In-House HR or Outsourced HR?

In-House HR or Outsourced HR?

Though every business approaches human resources differently, they generally run with in-house HR or outsourced HR. Both have their merits, and our team has experience with each. However, your company’s route depends on how you believe you can maximize your HR results based on your budget. 

HR is more than administration or hiring and firing. It’s evolved into such a critical strategic function that many professionals believe it’s even due for a new name. Human resources departments improve company culture, drive revenue, and, yes, handle all of the mandatory administrative and compliance work that sustains businesses. You need HR. The question is, will you hire in-house HR or outsourced HR? 

The answer to that question goes back to your needs and your budget. Small to mid-sized companies aren’t likely to be flush with cash like their larger counterparts. Every dollar counts. In this blog, we’ll break down what you get from in-house HR or outsourced HR so that you can find the right solution for your business. 


High angle shot of a group of businesspeople having a meeting to decide between in-house HR or outsourced HR.


In-House HR Departments 

Keeping HR in-house makes a lot of sense. Human resources work often involves direct contact with employees and certainly benefits from building familiarity and trust. In-house HR professionals also develop a deep understanding of your company’s culture and how your people operate. 

Moreover, HR handles sensitive documents such as employee I-9s and is responsible for critical employer tax processes. Having access to HR down the hall makes all of that seem easier to manage and more secure. Plus, the best HR departments provide a massive strategic benefit to their employers. They’re the masterminds behind everything from proper compliance to increased employee engagement and productivity. Frankly, they’re a real advantage for businesses that can afford them. 

However, only some companies can afford a proper HR department. For example, the median HR manager salary in Chicago, where we’re based, is $120,015. A payroll manager can run around $115,673, and a benefits manager $124,623, and those are just the base salaries. Then you have benefits, bonuses, and more to account for too. 

Of course, not every in-house HR department is stocked with those titles. Some may have more junior HR employees in place of a benefit or payroll manager; some only have one HR manager or director doing everything. 

Though, many smaller businesses don’t even have that. Often, their “HR department” is an office manager or a payroll person, or the work stretches across several employees who handle HR on top of their actual responsibilities. In fact, one study found that 70% of small businesses take this ad hoc approach to HR. 

Naturally, this opens companies up to a few issues. Namely that HR is not a great side hustle; it requires specific skills and expertise. That’s why 75% of these jerry-rigged HR teams fear they’re making mistakes around compliance. Those are costly mistakes to make! 

Instead, they’re flying by the seat of their pants, just trying to scrape by. This leaves you at a massive strategic shortfall on one of the most essential functions for long-term success. Even more worrisome, if you have a one-person HR department, you’ll be scrambling if that person misses time or leaves for a new opportunity. 

Perhaps this DIY approach can get you through leaner times, but long term, it caps your business’ upside and steals precious time away from your actual work. However, if you can’t afford in-house HR or would prefer to allocate funds elsewhere, outsourced HR is well worth looking into. 


Cropped shot of an attractive young businesswoman talking on her cellphone and typing on her laptop in the office


Outsourced HR Services 

Outsourced HR services give small to mid-sized companies access to genuine, expert-level HR support. Outsourcing is even popular among HR departments, with 54% of them looking to vendors for payroll and benefits administration

Other specific, highly complex HR tasks like FMLA management are outsourced by 31% of SMBs. That’s important to note because these HR compliance-related processes often need an expert touch to avoid non-compliance penalties. Sometimes, small internal HR teams might not have much exposure to these HR high-wire acts, and that can leave your company very vulnerable. 

Of course, what you choose to outsource depends entirely on your internal competencies and budget. But you’ll face no shortage of options when seeking HR services. 

Generally, you’ll work with one of three types of service providers: HROs, PEOs, or ASOs. Each has its own advantages and disadvantages, and you can learn more about that in the blogs linked above. But what you get from each of those providers is HR expertise that should fit snugly into your budget. That means you get to focus on your own work while the HR professionals handle your payroll, benefits, compliance, and talent management. 

Many drawbacks depend on the provider you work with. For example, some PEOs or ASOs might struggle to replicate the benefits of having an actual HR person on staff. Specifically, this can be a problem when it comes to cultural initiatives and building trust with these representatives internally. Additionally, working with a PEO is an all-or-nothing arrangement, so if you only need some support, you might need a different solution. 

However, if you work with ADDA, an HRO, you can have your cake and eat it too. Our services are flexible so that we can accommodate your business needs. If you only want payroll, you only pay for payroll. If you need us to step in as your HR department, our consultants can go as far as taking on a new email address with your company domain. 

On top of covering all of your HR bases, we take the time to work directly with your employees and understand your company culture. This combination of depth and flexibility of services makes meeting your HR needs easy. 

Still, how you handle HR is a big decision. Whether you work with in-house HR or outsourced HR, you need a solution that’s effective and scalable. It’ll spare you many headaches today and down the line. Better yet, it’ll keep you on track, ensuring there’s even a “down the line” to worry about. 


ADDA makes HR easy

Outsourcing HR is an excellent option for many companies, but the most important piece of that is with whom you outsource. ADDA’s expertise runs the gamut from HR standards to strategic initiatives like DEI or executive coaching. Our managed HR services are a serious upgrade for small to mid-sized businesses. If you’re interested in learning more about outsourcing HR with ADDA, schedule a call here.


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