HR Outsourcing Statistics and Facts (2025)

Introduction

Contents

Introduction
Editor’s Choice
What is Human Resource Outsourcing?
What HR Functions Are Commonly Outsourced?
Types of HR Outsourcing
General HR Outsourcing Statistics
HR Outsourcing Market Statistics
Payroll Outsourcing Statistics
US Outsourcing Statistics
Business Process Outsourcing Market Size
IT Outsourcing Statistics
IT Outsourcing and Cloud Services Statistics
Interesting Outsourcing Statistics
Advantages and Disadvantages
Conclusion

HR Outsourcing Statistics: In recent years, large and small companies have faced more complicated HR tasks. However, the way these challenges are dealt with is often very different between the two. Large companies often have their own HR teams to handle everything, which is something most small businesses can’t afford. Instead, small business owners usually have to take on HR tasks themselves, along with all the other duties of running a business. As a result, many small business owners have started to turn to HR outsourcing.

This option has become more popular over the past 10 years because it allows businesses to get expert HR help without the high costs of hiring a full-time HR team. We shall shed enough light on HR Outsourcing Statistics through this article.

Editor’s Choice

Around 24% of small businesses use outside companies for their HR services.
HR Outsourcing Statistics stated that nearly 45% of businesses spend almost a whole day each week on HR-related admin tasks.
Outsourcing HR could help reduce employment costs by as much as 70%.
44% of businesses say their biggest problem with outsourced HR is that the service providers are often reactive rather than proactive.
65% of small US businesses use HR software.
HR Outsourcing Statistics stated that almost 15% of small businesses plan to start using HR software in the next 1 to 2 years.
More than 73% of companies plan to invest more in recruitment technology.
97% of employers are thinking about increasing their investments in recruitment technology.
64% of HR professionals say that automation or AI tools help screen out unqualified candidates.
Around 85% of employers using automation or AI save time and boost efficiency.
66% of CEOs believe that AI can greatly improve HR tasks.
20% of small businesses use a PEO (Professional Employer Organization) to manage payroll.
About 40% of small businesses pay $845 in IRS penalties each year because of payroll mistakes.
15% of businesses with 2,500 or fewer employees fully outsource their payroll services.
Outsourcing HR costs about $583 per month for each employee.
HR Outsourcing Statistics stated that nearly 78% of HR outsourcing providers met or exceeded their cost goals.
The most commonly outsourced HR tasks are employee training (58%) and recruitment (38%).

What is Human Resource Outsourcing?

Human resources outsourcing (HRO) is when a company hires another business to handle its HR duties. The outside company takes care of all or some HR tasks for the employer.

Outsourcing HR allows the business to focus on important HR issues that affect company success and shareholder value. At the same time, tasks like hiring, payroll, training employees, managing benefits, and job assessments can be outsourced to save both time and money.

The next sections explain which HR tasks are best to outsource and the benefits this brings to the company. You’ll also learn about different types of HRO, like PEOs, BPOs, and ASPs, and see if outsourcing is a good choice for helping small businesses grow.

What HR Functions Are Commonly Outsourced?

Here are the seven most common HR tasks businesses often choose to outsource:

(Source: beepo.com.au)

#1. Administration

HR teams have a lot to handle, like making policies and helping employees grow. Outsourcing admin tasks can save time, allowing HR to focus on more important goals.

#2. Payroll Management

Payroll, including taxes, deductions, and tracking work hours, can be complicated. Outsourcing this task ensures everything is accurate and follows the law, avoiding potential issues.

#3. Compliance and Risk Management

Keeping up with changing rules and laws can be hard. Outsourcing this task to HR experts ensures the company stays up-to-date and follows the right rules. It also helps with creating employee handbooks and managing important documents.

#4. Recruitment Services

Finding the right people to hire is important for a business. Outsourcing recruitment makes it easier, as outside providers have large databases and tools to help write job ads, find the best candidates, review resumes, and schedule interviews.

#5. Benefits Administration

Creating the right benefits packages for employees can be tricky. Outsourced HR services can help offer healthcare, retirement plans, childcare, and other benefits, making employees happier and healthier.

