Why Outsourcing HR Could Be Holding Your Business Back
Leyda Lazo, SHRM-SCP
CEO | Fractional HR Solutions | Strategic HR Leadership | Global HR Solutions
Introduction
Outsourcing HR seems like an easy solution. Hand off payroll, benefits, and compliance to a third party, and you can focus on running the business—right? But I’ve seen that decision backfire more times than I can count.
Instead of freeing up resources, outsourcing often creates new problems. Leadership loses visibility, employees feel disconnected, and decision-making slows down. And when the outsourced provider isn’t responsive or aligned with the company’s needs, the burden falls elsewhere—usually on the finance or accounting team, who end up managing issues they aren’t equipped to handle.
The issue isn’t just about handing over responsibility—it’s about losing control over one of the most strategic parts of your business: your people.
The Problem with Outsourcing HR
With fractional HR, support is available when you need it—no tickets, no long hold times, no waiting for your “assigned day” to get a response. But that’s not the case with traditional outsourcing.
I’ve seen companies frustrated because basic HR issues were taking days to resolve. If an employee had a payroll discrepancy or a question about benefits, they were forced to wait until the provider’s “scheduled day” to visit the office. If that day was missed, they had to wait another week. One employee had a mistake in their paycheck that took three weeks to resolve because the provider’s rep only visited once a week.
And when a new hire started and the provider wasn’t available, someone internally—usually the office manager or even a department head—had to step in to handle onboarding. In one case, a manager had to spend half a day walking a new hire through benefits and compliance paperwork because the outsourced HR team wasn’t available.
When HR is outsourced, responsibility shifts internally—but not to the right people. The finance team often ends up fielding questions about payroll, benefits, and compliance—areas they aren’t trained to manage.
What’s meant to be a solution quickly becomes a burden. Employees are frustrated, leadership is left in the dark, and internal teams are stretched thin covering gaps left by the outsourced provider.
Why Traditional Outsourcing Falls Short
Outsourcing firms operate on volume. They manage processes—not strategy. Their goal is to reduce costs and standardize operations—not to align HR with business growth.
The problem is that HR isn’t just about compliance and payroll—it’s about leadership, talent development, and culture. And when those areas are managed externally, the business starts to lose its identity.
The Hidden Costs of Outsourcing
It’s easy to measure the immediate cost savings from outsourcing HR—but the hidden costs add up fast:
I’ve seen companies spend more time fixing the issues caused by outsourcing than they would have spent investing in the right support from the beginning.
The Alternative
Some of the fastest-growing companies I’ve worked with have taken a different approach. Instead of outsourcing HR, they’ve brought in experienced HR leaders who understand the business, align with company culture, and provide strategic insight.
The difference is clear: decisions are made faster, employee engagement improves, and business growth accelerates.
Takeaway
HR isn’t just an administrative function—it’s a strategic driver of business success. When you outsource HR, you risk losing control over the most valuable part of your business: your people. The companies that succeed are the ones that keep HR close to the core—aligning it with business goals, culture, and leadership. HR isn’t a cost center—it’s a competitive advantage.