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HR
23/10/2024
Understand HR Outsourcing Prices: The Complete Guide

AUTHOR

Talent JDI

READ TIMES

1 minutes

LAST UPDATED

Jan 07, 2025

Table of content

Understanding HR outsourcing prices is vital for businesses looking to entrust a reliable partner with their employee management processes. HR tasks can be complex and time-consuming, and hidden costs can quickly escalate without careful planning. This makes it crucial for companies to have a clear grasp of the cost factors involved to evaluate if the service is worth the investment confidently.

 

In short, you would want to ensure you're paying only for the needed services, with the flexibility to adjust the package as the team evolves—saving both time and money while maintaining control over your HR needs.

 

 

 

When Should Businesses Consider Outsourcing HR?

 

Most companies initially prefer to keep HR in-house to maintain direct oversight of daily operations. However, the reality is that it can consume hours each week in addition to the regular duties of those responsible, especially for global operations or remote teams in locations like Vietnam.

 

With additional challenges such as cultural differences, legal complexities, and communication barriers, outsourcing HR becomes a compelling option to streamline processes and focus on what you do best.

Companies should look at outsourcing HR if:

  • Overwhelmed by HR Tasks: If managing HR duties is pulling you away from focusing on other crucial areas of your business, it’s time to rethink your strategy.
  • Budget Constraints: When your budget doesn’t stretch far enough to support a full-time HR team, outsourcing can be a cost-effective solution.
  • Resource Shortages: Struggling to oversee hiring and employee management with limited resources effectively? Outsourcing can fill the gaps and streamline your processes.
  • Offshore Operations: If your company has overseas branches or offshore development teams, outsourcing HR can help manage complexities and ensure seamless operations across borders.
     

 

A Real-Life Case Study

Alfagomma, a global enterprise, chose to establish its own offshore development center in Vietnam but encountered challenges in managing its Vietnamese tech talent and ensuring compliance with local labor laws.

By partnering with Talent JDI, an HR outsourcing provider, Alfagomma streamlined its HR operations, including payroll and benefits administration. 

 

 

 

 

Common HR Outsourcing Pricing Models

 

If you have already done some research on HR services, you’ve probably come across various pricing models. Each model caters to specific needs and reflects the capabilities of different vendors.

 

Pricing Model

DescriptionAdvantagesDisadvantages

What to Consider

Hourly

Charges are based on the number of hours worked by the service provider.

Flexible for varying workloads

Cost-effective for short-term projects

Can be unpredictable

Difficult to estimate the total cost

Track hours accurately

Ensure a clear scope of work

Headcount-Based (Monthly/Yearly)

Calculated based on the number of employees, charged on a monthly or annual basis.

Predictable costs

Easier budgeting

Scales with the number of employees

Costs can add up with high turnover

Consider employee turnover rates

Evaluate growth plans

Flat Fee

A fixed, all-inclusive fee for services, regardless of the number of employees or hours worked.

Predictable expenses

Simple to understand and manage

No surprise costs

Less flexible

Could be expensive for low-usage scenarios

Ensure all services are included

Assess if the flat fee aligns with your needs

Percentage of Payroll

Costs are based on the percentage of each employee’s income.

Aligns cost with payroll size

Scales with your workforce

Potentially more cost-efficient for smaller teams

Costs increase with higher salaries

Can be complex to manage

Monitor payroll changes

Consider salary structures

Custom Pricing

Tailored pricing based on unique requirements, determined during contract negotiation.

Customized to fit specific needs

Can be flexible and accommodating

Potential for better value

Requires negotiation

Can be complex and time-consuming

Clearly define requirements

Negotiate terms and conditions

 

In a Nutshell, Here’s What You Need to Know!