#6. Recognition and Rewards Programs

Rewards programs, like bonuses or sales incentives, are key to keeping employees motivated. Outsourcing these tasks helps companies easily manage these programs and keep workers engaged.

#7. Performance Management

Outsourcing performance management ensures there’s a solid system for reviewing employees. This helps give useful feedback and encourages continuous improvement.

Types of HR Outsourcing

Here are the main types of HR outsourcing options:

Professional Employer Organizations (PEOs)

PEOs work with businesses to handle HR tasks and share the legal responsibility for employees. This allows businesses to focus on other parts of the company while the PEO takes care of everything HR-related.

Business Process Outsourcing (BPOs)

BPOs make sure your HR system is updated with the latest technology. They offer features like self-service options and HR data storage, which helps make HR tasks more efficient.

Application Service Providers (ASPs)

ASPs provide online software for HR functions. They offer both standard and custom solutions for tasks like payroll and managing benefits.

E-Services

E-Services are web-based HR solutions. BPOs and ASPs are often part of E-Services, offering various HR functions online for better efficiency and convenience.

General HR Outsourcing Statistics

The HR market is growing quickly. It is expected that the global HR outsourcing market will reach $65.3 billion by 2030, up from $44.3 billion in 2023.
Most companies (80%) rely on HR outsourcing to cut costs, get expert help, and follow labor laws.
About 58% of businesses use HR outsourcing to reduce costs, and outsourcing can save companies between 20% and 40% compared to doing it in-house.
HR Outsourcing Statistics stated that 78% of businesses are satisfied with the cost savings from HR outsourcing.
Many companies use HR agencies to lower costs, reduce workloads, and meet financial goals.
54% of businesses outsource recruitment, and 37% outsource payroll.
Working with an HR outsourcing company usually reduces the need for in-house HR staff by 10% to 18%.
Companies typically outsource tasks that are time-consuming or require special knowledge, like creating policies or compensation plans.
HR Outsourcing Statistics stated that 45% of small business owners spend at least one day each week doing HR tasks.
Nearly 95% of HR professionals use technology to manage their teams, especially for remote work.

(Source: thebusinessresearchcompany.com)

About 45% of businesses spend almost a full day every week or more on handling HR admin tasks.
47% of HR departments report that employee turnover and keeping staff are their biggest challenges.
83% of companies believe it’s getting harder to attract and keep talent.
HR Outsourcing Statistics stated that 51% of workers say they would switch jobs if a new job offered flexible work options.
The cost of employee turnover has reached $223 billion over the last five years due to workplace culture.
The average yearly salary for an HR professional in the US is $66,668; in Australia, it’s AU $97,516, and in the UK, it’s £44,759.
HR Outsourcing Statistics found that 78% of companies said their HR outsourcing provider either met or exceeded cost goals.
35% of companies with fewer than 1,000 employees outsource at least one HR task.
The most commonly outsourced HR tasks are employee training (58%) and recruitment (38%).
78% of employees leave their jobs for reasons that their employer could have avoided.

HR Outsourcing Market Statistics

The human resources outsourcing market is worth $39.3 billion.
The HR outsourcing market is growing at a rate of 4.3% each year and will likely reach $53 billion by 2031.
Banks, financial services, and insurance companies make up the biggest share of HR outsourcing, followed by the healthcare, hospitality, IT, and retail sectors.

(Reference: smbguide.com)

The global Business Process Outsourcing (BPO) market is worth $370 billion in 2024.
The BPO market is growing at an annual rate of 4.43% from 2024 to 2028 and is expected to hit $440 billion by 2028.
The average cost per employee is currently $105.2, which is surprisingly low compared to average wages in the US. This shows why many companies prefer outsourcing over hiring local workers.
HR Outsourcing Statistics stated that the robotic process automation (RPA) software market is valued at $5.4 billion.
The RPA market is growing at an impressive 36.6% each year and is expected to reach $81.8 billion by 2032.

Payroll Outsourcing Statistics

Outsourcing payroll is still a good option for small businesses. As we move into 2023, small business owners should think carefully about the pros and cons of outsourcing payroll. For many businesses, outsourcing payroll can be very beneficial.

