Types of HR Outsourcing: A Practical Guide for UK Businesses

Managing HR can be a real challenge, especially for small and medium-sized companies (SMEs) juggling growth, compliance, and employee expectations. That’s where HR outsourcing comes in. By partnering with external experts, you can streamline your HR processes, stay on top of ever-changing regulations, and free up valuable time to focus on what you do best. In this guide, we’ll walk you through the main types of HR outsourcing available to businesses, the key benefits, and how to choose the right approach for your needs. Whether you’re looking to save costs, access specialist knowledge, or simply make HR less of a headache, you’ll find practical advice and reassurance here.

In This Guide

What is HR Outsourcing?

HR outsourcing means transferring some or all of your human resources functions to an external provider. Instead of handling everything in-house, you partner with specialists who manage tasks such as HR administration, recruitment, compliance, and employee relations on your behalf.

The HR outsourcing market is booming in the UK, with more employers than ever turning to external partners for support.

Why Outsource HR?

1. Cost Savings

Outsourcing can reduce HR-related costs. Instead of hiring and training a full HR team, you pay only for the services you need. For SMEs, this is a game-changer, freeing up budget for growth. There are a whole range of reasons why businesses outsource HR but some of the most common ones can be found below.

2. Access to Expertise

HR laws and best practices change rapidly. Outsourcing HR gives you instant access to experts who stay up to date with employment law, compliance, and HR technology, helping you avoid costly mistakes.

3. Focus on Your Business

HR admin is time-consuming. By outsourcing, you and your team can focus on what you do best – serving your customers and growing your business.

4. Flexibility and Scalability

Your HR needs will change as you grow. Outsourcing allows you to scale support up or down, whether you’re expanding, downsizing, or managing seasonal peaks.

hr outsourcing

Main Types of HR Outsourcing

HR outsourcing isn’t one-size-fits-all. Here are the main models’ businesses use:

1. Administrative Services Organisation (ASO)

An ASO manages HR admin—like payroll and benefits—without becoming a co-employer. You remain the legal employer, but the ASO takes care of the paperwork and compliance. This suits businesses wanting support but with more control over HR strategy.

2. Business Process Outsourcing (BPO)

With BPO, you outsource specific HR processes (e.g., HR administration, employee relations, recruitment or training) to specialists. This lets you tap into expert knowledge for complex or time-consuming tasks, while keeping other HR functions in-house.

3. Single-Function Outsourcing

Some businesses outsource just one HR function, such as  recruitment. This targeted approach is cost-effective for companies with specific gaps in their HR capabilities.

4. Shared Services/Co-Sourcing

Here, you combine in-house HR with external support. Outsourced HR professionals work alongside your team, providing HR consultancy or covering busy periods. This is ideal for businesses with a small HR team needing extra support.

Key HR Functions Businesses Outsource

Recruitment & Talent Acquisition

Recruitment & talent acquisition is time-intensive and requires specialist skills. Outsourcing helps you access a wider talent pool, streamline hiring, and ensure compliance during the onboarding process with right-to-work checks and other legal requirements.

HR Compliance & Risk Management

Employment law is constantly evolving. Outsourcing compliance to experts helps you avoid legal pitfalls, penalties, and reputational damage.

Performance Management

External HR partners can help you set up and run performance review systems, ensuring fair appraisals and supporting employee development.

Training & Development

Specialist providers can design and deliver HR training programmes tailored to your business, helping your team develop new skills and stay engaged.

hr partner

Choosing the Right HR Partner

1. Assess Your Needs

Start by identifying your HR pain points and what you want to achieve; maybe it’s cost savings, compliance or better recruitment.

2. Define Your Objectives

Be clear on your goals. Are you looking for full-service support or help with specific tasks? This will guide your choice of provider.

3. Check Cultural Fit

Your HR partner should understand your business values and culture. A good fit leads to better communication and outcomes.

4. Evaluate Expertise

Look for providers with experience in your industry and a strong track record. Ask for references and case studies.

5. Review Technology

Ensure your provider uses secure, user-friendly Human Resource Information Systems (HRIS) that integrate with your existing tools or HR software.

6. Set Clear Agreements

A robust service level agreement (SLA) should outline services, performance standards, security, and confidentiality.

FAQs About HR Outsourcing

What’s the difference between HR consulting and HR outsourcing?

Consulting is short-term advice on specific issues; outsourcing involves ongoing management of HR tasks.

Which HR functions are most commonly outsourced?

HR administration, recruitment, training, projects and strategy, and compliance.

How much can I save by outsourcing HR?

Anywhere between compared to in-house HR, plus savings on recruitment and training.

How do I choose the right HR outsourcing model?

Consider your business size, needs, and how much control you want to retain.

What are the risks, and how can I manage them?

Risks include loss of control and data management. Mitigate by choosing reputable providers, setting clear SLAs, and maintaining some internal oversight.

How Norton Loxley Can Help

At Norton Loxley, we know every business is unique. Whether you need full HR support or help with specific functions, our experts will tailor a solution to your needs – saving you time, money, and stress.

We’ll work closely with you to understand your business and recommend the right outsourcing model. Our team brings deep expertise, robust technology, and a friendly, supportive approach – so you can focus on what matters most, growing your business.

Ready to see how HR outsourcing can help your business?

If you are looking for support to get started with your HR function get in touch with the Norton Loxley team. We are here to support you and your Company as your outsourced HR team.