 

  • Hourly Pricing: Ideal for businesses with fluctuating HR needs or short-term projects but requires meticulous tracking of hours and scope.
  • Headcount-Based (Monthly/Yearly): Best for stable, predictable needs with a fixed workforce. Evaluate your company's growth and turnover to ensure this model remains cost-effective.
  • Flat Fee: Useful for companies with a clear scope of work and predictable needs. Ensure that the flat fee covers all required services and matches your usage.
  • Percentage of Payroll: Suitable for businesses where HR costs should scale with payroll size. Monitor salary changes closely to manage costs effectively.
  • Custom Pricing: Allows for tailored solutions but can be more complex. Clearly outline your needs and ensure the pricing model aligns with your operational requirements.

 

 

HR Outsourcing Prices Breakdown by Services

 

When it comes to finding HR outsourcing prices, a simple online search won’t suffice, as the cost will be influenced by the type of services and their complexity.

 

Apart from selecting pricing models, firms must also define the specific HR outsourcing services they need, as it determines what they are actually paying for. In other words, depending on the scope of operations, strategic goals, and budget, businesses can make an informed decision on the ideal HR outsourcing pricing model and services.

 

Employer of Record (EOR) 

Understand the Employer of Record (EOR)
Understand How An Employer of Record (EOR) Operates

 

 

An EOR acts as the official employer for workers on behalf of another organization, handling all aspects of employment, including compliance, payroll, taxes, and benefits.

 

This model works best for:

  • Companies venturing into new regions.
  • Organizations recruiting remote or international workers.

 

How much does EOR cost?

Assuming your team consists of 15 people, the calculated cost would be:

Expense Components

Estimated Cost (Monthly)*

Setup fee (one-time)

$500 ~ $2,000

Per employee per month** 

$50 ~ $2,000

x15 pax = $750 ~ $30,000

Additional fees: special benefits packages, unique compliance requirements, etc.

$1,250 ~ $2,000

Total Monthly Cost 

$2,500 ~ $34,000

*Disclaimer: The calculated cost is intended for estimation and guidance only and should be used as a reference. For precise figures, professional consultation is recommended.

** For this sample, we will use the Headcount-Based (Monthly) pricing model

 

More insights: How Employer of Record Services Can Simplify Offshore Team Management

 

 

 

Professional Employer Organization (PEO) 

The mechanics behind Professional Employer Organization (PEO)
How Professional Employer Organization (PEO) Works

 

A PEO uses a co-employment model, managing payroll, benefits, HR compliance, and risk, while the client company retains control over daily employee management and operations.

 

This model works best for:

  • SMEs aiming to outsource HR functions.
  • Companies seeking to enhance compliance and minimize HR-related risks.
  • Firms want to offer appealing employee benefits without the associated HR overhead.

 

How much does PEO cost?

Assuming your team consists of 15 people, the calculated cost would be:

Expense Components

Estimated Cost (Annually)*

Setup fees (one-time)

$500 ~ $5,000

Per employee per year (flat fee)** or Percentage of payroll (usually ranges from 2% to 12%)

$500 ~ $1,500

x15 pax = $15,000 ~ 22,500

Additional fees: special benefits packages, legal consultations, unique compliance requirements, etc.

$5,000 ~ $15,000

Total Annual Cost

$20,500 ~ $42,500

*Disclaimer: The calculated cost is intended for estimation and guidance only and should be used as a reference. For precise figures, professional consultation is recommended.

** For this sample, we will use the Headcount-Based (Monthly) pricing model

 

 

 

Human Resource Outsourcing (HRO)

How Human Resource Outsourcing (HRO) operate
How Human Resource Outsourcing (HRO) Works

 

HRO entails delegating particular HR functions or the full HR department to an external service provider. The HRO provider takes over these HR tasks or processes for the client company.

 

This model works best for:

  • Companies that prefer to outsource only certain HR responsibilities.
  • Organizations requiring specialized HR expertise.
  • Businesses want to lower HR operational costs as much as possible.

 

How much does HRO cost?

The costs for HRO can vary significantly, as they are largely determined by the number and type of HR functions being outsourced, along with any additional fees for specialized services. 

HR Functions

Services Included

Estimated Cost
(per employee per year)*

Payroll Outsourcing

Payroll processing, tax filing, benefits administration, direct deposit, year-end processing, etc.

