Topic Outsourcing HR / PEO

The Undeniable Influence of HR Outsourcing on Profit Margins

The Undeniable Influence of HR Outsourcing on Profit Margins

Strong business finances aren't about the revenue but the profit margins and the cash flow. While growing your business by creating a bigger customer base and creating more sales opportunities is important, keeping your costs under control is essential to achieving a significant ROI for every initiative or business change. One of the most effective strategies for increasing your profit margins for small- and medium-sized businesses is to outsource as many behind-the-scenes business operations as possible. Focus on your core competencies—the core products and services your organization provides—and let other specialists handle billing, IT security, and HR.

Outsourcing HR is a particularly effective way to affect your profit margins. It offers more than reduced costs, letting you do more and profit more with every dollar of revenue. It also protects your organization from compliance-related costs and makes every dollar spent on employee benefits and recruiting efforts stretch further.

In this post, we'll discuss how HR outsourcing can help improve company profit margins by streamlining core functions, decreasing costs for benefits, and maintaining compliance.

How HR Outsourcing Impacts Profit Margins

HR outsourcing involves different approaches, but one of the most beneficial practices is to partner with a professional employer organization or PEO. These organizations take on some of your responsibilities as an employer, including managing payroll and benefits, recruiting and onboarding functions, ensuring compliance with local and state labor laws, and more.

They can bolster and empower your in-house team by letting them lean on an organization full of experts who can handle the crucial HR tasks that detract from their ability to support your staff. The PEO can handle business operations tied to scaling up, scaling down, stabilizing, or moving to new areas, such as increasing employees on payroll or adjusting regulatory actions in new areas. Meanwhile, your in-house staff can focus on developing work culture by creating events or instilling workplace wellness.

Let's take a closer look at these eight ways HR outsourcing improves your profit margins without compromising the excellence you offer as an employer:

Reduces Overhead Costs

HR teams handle several operational tasks, many of which are repetitive and mundane but incredibly time-consuming. It's far more efficient to outsource these repetitive tasks to teams that can handle them at a lower cost than having your in-house administration team handle them. You pay for their labor and expertise while freeing up your in-house team to focus on more strategic, high-level tasks.

Access to Expertise

With HR outsourcing, you can access a pool of experts who are certified and knowledgeable in every area you need. Compared to the limitations of hiring a smaller team, you can more easily implement best practices in niche and highly regulated HR areas. Consult with different experts and lean on their knowledge when creating company documents, making your organization compliant with upcoming employment law changes, or transitioning to new employment benefits – all without hiring or firing.

Enhanced Compliance

One of the trickiest ongoing requirements businesses encounter is staying compliant with regulations and laws. Labor laws vary based on state and local regions, and different companies in different industries or simply of different sizes face vastly different requirements on insurance coverage, signage and education, and other HR functions. PEOs and outsourced HR services can give you resources and support for ensuring greater compliance tailored to your industry and region.


Outsourced services naturally give companies an advantage when it comes to scaling. If you're in a hiring phase, you can ramp up recruiting and onboarding services quickly by alerting your HR outsourcer of the number of employees you need to add or remove. You can also add payroll and benefits management tasks to an outsourced service more efficiently. Your costs will incrementally increase but at a far lower rate than managing everything internally.

Streamlined Recruitment

Outsourced HR services can also help with recruiting. Speed up the hiring cycle with standardized and compliant job descriptions, get first-round interviews handled without filling up managers' schedules, and complete the administrative onboarding before employees show up for training. PEOs may also have continuously open lines of recruitment so they can more easily fill open positions with well-vetted candidates. Some HR services also provide offboarding processes for complete employee management.

Focus on Core Business

Because you're outsourcing functions that aren't critical to your core competencies, your entire team can focus exclusively on your business objectives. Your management and leadership teams can focus on customers, products, and sales without managing administrative demands. Any new hires also add directly to the revenue side of the business, not bulky administration.

Employees will feel more supported because your HR team can proactively implement wellness initiatives or improve your work culture. They will also be more available when anyone asks them questions or needs clarification.

Improve Employee Well-being

When you improve employee well-being, you decrease costs. Expenses like turnover, turbulence from low attendance and burnout, and poor employee performance decrease when your work culture supports better health, wellness, and work-life balance. In implementing these wellness programs, you incentivize workers to live healthier lives. These can be simple reminders for employees that they are encouraged to take breaks or walk around and be active if the job is mainly sedentary.

HR outsourcing can also give your organization access to better benefits at a reasonable cost because they represent large groups of businesses as a network. Your employees can access flexible healthcare options and choose the plan that fits their needs and supports their families.

Increase Retention

Turnover is a massive drain on company resources – both on finances and productivity. Increasing employee retention increases your profit margins by incurring fewer costs, like hiring new employees and dealing with missed opportunities when there's an open position. You also gain the expertise of longer-term employees who can serve your customers better, as well as the productivity benefits of a better company culture that typically goes hand-in-hand with greater retention.

Support a Stronger Business with HR Outsourcing

Growing your business isn't just about generating new leads and providing excellent services for all your customers. It's also about refining costs to stabilize your cash flow and finances while still providing support and great benefits for all of your employees.

At Questco, we share our clients' missions to provide employees and businesses with the human resources assistance and expertise they need to thrive. Reach out today to learn more about our HR outsourcing services and to see how our team can enhance your organization's profit margins.

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