Larger companies are 66% more likely to outsource payroll than smaller ones –

This shows two things: bigger businesses have more money to spend on outsourcing, and they know outsourcing helps them grow.
Understand that the benefits of outsourcing are worth the cost.

The payroll outsourcing market is expected to grow by $6.15 billion by 2025 –

The demand for payroll outsourcing is growing as more businesses need expert help.
Hiring an in-house payroll specialist can be expensive, so more small businesses are turning to outsourcing to save money.

(Source: alliedmarketresearch.com)

25% of employees have received a paycheck with errors

Payroll mistakes happen often, and they can cause a lot of problems.
This shows how important it is to hire experts who can handle payroll rather than relying on employees who do payroll as an extra task.

49% of employees quit after two payroll errors

HR Outsourcing Statistics stated that Payroll mistakes can be very expensive.
Many workers live paycheck to paycheck, so when there are errors, it can hurt their trust in the company.
Consistent, accurate payroll helps keep employees satisfied.

One-third of small businesses spend over 6 hours a month on payroll

Payroll can take up a lot of time, especially as a business grows. Often, an employee who already has other important jobs will spend this time on payroll.
Outsourcing payroll to experts can save time and let employees focus on other tasks.

(Source: maximizemarketresearch.com)

Their employers misclassify 10%-20% of employees.

Misclassifying workers can lead to costly fines from the IRS. In 2020, the IRS collected over $6 billion in payroll mistakes.
To avoid this, outsourcing payroll to professionals can help keep things accurate.

US Outsourcing Statistics

The Business Process Outsourcing market is expected to reach $146.30 billion in 2024.
The average spending per employee in the Business Process Outsourcing market is expected to be $840 in 2024.
The United States is predicted to generate the highest revenue in this market, with $146.30 billion in 2024.
Around 300,000 jobs are outsourced by US businesses every year.
HR Outsourcing Statistics stated that 68% of US companies use outsourcing services, especially in the healthcare industry.
The market is expected to grow at a rate of 4.08% per year from 2024 to 2029, reaching $178.70 billion by 2029.
The US is the world’s biggest outsourcer, with a huge share of global outsourcing. The UK comes in second, with only 5.2% of outsourcing deals.

(Reference: innovatureinc.com)

Many US companies choose to outsource to countries like India and Bangladesh to save on labor costs.
These sectors have strict rules for contracts that differ from those of the private sector, often with special rights for government agencies.
One reason US companies outsource is to lower costs. A call center worker in India makes between $5 and $9 per hour, while in the US, workers are paid between $22 and $35 per hour.
Workers in the Philippines earn slightly more, with hourly rates ranging from $8 to $14.
After the global financial crisis, companies should stop outsourcing and focus on hiring local workers.
However, 57% of businesses increased their use of outsourcing to save money, with 46% choosing cost savings over keeping jobs local.
While many business owners support outsourcing, most Americans believe it harms the US economy.
HR Outsourcing Statistics stated that about 7 out of 10 people think outsourcing negatively affects the economy. While outsourcing helps businesses make profits, it has hurt the middle class in urban areas.
California has lost the most jobs to outsourcing, especially in areas like Silicon Valley and the apparel industry.
By 2020, it was worth $52.9 billion, and it’s expected to keep growing at 3.8% per year, reaching $66.3 billion by 2025. The need for better IT and record management drives this growth.
Larger companies are more likely to outsource. For example, 10 tech companies outsource over 200,000 jobs in total.
Companies like Intel, Accenture, General Electric, and IBM are among the biggest outsourcers.
IBM has more workers in India than in the US, with 130,000 employees compared to under 100,000 in the US. This is because the company can save 50% to 80% on wages by hiring in India.

Business Process Outsourcing Market Size

Today, industries such as healthcare, e-commerce, and tech depend on BPOs to make their internal processes more efficient.
Most of the tasks companies outsource are in-house activities like HR or customer support.
HR Outsourcing Statistics stated that around 59% of businesses, both large and small, are turning to outsourcing to reduce costs. As a result, the BPO industry is expanding quickly.

