Please ensure Javascript is enabled for purposes of website accessibility

Benefits of Outsourcing Payroll & HR


  • Small businesses often find themselves trapped in a never-ending cycle of time-consuming tasks.
  • By outsourcing payroll and HR, companies can spend more time on revenue-generating activities.
  • At National PEO, we partner with small businesses and handle their “back office” activities like payroll and benefits, so they can focus on growth. Contact us to get started!

For small businesses, administrative HR tasks —like processing payroll, managing employee benefits, and ensuring compliance— can be huge time drains. But what if you could get this time back? Say hello to the benefits of outsourcing payroll and HR.

By delegating time-consuming tasks to an external company, your internal team can reduce the time spent on mundane tasks and shift the focus toward high-impact strategic initiatives.

Keep reading to find out exactly how outsourcing payroll and HR work, its main advantages for small businesses, and how to get started.

Let’s jump right in!

How Does Outsourcing Payroll & HR Work?

Outsourcing payroll and HR involve hiring an external service provider to manage specific aspects of your company. For instance, you can delegate tasks like calculating taxes and processing payments every month, negotiating benefits for your employees, and dealing with complex compliance requirements.

Outsourcing some of your most time-consuming daily activities can be a strategic decision, especially for small businesses.

By leveraging the expertise of specialized professionals, your internal HR team can be more efficient and have more time to focus on core operations.

One of the best alternatives for small and medium-sized businesses is partnering with a Professional Employer Organization, also known as PEO.

Joining forces with a PEO involves entering into a co-employment agreement, in which a business transfers several HR responsibilities to the PEO. In this case, the PEO becomes an employer of record, taking full responsibility for the financial and legal aspects of your business, while you stay in control of the operational and strategic side.

However, depending on your company size and specific needs, you might prefer a more flexible solution that enables you to outsource certain HR tasks. With an Administrative Services Organization (ASO), you can choose which activities to outsource and pay only for the services you need.

For growing businesses, being able to upgrade or downgrade as your business expands and your needs evolve can be a crucial advantage.

What HR Activities Can You Outsource?

Whether you decide to partner with a PEO for the full package or hire ASO services separately, these are the main HR activities you can outsource:

  • Payroll processing — Delegate the tasks of calculating deductions, filing taxes, and keeping payroll data safe.
  • Benefits administration — Let an external provider handle the complex aspects of filling out forms and keeping track of legal and statutory requirements. More importantly, a PEO can give you access to healthcare and retirement benefits at a more competitive rate.
  • Labor law compliance — Partner with a team of experts to ensure your business is up to date with federal, state, and local labor laws. Also, allow them to perform a compliance audit to identify compliance issues.
  • Workers’ Compensation and risk management — Let a specialized partner take over the overwhelming tasks of submitting paperwork, handling claims, and being audit-ready.
  • Other HR functions — Some companies enable you to outsource additional HR tasks such as creating an employee handbook, offering training programs and opportunities for development, and even supporting your recruiting needs.
Discover How Outsourcing Payroll Can Help Your Small Business

Outsourcing Payroll & HR Benefits

Outsourcing payroll and HR functions can offer numerous benefits for small businesses.

“Businesses in a PEO arrangement grow 7-9 percent faster, have 10-14 percent lower turnover, and are 50 percent less likely to go out of business.”


Let’s take a closer look at some of the main advantages of outsourcing HR:

Cost Savings

Instead of hiring and training in-house staff, businesses can leverage the expertise of external service providers. This can lead to significant cost savings for small businesses, as it reduces payroll expenses, overhead costs, and the need to invest in HR technology.

Expertise and Compliance

Staying updated on the latest labor laws, tax regulations, and compliance requirements can be overwhelming. Small businesses may lack the resources to keep pace with these changes, making outsourcing a valuable solution to ensure compliance.

Outsourcing providers are specialists in their field. This can give your business peace of mind and keep you safer from the costly fines and penalties that can arise from non-compliance.

Time Efficiency

Running a business involves many time-consuming activities that keep businesses away from doing the things that can truly drive growth.

Outsourcing HR takes the boring administrative tasks —such as payroll processing, benefits administration, and compliance management— off their plate, freeing up time for strategic priorities.

Reduced Errors and Increased Accuracy

Payroll and HR errors can lead to legal and financial consequences.

According to an EY report, the average company has an 80% payroll accuracy rate and makes 15 corrections per pay period.

Outsourcing to specialized providers reduces the risk of errors, as these professionals are experienced and use advanced technologies to ensure accuracy. This can help small businesses avoid costly mistakes related to tax filings, employee benefits, and regulatory compliance.

Access to Technology and Innovation

Investing in technology is quite expensive for small businesses. However, by partnering with an external provider, companies can get access to cutting-edge tools and software to streamline daily processes. Advanced technology can make businesses more efficient, safe, and aligned with industry best practices.

Empower Business Success with National PEO

When running a small business, there are tons of administrative tasks to deal with — but you don’t have to do them all by yourself. By partnering with a team of payroll and HR specialists, you can get rid of time-consuming tasks while keeping your business safe and fully compliant.

National PEO is a leading provider of PEO services, supporting small businesses across the U.S. with payroll and HR solutions so they can focus on the things they do best.

Contact us to learn how we can save you time and make your business more efficient!

Related Articles

Table of Contents
Share This Post