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Usually, such businesses try to focus their effort and time on core tasks, and attention span is the last thing they want to face. In this case, outsourced HR can become an opportunity to break new ground without cutting corners.

It’s little wonder that human resources is the most commonly outsourced function. HR outsourcing companies can undertake a handful of tasks, from payroll proceeding, administration, and benefit plan management to recruiting and training. You can find a reliable provider that will take responsibility for a set of HR functions and take benefit from it, and won’t have to outsource them to multiple vendors. 

However, the financial side of this issue might significantly affect your final judgment in deciding whether HR outsourcing is worth the money. This leads to the question: what are the average HR consulting fees? 

To save your time from doing copious research on the topic, we did it for you. We want to give you some essential information on the factors affecting the final price, so you would know what to keep an eye on.

What are commonly outsourced HR functions?

What are Normal HR Consulting Fees?

Each company is one of a kind, so it’s challenging to say a specific number that will fit every company like a glove. HR outsourcing services on the market are customized under the clients’ needs because each one has specific requirements.

If you were to ask us, “what is normal HR consulting fees per hour,” we’d have said that it ranges between $95 and $190, while the average number is $140. 

Yet, the approximate HR outsourcing costs can vary from $50 to $1,510 per month. Yes, this is a large range, but we are here to help you understand the budget you’ll need to allocate for outsourced HR. It’ll be based on the most common functions that companies usually outsource. Besides, you need to know what functions you need help with to understand the HR consulting fee structure. These include:

  • Recruiting.
  • Staffing.
  • Relocation.
  • Payroll.
  • Benefits administration.
  • Creating/updating employee handbooks.
  • Employee relations and compliance.
  • Pre-employment skill testing and background check.
  • Providing sexual harassment training.
  • Coaching.

Surely, the list goes on, but it sheds light on the average HR consulting services fees that might end up in the final bill. You can choose one service to outsource, or it can be a bunch of them. Usually, small businesses opt for human resources consultant fees on a fixed monthly basis because it’s easier to distribute finances in this case.

Whatever your case is, HR Bit will review each function more in detail to help you decide whether HR outsourcing will hit the spot. 

HR Consulting Fee Structure

The primary factor affecting the HR outsourcing costs is the function or functions you need to be handled by the vendor. You can choose any service depending on your business needs, and, sometimes, companies offer purchasing some of the most popular services in packages. 

Recruiting

Small and medium business or startup owners know there are many bottlenecks when it comes to hiring. If you don’t have an HR department, you probably take care of all the recruitment-related processes, unable to entirely focus on other core activities. That’s why outsourcing recruiting is a choice to make.

Recruiting implies a certain number of services, from creating job descriptions and sorting the CVs to reaching out to the candidates and screening them. In this case, the HR consultant fees vary by the new hire’s first year’s salary because the specialists may charge a percentage based on that sum. Another option is when HR consultant rates depend on the salary of the employee you’re trying to find; this is a flat fee. 

In the case of the first option, the percentage varies from 15% to 30%, although it might be higher depending on the vendor you choose. For example, if you’re looking for an employee with a salary of $70,000, you’ll spend from $10,500 to $21,000 on HR consulting fees. HR consulting rates per hour vary from $30 to $130 on average, so this might be more cost-effective for you. The more hard-to-fill the position, the higher the percentage the recruiters will charge.

Relocation

If you are confident in a particular employee, it’s much more cost-effective to allocate money on his/her relocation than hiring a new one. That’s why partnering with a company that has a flexible approach to relocation can become a significant investment for your business. 

The professionals have tried-out and reliable relocation strategies tailored to the market needs. There are two major approaches for relocation processes: the “tiered” and “a la carte.” 

The first one suggests the organization’s relocation strategy has four levels. It makes it easier for the company to be open with its employees and provide superior relocation packages to prove their importance for its growth.