(Source: orientsoftware.com)

BPO business analytics helps predict the current and future trends in the industry by looking at the latest business patterns, technologies, and other factors that impact the industry’s revenue.
Even though technology and automation are replacing some jobs, new job opportunities are also being created.
The IT sector, which is the most outsourced, needs workers and freelancers who stay updated with the latest tech trends to offer top-notch services.
More companies are also forming partnerships with outsourcing providers both locally and globally.
The global outsourcing market is expected to create millions of job opportunities in the years ahead.
As jobs continue to evolve with technological advancements, it’s a great time for people to explore remote contract work and employment.

IT Outsourcing Statistics

According to GrandViewResearch, the global IT services market, including both in-house and outsourced services, was valued at about $1250 billion in 2022.
It is expected to grow to $1364 billion in 2023. The biggest part of the IT services market is IT outsourcing (ITO), which is expected to reach $430.53 billion in 2023 and increase to $587.3 billion by 2027, according to Statista.
This means the ITO market will grow at a rate of 8.07% per year from 2023 to 2027.
Overall, the IT services market is expected to grow at 6.68% per year during the same period. As a result, the share of IT outsourcing within the total IT services market will continue to rise.

(Source:kruschecompany.com)

The value of the IT outsourcing market can differ based on the methods used to gather and analyze data.
HR Outsourcing Statistics estimated that the IT services market was worth $821.58 billion in 2022, and it is expected to grow at an annual rate of 9.1% from 2023 to 2030.
For the IT outsourcing (ITO) market, Grand View Research valued it at $520.74 billion in 2019 and predicted it would grow at a rate of 7.7% from 2020 to 2027, although newer data wasn’t available at the time.
Meanwhile, HR Outsourcing Statistics stated that the ITO market was nearly $320 billion in 2020 and expects it to increase to $425.19 billion by 2026, with an annual growth rate of 4.5% over that period.
HR Outsourcing Statistics stated that web development is the most popular tech skill in 2023. 58.53% of people surveyed said they are looking for employees with web development skills.
The second most in-demand skill is DevOps at 35.55%, followed by Database Software at 27.5%.
Around 24.6% of employers are also looking for people with skills in AI, Machine Learning, and Deep Learning.

(Reference: kruschecompany.com)

HR Outsourcing Statistics stated that nearly 50% of businesses (49.6%) plan to increase their outsourcing.
About 40% expect no changes, and only 10.4% intend to cut back on outsourcing. This suggests that the outsourcing market is expected to keep expanding.

IT Outsourcing and Cloud Services Statistics

(Reference: orientsoftware.com)

	2022	2023	2024
Cloud application infrastructure services(PaaS)	26.09%	23.25%	21.45%
Cloud application services (SaaS)	16.06%	16.82%	18.89%
Total market	20.38%	20.69%	20.44%

With the growing amount of data collected from IoT sensors, traditional ways of storing and managing information are becoming outdated.
As a result, many companies, including outsourcing providers, are moving to a cloud-first model.
HR Outsourcing Statistics stated that 90% of businesses believe cloud computing is essential for outsourcing.
Cloud computing is developing quickly because it brings major benefits to businesses. It uses a network of remote servers on the Internet to store, manage, and process data.
By adopting cloud services, companies can improve teamwork, simplify operations, access advanced technology, and save money on hardware and maintaining data centers.

Interesting Outsourcing Statistics

Global revenue from IT outsourcing is expected to hit a new high in 2029, continuing to grow for nine years in a row.
HR Outsourcing Statistics stated that 70% of business decision-makers have outsourced key services to third parties, while 25% say they’ve never outsourced any part of their business.
Sales of BPO services in Japan are expected to exceed 5.3 trillion yen by 2027.
Smaller businesses are more likely to outsource payroll services than larger companies.
IT outsourcing developers in Eastern Europe earn 10-50% more than those in Southeast Asia.
59% of businesses say that saving costs is the main reason they outsource.
HR Outsourcing Statistics stated that 47% of marketing professionals outsource graphic design.
The global payroll outsourcing market is expected to reach $19.5 billion by 2031, growing at a rate of 7.2% from 2022 to 2031.