$3,500 ~ $20,000

Recruitment and Onboarding

Talent acquisition, negotiation, onboarding, mentoring and supporting, etc.

$500 ~ $1,000

Training and Development

Training and development programs.

$200 ~ $500

Benefits AdministrationBenefits enrollment, compliance assurance, reporting and analytics, etc.

$100 ~ $300

Employee Relation

Performance management, consultation, conflict resolution, documentation and record keeping, etc.

$10,000 ~ $50,000

HR Consulting

Strategic HR planning, organizational development, compliance and legal advisor, etc.

$540 ~ $18,000

Compliance and Risk Management

Regulatory compliance, audits, risk assessment, policy development and review, etc.

$1,000 ~ $2,000

*Disclaimer: The calculated cost is intended for estimation and guidance only and should be used as a reference. For precise figures, professional consultation is recommended.

 

More Insights: Talent JDI Marks 8 Years as a Trusted Licensed Recruitment and Staffing Partner

 

 

 

Other Factors Affecting HR Outsourcing Prices

Understand the factors affecting HR outsourcing prices
 Understand the factors affecting HR outsourcing prices

 

Project Scope

 

Comprehensive services like full end-to-end HR management, including benefits administration, and compliance support, generally cost more than basic offerings like payroll processing. Additionally, the complexity of the services needed to meet specific HR requirements also influences the pricing structure, with more customized solutions often resulting in higher costs.

 

 

Team Size

 

The number of employees covered mainly drives HR outsourcing prices. Enterprises usually face higher costs due to their complex HR needs and larger workforce while smaller companies can expect a much lower fee. 

 

 

Technology and Infrastructure

 

Advanced platforms, such as automated payroll systems and employee self-service portals, typically come with an additional price tag. Companies seeking cutting-edge technology or integration with existing systems should be prepared for increased costs associated with these premium capabilities.

 

 

Geographic Location

 

HR service providers in developed regions typically charge higher fees due to elevated operating expenses, including higher wages, rent, and other overheads. In contrast, vendors from countries with lower living costs, like Vietnam, can offer significantly more competitive pricing. 

 

These cost advantages are largely driven by lower wage rates, favorable economic conditions, and differences in labor laws and regulatory environments, enabling businesses to access high-quality HR services at a fraction of the cost without compromising on expertise or service delivery.

 

 

Service Provider

 

Lastly, HR outsourcing prices will also be influenced by the selected vendor.

 

Well-established HR service providers with a proven track record often command higher rates, reflecting their expertise, reliability, and industry standing. On the other hand, emerging providers or smaller firms may offer lower prices as they build their client base. While cost savings are tempting, businesses should weigh these options carefully, ensuring that reduced fees don’t compromise the quality or consistency of services delivered.

 

 

 

Choose The Best HR Outsourcing Service Provider

 

A quick search on Google and you will be flooded with a multitude of vendor options. To make the decision-making process easier and more strategic, consider the following key factors that will help narrow down your options and guide you toward the ideal vendor for your unique needs.

 

  1. Clarify your HR needs and requirements
  2. Identify potential HR outsourcing vendors within your industry
  3. Collect details on each vendor’s services, expertise, and reputation
  4. Evaluate their experience with similar HR functions
  5. Look into how HR outsourcing prices are structured
  6. Review client feedback and testimonials to gauge vendor performance
  7. Schedule interviews or meetings with vendor representatives

 

 

Conclusion 

 

To make the most of HR outsourcing, businesses must understand how various pricing factors impact their costs and evaluate the value offered by different providers. Carefully assessing these factors helps ensure that investments align with their needs and goals. 

 

However, for those new to HR outsourcing, especially with offshore teams, establishing a realistic budget and managing potential additional costs can be a significant challenge.

 

Having encountered the same issues, ErudiFi, a leading and innovative FinTech company, engaged in thorough consultancy before partnering with Talent JDI for efficient and cost-effective HR management of their remote team in Vietnam. Explore their journey here!

 

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