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How HR Outsourcing Compares to Other HR Options

aso bootstrap hr hr outsourcing hro in-house hr peo professional employer organization Jan 01, 2024

You’re considering your HR options. Maybe you need more time to focus on growth, or maybe you're looking for expert guidance on critical HR issues. Depending on the needs of your company, you can approach HR in four ways: 

  • Bootstrap HR, delegating HR tasks to your non-HR employees 
  • In-house HR, hiring an HR manager to handle all HR functions 
  • Professional employer organization (PEO), a co-employment company that handles HR functions
  • HR outsourcing (HRO), a partner company that provides custom and comprehensive services

Keep reading for an overview of each approach and how they stack up against HR outsourcing.  

Bootstrap HR 

Some companies get by with entrusting HR responsibilities to non-HR employees. As the reasoning goes, someone who is already getting paid for their job can take on a few extra HR tasks, which saves the company money. As long as someone gets the job done, it doesn’t matter who does it, right? But think about asking an astronaut to design a rocket. Sure, you trust him to do his best, but he can’t do his best side hustling as an engineer. He doesn’t have that kind of expertise, and these extra responsibilities distract him from focusing on what he’s really good at–which slows progress for everyone. According to a Workfront survey of 2,000 office workers, employees are spending 12% of their time on administrative tasks.  

Asking a non-HR employee to take on HR responsibilities can make work inefficient, or worse, could result in legal problems. HR outsourcing specialists understand the ins and outs of HR, including how to stay compliant with current law and regulations, so your business stays protected. They save time so professionals can focus on their missions. Who doesn’t want a partner whose sole purpose is to make their lives easier? 

In-House HR 

An in-house HR manager may sound appealing because they’re always in the office, but what you gain in convenience, you lose in expertise and money. An HR manager may be less proficient in certain types of responsibilities. For example, they may have a lot of experience in administrative tasks, such as payroll, but not so much in recruiting or training. More and more employers are seeking strategic HR, which proactively contributes to the business’s most important goals, rather than only administrative HR. HR outsourcing usually has a specialist for every service. This means they can provide both the breadth of services and the depth of expertise that their partner companies need. With Megastar HR, if you still feel that you’re missing out on having someone who really gets your culture and employees, a dedicated HR partner can regularly visit your place of business and work with your team.  

With HR outsourcing, you’re also saving money. By hiring an in-house HR manager, you spend on recruitment, onboarding, salary, benefits, and anything else your company provides to employees. By partnering with HR specialists, you get as many services as you need and only have to take care of one (much lower) invoice. Typically, HR outsourcing is the most cost-effective choice for new or small businesses, and with Megastar HR, there’s no long-term contracts. If you ever decide to move to in-house HR, we can help with that transition.  

Professional Employer Organizations (PEOs) 

PEOs are co-employers that typically manage administrative duties such as hiring, payroll, benefits, and taxes but can offer additional HR services. They are a common choice for small companies that want to outsource tedious or legal tasks to experts. PEOs have a low state unemployment tax rate, which makes PEOs a good choice if you have high employee turnover. PEOs also often come with their own insurance brokers. This can be convenient for companies that don’t already have one, but if you have a great insurance broker you don’t want to give up, not every PEO will let you keep them. And because PEOs are a co-employer, companies that want to stop using their PEO may have a difficult time disentangling from them.  

Compared to PEOs, human resource outsourcing tends to be more flexible and comprehensive. While a PEO may offer a rigid package, an HRO allows companies to select services based on their needs. This means if all you need is payroll processing, they can provide that. If you want full services, they can provide that too. The flexibility HROs offer is useful for small companies on a budget. It’s also useful for large companies that have established jobs and systems for some HR tasks. These companies may only need a few services or just want an expert’s perspective. HROs provide custom solutions that scale to fit companies’ changing needs, perfect for growing businesses. At Megastar HR, we work hard to understand our partners’ cultures and are happy to introduce ourselves to management and employees. 

HR Outsourcing (HROs) 

HR outsourcing provides multiple HR services, typically à la carte so businesses only select the services they need. Some HROs also offer consulting about HR issues. Megastar HR offers unlimited chat, email, and phone calls with a dedicated HR Business Partner. 

New businesses may be hesitant to outsource their HR because of the upfront cost. But outsourcing is more cost effective in the long term because it enables the business to focus on growth and profits, rather than being bogged down by endless but essential HR duties.  

The "Megastar" of HR Outsourcing 

Megastar HR is a growing HR outsourcing company with a vision to become the thought leader of the HR industry and the premier choice for HR consulting and outsourcing services. You’ve learned how HR outsourcing stacks up against other HR options. Now see how Megastar HR rises above typical HR outsourcing.

Legal Disclaimer: This article is for informational purposes only and is not intended to constitute legal, accounting, or tax advice and it should not be relied on as such. Contact your own legal, accounting, and/or tax advisors to obtain advice before engaging in any transaction. No one from should act or refrain from acting based solely on information provided by Megastar HR without first engaging their own legal, accounting, or tax advisors.

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