Outsourcing any activity to an external provider can offer benefits, such as increased efficiency and access to expertise. But it can also present challenges, such as loss of in-house knowledge and processes, and fragmentation of the service provided. Payroll is the most commonly outsourced HR activity, followed by providing advice on specialist topics.

This factsheet introduces HR outsourcing and its use by organisations, outlining some of the alternatives, such as shared services, employee self-service, and buying-in consultancy services. It highlights the need to consider the business case for outsourcing HR work and the questions to ask in deciding whether outsourcing is the appropriate solution. Finally, the factsheet offers guidance on selecting a provider and sets out what to consider when managing the move from in-house to a third-party service.