Human Resources Outsourcing

Summary

This practice note discusses special issues that may arise in the context of Human Resources Outsourcing (HRO). HRO is a form of business process outsourcing (BPO) focused on the functions that have typically been performed or managed through a company's Human Resources (HR) or Personnel department. The accepted industry definition of an HRO transaction is that it includes a minimum of three HR functions and service to more than 3,000 employees. Contracting with a management services company to process the company's payroll is not considered outsourcing, even though some of the concepts discussed may be relevant to a customer's hiring of such a company. The issues that customers should address in connection with the outsourcing of HR functions can be broadly grouped into three types: (1) compliance, (2) contractual, and (3) operational. This practice note will explore these issues and provide best practices for how to address them, so that the HRO deal is successful.