There are four arrangements sold as HR outsourcing, and the reason buyers get confused is that providers use the same vocabulary for all of them. Sorted by how much of the employment relationship leaves your hands, they are: payroll only, administrative services, full HR outsourcing, and co-employment. Work out which one you want before you take a call, because otherwise the provider will decide for you.
Payroll only
The pay run, the filings, the pay records. Nothing else. Cheapest, most transparent, most likely to have a published price, and enough for a great many small employers who think they need more. If the thing that keeps you up is a tax deposit deadline rather than a handbook, this is the arrangement.
Administrative services and full outsourcing
Administrative services adds the processing around payroll: registrations, starters and leavers, records, sometimes benefits administration against your own plans. Full outsourcing adds the documents and the advice: contracts, handbooks, policy updates, an advice line. Both leave you the sole employer. The gap between them is where providers differ most and where the word offered does most of its work, so read inclusions rather than headings.
Co-employment
The professional employer organisation model, in which the provider becomes an administrative employer of your staff and puts them on its own benefits and workers' compensation. It is the only type that changes your legal position, the only one where certification matters, and the only one whose price no provider in this record publishes.
Questions people ask about types of hr outsourcing
How many types of HR outsourcing are there?
Four in practice: payroll only, administrative services, full HR outsourcing, and co-employment through a PEO. They differ by how much of the employment relationship moves, and their prices are not comparable with each other.
What is the difference between ASO and PEO?
An administrative services arrangement processes the work and leaves you the sole employer with your own benefits. A PEO co-employs, files under its own identification number and provides the benefits. The second changes your legal position; the first does not.
Which type do most small businesses use?
Payroll only, more often than the market's own marketing suggests. It is the cheapest, the most transparent and enough for an employer whose problem is filings rather than paperwork or benefits.