Advantages and Disadvantages

Advantages of Outsourcing HR

Lower Costs: Outsourcing HR can save businesses money on hiring, training, and maintaining an in-house HR team. Employers don’t have to pay for salaries, benefits, or office space. Outsourcing companies also offer flexible services where businesses only pay for what they need, allowing them to focus on core activities that drive growth.
Expert Knowledge: Outsourcing HR companies have experts in human resources who are up-to-date with the best practices in the industry. This gives businesses access to high-quality HR management without having to build that knowledge in-house. This ensures tasks like recruitment, employee relations, and benefits are handled correctly and in line with the latest laws.
Better Compliance: HR outsourcing companies stay informed about changes in employment laws and make sure businesses follow them. This helps reduce the risk of legal problems and fines, which gives companies peace of mind.
Focus on Main Activities & Efficiency: Outsourcing HR allows companies to focus on what they do best—growing and improving their business. Company leaders can spend more time on strategic planning and less time on HR tasks. This helps the business grow and stay aligned with long-term goals.
Improved Hiring: Outsourcing firms often have better tools and wider networks to find candidates. They can fill positions faster and make sure the company gets the best talent. Outsourcing can also improve retention strategies, reduce turnover, and build a stronger workforce.
Flexibility and Growth: As businesses grow or deal with seasonal changes, their HR needs may change. Outsourcing makes it easy to scale services up or down without long-term commitments, which is especially helpful for businesses that are growing quickly or experiencing seasonal fluctuations.
Employee Development: HR outsourcing firms offer training and development opportunities to improve employees’ skills and job satisfaction. This can help keep employees longer by making them more engaged and skilled in their work.

Disadvantages of Outsourcing HR

Loss of Control: Outsourcing HR can make it harder to keep control over key HR processes. Companies might find it difficult to ensure the external provider understands their values and culture, which could lead to inconsistencies in policies and employee management. This may cause employee dissatisfaction and disrupt workplace morale.
Data Security Risks: When HR is outsourced, confidential information could be exposed or mishandled. External providers might not have the same level of security as the company, risking important data. If such a breach happens, it could lead to legal issues and harm the company’s reputation.
Communication Issues: Good communication is key to managing HR tasks like resolving conflicts and performance reviews. Outsourcing can cause delays or misunderstandings because of differences in time zones, language, and business styles. Outsourced HR services may not fully understand the company’s culture, making solutions less suited to the company’s needs.
Hidden Costs: Although outsourcing HR seems cost-effective, there may be unexpected expenses. These could include fees for additional services, time spent managing the vendor, and costs if the company later decides to bring HR back in-house. These extra costs can reduce or even outweigh the savings.
Quality Concerns: The quality of HR services from external providers may not always meet the company’s standards. Outsourcing companies might use general solutions instead of personalized ones, which can negatively affect areas like recruitment, training, and employee retention. This could lead to lower employee satisfaction and performance.
Loss of Internal Expertise & Over-reliance on Outsiders: Relying too much on outsourcing can result in a loss of internal HR skills. If the outsourcing relationship ends or needs to change, the company may find it difficult to get that expertise back. This can create a dependence on external providers and limit the company’s flexibility in making changes without renegotiating contracts.
Compliance Issues: Outsourced providers may not be familiar with local laws or industry-specific regulations, which could lead to legal problems or fines. This can hurt the company’s reputation and result in financial penalties.
Employee Resistance: Employees may feel uncomfortable with HR being managed by an outside company. This can lower morale and make employees distrustful of the HR system. If employees don’t feel connected to HR services, it can hurt engagement and create a negative atmosphere in the workplace.

Conclusion

Recent data in HR Outsourcing Statistics state how important outsourcing is to the global economy and how widely it’s being used across industries. Global spending on outsourcing is expected to reach $777.70 billion by 2028, growing at a rate of 11.07% each year.

This shows that businesses are increasingly turning to outside partners to improve efficiency and access expert skills. In 2023 alone, the United States is expected to contribute $167.90 billion to this market, highlighting the country’s key role in outsourcing growth. These numbers stress how crucial outsourcing is for companies today. It helps them improve their operations, save money, and stay competitive in the global economy.

As businesses face changes in the market and advancements in technology, outsourcing will remain an important factor in boosting flexibility, innovation, and long-term growth.

HR Outsourcing Statistics By Types, Advantages and Disadvantages