Typical cost of outsourcing HR
- Typical cost of outsourcing HR
What is the typical cost of outsourcing HR?
The typical cost of outsourcing HR usually runs from $20 to $200 per employee per month, or 2% to 10% of each worker’s salary, based on your scope and provider.
- Your business size and headcount shape the final price.
- The range of HR services you need also drives the cost.
- Offshore providers can cut costs while keeping quality high.
Here is the key point about the typical cost of outsourcing HR: the price depends on a few clear factors. It may seem odd that outsourcing costs vary so widely. However, many providers use a simple formula based on manpower. In short, they take the total cost of operation and divide it by the number of billable full-time staff.
So our quick answer is this: expect a cost that reflects your business size, your headcount, and the HR services you commission. For a broader view of the model, see this HR outsourcing guide.
What determines HR outsourcing costs
To add more detail, your contractor will negotiate costs based on a few things. For example, these factors matter most:
- Scope of services to be commissioned;
- Volume of information to be handled;
- Technology type to be employed;
- Deal type;
- Industry vertical (the type of industry where HR services will be contracted, which could differ for a nonprofit, IT company, finance firm, healthcare institution, design agency, or manufacturing company, so you will need to do the research).
As a result, each factor can push the price up or down. So it helps to map your needs first. To learn what falls under this work, review the common services offered by human resource firms.
Payment schemes to expect
There are two main payment schemes to follow. The first is a fixed fee basis, or a fee paid per employee to be managed (with a range of $20 to $200 per employee). Meanwhile, the second is a percentage basis. In this case, the fee is a set percentage (from 2% to 10%) of each employee’s salary.
You can also pick how you pay. For instance, pay-as-you-go schemes suit short projects. Meanwhile, retained services work better if you want a loyal HR partner. Many providers deliver this through a human resource BPO model.
Cost compared to hiring in-house
Another way to weigh the impact is to look at the cost of hiring a full-time HR employee. To help, here is a table with the average annual income of HR pros in different countries. You can also try an employee cost calculator to model your own numbers.
| Job Title | Annual PH Salary in USD | Annual US Salary in USD | Annual CA Salary in USD | Annual AUS Salary in USD | Annual UK Salary in USD |
| Human Resource Assistant | $ 3,254 | $ 39,124 | $ 29,685 | $ 34,027 | $ 26,428 |
| Human Resource Manager | $ 9,069 | $ 64,476 | $ 59,778 | $ 62,690 | $ 46,398 |
| Payroll Analyst | $ 5,664 | $ 55,184 | $ 42,801 | $ 62,808 | $ 45,503 |
| Payroll Manager | $ 13,321 | $ 64,035 | $ 51,870 | $ 72,517 | $ 40,338 |
| Payroll Specialist | $ 5,482 | $ 46,858 | $ 41,221 | $ 59,707 | $ 35,703 |
| Payroll Supervisor | $ 7,900 | $ 58,764 | $ 52,338 | $ 60,040 | $ 34,246 |
| 1 USD=53.44 PHP | 1 USD=1.31 CAD | 1 USD=1.35 AUD | 1 USD=0.76 GBP |
This shows a clear pattern. A company can save a lot by outsourcing HR to a country with lower wages and living costs, like the Philippines. To see the gap, compare it with the average salary in the Philippines. As a result, firms can choose from many affordable providers. In turn, they enjoy world-class service without raising overhead.
Benefits of outsourcing HR
It helps to learn the cost of outsourcing HR before you commit. Still unsure? Here are the top benefits of HR outsourcing that may convince you to take the leap.
Outsourcing HR saves time
When you outsource HR, your team can focus on core work again. So staff who once handled HR tasks get their hours back. As a result, outsourcing HR saves time and can boost productivity.
Outsourcing HR is cost-efficient
An in-house HR team can be productive. However, a full department is costly to run. In many cases, the annual cost of outsourcing HR comes in lower than hiring in-house. For a related view, compare the typical cost of outsourcing payroll as well.
Outsourcing HR retain employees
Outsourced HR can help you take a more proactive approach to hiring. In addition, it supports employee relations and smooth onboarding for new hires.
In addition, building a strong, skilled workforce brings long-term gains. For example, you get lower hiring costs, deeper experience, and a more stable business.
Typical cost of outsourcing HR FAQs
How much does it cost to outsource HR per employee?
Most providers charge $20 to $200 per employee each month. The exact rate depends on your scope and headcount. So a small firm with basic needs pays far less than a large one with full HR support.
Is outsourcing HR cheaper than hiring in-house?
In many cases, yes. A full in-house team means salaries, benefits, and pensions. Outsourcing turns much of that into a flexible fee. As a result, you often pay less overall.
What HR functions can I outsource?
You can outsource payroll, recruitment, onboarding, and benefits admin. In addition, many firms hand over compliance and employee records. So you can pick a few tasks or the whole function.
Why do companies outsource HR offshore?
Offshore providers offer lower wages and living costs. For example, the Philippines is a popular choice. As a result, companies get quality HR support while they keep overhead low.
Key takeaways
- The typical cost of outsourcing HR is $20 to $200 per employee monthly, or 2% to 10% of salary.
- Scope, data volume, technology, deal type, and industry all shape the price.
- You can pay per employee, by percentage, pay-as-you-go, or through a retainer.
- Offshore hubs like the Philippines cut costs without cutting quality.
- Outsourcing HR saves time, lowers costs, and helps you retain staff.
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