The second one, an A La Carte approach, is more individual-focused because it allows for creating unique relocation plans for each employee. It takes into account the employee’s individual needs, and in some cases, the specialists may select which relocation benefits they want to receive.   

Furthermore, well-thought-out relocation solutions enable businesses to ensure a smooth employee transfer into new markets. HR experts ensure that payroll and insurance payments are correct and that all local laws are observed.

In this case, HR consulting rates range from $200 to $300 per hour, or you can expect to pay between $1,000 and $1,500.

Payroll

Keeping in mind all the rules on calculating deductions, benefit premiums, taxes, and wage garnishments might be a burden. Outsourcing payrolls can streamline processes for enhanced business productivity. You won’t have to worry about jeopardizing operations because of spending too much time managing payroll queries. 

Your company will go beyond regular document management and workflows because outsourced payroll enables accessing software systems. This enables you to get expert assistance like any other big company. You will take advantage of the already established and tested approaches to payroll management and elevate the online user experience.

One reliable vendor will help to simplify, streamline, and automate your payroll by using a secure online platform you can access at any time. The outsourced specialists will calculate any kinds of benefits and other bonuses, like vacation time and pension plans.   

The cost of outsourcing payroll is rather affordable and depends on the number of employees in your company. Usually, you can expect to pay about $100-250 per employee per year. 

There are three major approaches to HR consulting rates in this case. Namely, paying per frequency, per employee per month, and a fixed pricing. Also, you can ask about the HR consultant hourly rate to see if this option is available. You’re welcome to choose the option that meets your needs best because each of them fits teams of certain sizes.  

Benefits administration

Usually, benefits enrollment happens once a year. Thus, it’s not practical to have such a specialist in-house because he/she won’t have much to do after finishing the primary task. When outsourcing benefits administration, you can agree on the time you’ll need help and pay for the delivered services. 

Also, cooperating with an external resource to manage your benefits reduces the risks of financial exposure, and the outsourcing company takes on the liability burden. You will hire a team or a single expert who has the required experience in handling similar tasks and tested systems and technology to streamline the processes. 

The benefits administration HR consultant rates vary from $120 to $200 per employee yearly.

 Creating/updating employee handbooks

An employee handbook is a crucial communication resource for the employer and employees. It helps your team members understand the company’s mission, policies, and expectations. When receiving it on the first day of their work, employees understand what to expect from the company and vice versa. 

The human resources consultant fees for creating an employee handbook range from $1,000 to $3,000. You can also ask for updating the guide to meet the ever-changing legal and regulatory implications. This costs less; for example, HR consulting rates per hour to update an employee handbook vary from $100 to $300.  

Employee relations and compliance

An external specialist will handle your policies, law compliance, conflict resolution, new hire, termination paperwork, and much more. You can be confident that your company will avoid penalties and lawsuits because of reducing human error and lowering the risk of receiving hefty fines. 

The scope of the review affects the cost of compliance assessment, but the average HR consulting fees you can expect to pay range between $800 and $2,000. 

Pre-employment skill testing and background check

The professional HR specialists understand what kind of information they need to check and where to find it. You won’t have to spend hours figuring out how to manage pre-employment screening and not miss anything.

The bias will be minimized as well because the specialists who check the candidates’ background understand what they should and shouldn’t put in their reports. This allows eluding discriminatory decision-making and prevents conflict of interests. 

The HR outsourcing costs depend on the level of background search. You might need just basic information about employment history or more detailed data about criminal history. Based on your choice, HR consultant rates will be around $25 to $100 and higher per person.  

Providing sexual harassment training

Certain federal and state laws regarding anti-harassment require the companies to run employee training on this topic because many of them lack the expertise. You can purchase ready-made online classes or set live classes, both remotely and in-house. 

HR outsourcing costs for an online class could exceed $50 per employee, while on-site courses range from $1,500 to $5,000, depending on the number of participants. As you can see, HR consultancy fees are lower on an online basis.

