In This Blog:
- ➤What is HR Outsourcing? (HRO)
- ➤What Is the Cost of HR Outsourcing?
- ➤How Much Does It Cost to Outsource HR?
- ➤Which HR Functions Do Businesses Outsource First?
- ➤What Hidden Fees Should You Ask About Before Signing?
- ➤What Should Stay Local, and What Doesn’t Need To?
- ➤Why Are More US SMBs Hiring Dedicated Offshore HR Support?
- ➤FAQs
- ➤Cost and Model Are Number Two in the Priority List
Your HR manager just quit. Either that, or your administrative assistants have been throwing themselves into HR work because no one local has responded to your job post.
Whether it’s someone else on your team who isn’t HR but is doing HR work, or it’s you, the founder (it’s still not your job), it’s almost inevitable that you’re checking online, asking: “How much does HR outsourcing cost?”
You go to the top pages, top search results, in Google-speak. You look for familiar-sounding job boards and salary sites. Open them all, one tab each. Right off the bat, you notice all-over-the-map salary ranges.
How many HR managers do I need for my team’s size?
How much is a fair salary for offshore HR professionals?
Are there benefits to offshoring online HR specialists?
This guide gives you answers to “how much” and why those numbers are so. Learn about what work can go to your remote HR, which ones are better handled locally, and why US SMBs are all choosing the remote approach.
What is HR Outsourcing? (HRO)
HR outsourcing, or HRO, means bringing in an external provider or HR professional to handle some or all of your business’s Human Resources work. That can range from payroll and benefits administration to recruitment, onboarding, compliance support, and day-to-day HR tasks. Depending on the model, you may be outsourcing the work to a provider, sharing employment responsibilities, or bringing a dedicated HR professional into your team remotely.
What Is the Cost of HR Outsourcing?
What Are You Paying For: Core HR Pricing Models
There are three main “delivery models,” which are, for better understanding, three ways to outsource HR. Go through each one and check the model your operations lean closest to before trying your hand at pricing.
HR Outsourcing Options:
PEO (Co-Employment)
Professional Employer Organization. This HR hiring model means that your chosen offshore hiring agency becomes your co-employer. They share the employment relationship with you.
This one’s the more secure option, where the hiring agency helps you monitor work quality and consistency, as well as worker commitment. They’re there to ensure responsibilities are ticked off when they’re supposed to be, on time, and as expected (or beyond).
ASO (No Co-Employment)
You’re the legal employer in an Administrative Services Only model. Just you. The provider handles payroll, benefits administration, paperwork, and other day-to-day tasks. HR admin is theirs, too. You still make the employment decisions and remain responsible for compliance.
Unlike a PEO, there’s no shared employment relationship here.
Dedicated Offshore Staffing (No Co-Employment)
You may have already heard of this, but under another name: managed provider. You reach out to the offshore staffing agency, and they provide you with the HR professional who’s an expert at the specific tasks you’ll need from them, day-to-day.
They become exclusively part of your team. They follow your team’s and operations’ processes and your instructions, just remotely.
Instead of handing your entire HR function to a third party, you get a dedicated person working inside your business and becoming familiar with how you actually do things (where Remote Staff comes in).
How Much Does It Cost to Outsource HR?
There’s no fixed formula or range when it comes to pricing HR outsourcing services. What we’ve done is look at data from decades’ worth of clients working with HR professionals offshore and compare those with what online posts and articles are saying.
Note that the cost of outsourcing human resource specialists is laced with several variables. Pricing model from managed providers. Specialist experience. Tool knowledge (and number of tools). Job description (different business needs means different responsibilities).
All in all, there are four common threads that run through them.
Per-Employee-Per-Month (PEPM)
The most common structure. Providers charge a flat rate for each employee on your payroll, every month.
- Basic services such as payroll, benefits administration: $45–$160 per employee; monthly
- Comprehensive services such as recruiting support, performance management, strategic HR guidance: $210–$400 per employee; monthly
Payroll Percentage
Some providers charge a percentage of each employee’s gross pay instead of a flat per-head rate.
- Around 4% to 8% of gross payroll
Monthly Retainer
A fixed monthly fee, which works best for businesses with already stable teams, since that also means more regular, predictable HR needs. Small headcount changes don’t affect this.
Project-Based / Pay-As-You-Go
For one-off needs rather than ongoing management.
The only way to make fair comparisons is to convert rates into a single monthly dollar figure based on your actual headcount and payroll. When you have that down, you can move to deciding which one costs less.
Which HR Functions Do Businesses Outsource First?
There are 5 central functions that US businesses, no matter the size, entrust to remote Human Resources specialists. The five most suitable for remote support, whether HR assistants, HR coordinators, HR managers, or HR administrators.
- Payroll processing – calculating pay, tax withholdings, and direct deposits
- Benefits administration – enrollment, plan management, and employee questions
- Recruiting and onboarding coordination – sourcing candidates, scheduling interviews, and handling new-hire paperwork
- Compliance documentation – maintaining employee files, tracking required certifications, and preparing audit-ready records
- HRIS management – keeping employee data systems updated and accurate across departments
Note: These are not the only HR-related tasks you can outsource. What they are are ones you can confidently give your remote HR specialist, since they don’t require daily strategic planning or check-ins. They’re also the most time-consuming.
Culture initiatives and leadership development, along with other strategic HR work, are often left in-house. Just the same, with more and more SMBs adopting hybrid work and distributed teams, even these tasks are easily managed effectively from anywhere
What Hidden Fees Should You Ask About Before Signing?
The quote you get isn’t always the number you end up paying. A few charges tend to show up after the contract is signed, not before.
