<span id="hs_cos_wrapper_name" class="hs_cos_wrapper hs_cos_wrapper_meta_field hs_cos_wrapper_type_text" style="" data-hs-cos-general-type="meta_field" data-hs-cos-type="text" >Pros and Cons of Employment Outsourcing</span>

When most people think of outsourcing employees, they think of outsourcing specific roles to qualified candidates. There is another option: employment outsourcing. When organizations work with an employer of record (EOR), the EOR becomes the legal employer for the worker for the duration of their employment. There are also professional employment organizations (PEO) that act as co-employers with the hiring organization to share the responsibility of employment. Outsourcing employment often goes hand-in-hand with outsourcing HR. Both can benefit small or large organizations.

What is outsourcing? 

Outsourcing is the process of hiring outside the organization to a third-party—vendor, consultant, or contractor—for the completion of specified tasks or processes that are traditionally done in-house. The outsourced tasks can be complex, requiring a specialist, or time-consuming and tedious to complete. 

Commonly Outsourced HR Services

Outsourcing employment to a third party is only one of the many HR services that are commonly outsourced. Organizations may also outsource:

  • Payroll administration
  • Compliance management
  • Benefits administration
  • Onboarding and offboarding
  • Pre-employment screening and credentialing
  • Insurance and workers' compensation


EOR organizations, and often PEO will offer many of these services in-house, making them one-stop shops that save companies money as well as time and resources. 

Pros of Outsourcing Employment

There are many reasons that organizations choose to outsource employment or other back-office administrative functions. But allowing a third party to take over your back-office and provide support can be stressful. You want to ensure that the advantages outweigh the disadvantages. These are some of the pros of outsourcing employment: 


Complete Compliance. Compliance is a big concern whether you’re talking about regulatory compliance, payroll tax compliance, or complying with local hiring laws. The laws and regulations are always in flux, making it difficult to maintain complete compliance. If you’re expanding your business, each additional market you take on will include additional compliance responsibilities. Outsourcing to an EOR or PEO can ensure that you maintain compliance no matter what markets you operate and hire in. 


Expanded Benefits. An EOR/PEO acts as the legal employer (or co-employer) for a large number of workers. That employee count can allow them to negotiate their benefit plans in a way that smaller organizations cannot. They may be able to negotiate more favorable rates, which could allow you to expand your offerings for the same cost. This not only benefits employees, but it can also increase both employee retention rates and the attraction of ideal candidates. 


Less Employee Turnover. With an average cost of $15,000 per turnover, it is in a business's best interest to ensure that turnover is less frequent. Outsourcing employment to an EOR/PEO can help to reduce turnover. How? The team of experts has an intimate understanding of the markets they serve, allowing them better insight into what is important to the workers there. The expanded benefits they can offer can also lower turnover rates. 


Save Time and Money. Not only do payroll and taxes take an extended time to complete, but the hiring process can also be lengthy and expensive. Outsourcing employment can lead to a faster turnaround, so workers start faster, lower labor costs for human resources, and better, more efficient processes without the higher cost. 


Expand to Additional Markets. Working with a global EOR/PEO will allow you to expand into other national and international markets without needing to have in-country representation. They will also handle the additional compliance responsibilities and ensure that workers hired in those markets receive what they need in terms of benefits and support. 

Cons of Outsourcing Employment

Nothing is without its disadvantages. As with all things, there are some cons to outsourcing employment to a third-party EOR/PEO. 


Limited Contact. When you’re outsourcing your back-office functions and employment to a third party, you’re also outsourcing those communications. Having an outside contact for your HR needs may mean limited availability or multiple points of contact. Fortunately, there are EOR/PEO organizations, like The Payroll Edge, that offer a single point of contact to make everything run smoothly. 


Lack of Control. Those back-office administrative tasks may be time-consuming and often complex, but they are necessary. And having someone else manage them can make you feel like you don’t have control over certain aspects of your organization. When you choose the right EOR/PEO partner, you won’t have to worry. You can rest assured that the tasks are being completed on time and within budget—and compliant with local laws and regulations. 


Start taking advantage of some of those advantages today. Outsource employment to The Payroll Edge. Contact us today!