Coaching

When outsourcing training and development, you won’t have to think about finding several experts in each required niche and hiring them full-time. It’s often when the employees need short-term training, or the deadlines are tight. Outsourced coaching reduces time wastage and inefficiency and helps the employees to become more productive. Also, it enables higher flexibility since you can exit a contractor or change the terms whenever you feel the need.

The average HR cost for outsourced training and development is $300 to $1,500 a year per one employee.

How Much do Companies Save by Outsourcing?

When you outsource your HR needs to a vendor, you pay a certain part of the costs that would come from working with a traditional HR team. You can save up to $450 per employee when outsourcing onboarding, paperwork, and prescreening.

The human resources consultant fees you pay to the vendors will be 18% less than those of the companies that choose not to outsource.

How does HR outsourcing reduce costs?

Well, around 40% of companies experienced fines, penalties, and lawsuits in the past 12 months. That was due to the lack of expertise in ensuring compliance with government regulations. When outsourcing compliance issues, you will pass off the liability to the outsourced HR experts. So, paying HR outsourcing costs is several times lower than paying the employment lawsuit award, which is usually about $500,000.

HR Outsourcing Costs vs In-House

There are many factors, both external and internal, affecting HR consultancy fees. Companies often wonder whether to outsource HR or handle all the tasks in-house. Choosing the right option will help you minimize the HR consultant fees and become more efficient.

Although HR services, overall, don’t bring revenue, they’re the prerequisite for income, if one can say so. In other words, HR services are critical because they ensure the effectiveness of your employees, which, in turn, directly affect the success of your company.

Since in-house HR consultants fees are rather expensive, it makes sense for most small and medium-sized businesses to outsource their HR functions. In this way, you can focus on core business goals and leverage affordable HR consultant rates alongside high-quality services. So, why bother with payroll, employment law, and benefits administration yourself if you can outsource these functions while paying reasonable human resource consulting fees? 

HR Outsourcing Statistics

  • The global market for payroll outsourcing is expected to reach $1,03 million by 2023.
  • The global recruitment process outsourcing is estimated to grow to $25 billion by 2022.
  • 87% of US-based, 71% of Canadian, and 57% of European companies outsource major HR functions.
  • Around 300,000 jobs are outsourced out of the US each year.
  • 78% of business owners worldwide share positive feedback about their outsourcing partners.
  • 37% of small businesses utilize outsourcing to handle at least one of their business processes, most often HR operations, accounting, and IT services.
  • 45% of the outsourced HR services are related to HR consulting, 36% to benefits administration, and 24% to time tracking.HR consulting fee structure

Conclusion

Planning ahead is your key to figuring out the nuances and cutting down on additional expenses. For example, suppose you don’t have enough time to go through numerous CVs, do background checks, and hold interviews. In that case, you might want to consider recruitment, staffing, and pre-employment skill testing and background check as functions to outsource. 

Once you understand what exactly your company lacks to expand rapidly or what diverts your attention from the core business processes, you will choose the right HR functions to outsource.

If you’re not sure where to start, you can reach out to HR Bit – hr consulting that follows the latest trends and offer a wide range of services. We will discuss your requirements and give you an idea of your business’s average HR outsourcing costs. As we have many years of experience, we know how to handle a handful of HR services based on our customers’ requirements. 

FAQ on HR Outsourcing Cost in 2022

1. How much does human resources outsourcing cost?

In 2022, the average HR outsourcing cost varies between $50 and $1,510 per month.

2. Is outsourcing HR cost effective?

Yes, it is because outsourced HR cost is several times lower than in-house HR. You can save up to $450 per employee when opting for outsourcing. 

3. How does HR outsourcing reduce costs?

You save money on specialists’ salaries when paying human resource consulting fees because a remote HR manager doesn’t need a workstation, benefits, etc. Meanwhile, the average HR specialist earns $81,185 (excluding benefits).  

4. How much does HR cost per employee?

The average HR fees per employee vary between $50 and $250 per month, depending on the HR services you outsource.