- Implementation or setup fees: anywhere from a few hundred to several thousand dollars, depending on how much integration work is involved
- Software or per-seat charges: premium HRIS features or additional user accounts often cost extra, separate from the base service fee
- Early termination penalties: the cost of exiting a contract early varies by provider and isn’t always disclosed upfront
- Annual payment discounts: several providers offer 10–15% off if you pay annually instead of monthly, ask, since it’s rarely offered proactively
What To Do: Before signing anything, ask two questions directly: “What happens if I need to exit this contract mid-term?” and “Does this quote include software licensing, or is that billed separately?” The answers to those two questions will tell you more about the real cost than the initial quote does.
Important: These are staffing benchmarks. Since there are no fixed requirements, a 200-person company with low turnover and outsourced payroll may need less in-house HR than a fast-growing, multi-state employer with heavy recruiting for heavier operations and compliance needs.
What Should Stay Local, and What Doesn’t Need To?
Some HR needs need to be overseen by people in your office, and there are many more that don’t. Differentiating which belongs to which will make it easier for you to make the decision on when and how many HR specialists to outsource.
What generally needs to stay with a licensed, US-based professional:
- Legal compliance sign-off
- Regulatory determinations specific to your state or industry
- Final liability decisions in disputes or terminations
The average cost to defend an employment lawsuit through settlement runs $160,000 to $200,000 (legal fees + settlement). Wrongful termination settlements average $40,000, with a range of $5,000 to over $100,000.
Why are we mentioning this seemingly unrelated piece of information? Because compliance. Someone licensed and accountable in the jurisdiction where your business is headquartered is going to have to be local.
What doesn’t require being in the US (because tasks are platform-based):
- Payroll processing support
- Benefits administration coordination
- Onboarding logistics and documentation
- Recruiting sourcing and candidate screening
- HRIS data entry and management
Everything else in the second bulleted list has to do with the administrative and operational side that doesn’t require legal authority. Work that needs correct and consistent handling by professionals who are already adept at doing so, no matter what part of the world they’re in.
Have questions? Drop our team a line anytime.
Why Are More US SMBs Hiring Dedicated Offshore HR Support?
Because with business growth comes more administrative work. But when you’re pouring resources into the business itself, along with hiring local professionals to support the parts of your operations that have to stay local, US SMBs are turning offshore for HR support.
They’re turning to managed providers like us: Remote Staff.
Remote Staff has been pairing US businesses with HR specialists, HR managers, and HR support teams for over 18 years. We know whom to vet and what to look for in candidates. We know which work experience and tool knowledge are the ideal match for your specific business needs and industry.
Payroll, admin, HR, and onboarding work are covered, so you can be sure there are no loose ends. The cost? Definitely friendlier (only because of market location). Talent quality? The same as what you’d get locally.
Related Read: Heard of Return to Office Mandates and Hybrid Work Policies? Here’s what the news isn’t saying.
FAQs
How much does it cost to outsource HR for a small business?
Outsourced HR can cost a small business anywhere from $45 to $1,500 a month, depending on the services included and how the provider charges. Under a per-employee-per-month model, basic services such as payroll processing and benefits administration can cost $45 to $160 per employee per month. More comprehensive support, including recruiting and strategic HR guidance, can run from $210 to $400 per employee.
Is outsourcing HR cheaper than hiring an HR manager?
For most businesses with fewer than 50 employees, outsourcing HR can cost less than hiring a full-time HR manager. The median annual salary for an HR manager in the US was $140,030 in May 2024. Add benefits and other employment costs, and that one hire can cost around $175,000 to $182,000 a year. That’s before HR software or office space.
Can an offshore HR hire handle US compliance work?
An offshore HR hire can handle much of the administrative work around US compliance, but legal compliance decisions and sign-off should remain with a qualified professional in the US. The cut-off point is when the work requires legal authority, jurisdiction-specific decisions, or someone to take responsibility for the final call.
What’s the difference between a PEO and a dedicated offshore HR hire?
A PEO shares the employment relationship with your business, while a dedicated offshore HR hire works on your HR tasks without becoming a co-employer of your US staff. With dedicated offshore staffing, you have a specific HR professional working in your systems and following your processes. The staffing provider handles that person’s employment, but there’s no co-employment arrangement with your US employees and no bundled insurance products.
How fast can an outsourced HR hire actually start contributing?
An outsourced HR hire can usually start contributing within two to four weeks if the role, responsibilities, and system access are already in place. That timeline can stretch if the work still needs to be sorted out before someone can take it over. But when there’s a clear list of responsibilities and access to the software they’ll be using, there’s usually less time spent figuring out where to begin.
Cost and Model Are Number Two in the Priority List
There’s no single number for what HR outsourcing costs. A $45 monthly service and a $400-per-employee package may both fall under “outsourced HR,” but you’re not getting the same thing. Before comparing prices, look at the model, the work included, and who’s actually doing it.
For some businesses, that means a PEO. Others may only need help with the administrative side of HR. Those looking to bring someone into the day-to-day without adding another local full-time hire? Dedicated offshore staffing is another option.
The point is to figure out which HR work your business needs help with, which work has to stay local, and what you’re paying for the rest. Let us help you get to that decision. Call us or Request a Callback today.
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Vaune Everis Cura has always been a writer in the truest sense, drawn to the art both as a personal creative pursuit and as a profession. Her experience penning content across digital marketing spaces and collaborating with business owners and market shapers has broadened her craft to include strategic direction and SEO insight. Having spent years with the InterContinental Hotels Group before stepping boldly into freelancing, she understands that at the centre of it all are genuine, meaningful brand–customer relationships built on purposeful, human content.
