helped a number of clients recognize the importance of flexible schedules and remote work and guided their development of policies to support these initiatives.  Outsourced HR is the advocate employees need to guide the leadership team in implementing progressive HR and people policies because their only goal is to leave the business better than they found it.

4. Improved Employee Relations

Business leaders aren’t always HR policy experts or they can’t devote the necessary time to managing highly nuanced employee relations problems.  Having a devoted HR resource to manage these issues allows employees to be heard and feel confident the company will deliver appropriate and adequate solutions.  Outsourced HR can provide unbiased, but well informed, perspectives on challenges employees are facing in the workplace.

5. It Increases Efficiency

Having a devoted HR resource means everyone in your organization knows to go to them for people-related issues.  Outsourced HR owns the entire human resources function, so they are directly responsible for the outcomes of the business unit.  Clear accountabilities make for a more efficient organization.  It’s that simple and straightforward.

Want to Start Outsourcing HR?

Red Clover has over six years of being the go-to Outsourced HR function for businesses across New York and New Jersey.  We have served a variety of industries, ranging from a family-owned commercial roofing business, a trades-focused events organization, and an iconic Jersey coffee brand.  We offer a variety of service levels to businesses at different phases of their company growth.  If you’re ready to outsource your HR to a skilled firm with industry-certified consultants, it’s time you reach out to us.

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