HR Outsourcing in the USA: Benefits and Disadvantages

Share This Post

Table of Contents

HR outsourcing in the U.S.A means you can have staff and a presence in one of the biggest markets in the world, without having to go through the legalities of setting up a separate entity in the country. Many companies use HR outsourcing to grow their businesses in the U.S. and test the market before diving deeper into the market.

Additionally, outsourcing HR can assist smaller businesses by avoiding the hassles and manpower needed to manage HR in foreign lands. When you outsource your HR you can ensure your employees can focus on your core business and not administrative tasks.

The U.S. especially can be an HR burden due to the different laws and regulations on a city and state level, but with NNRoad your company can have a flexible international expansion strategy through our HR outsourcing services.


Overview of HR laws and regulations in the U.S.A

The United States Department of Labor oversees and enforces more than 180 federal laws governing workplace activities for about 10 million employers and 125 million workers. These include:

  • Wages and hours
  • Workplace safety and health
  • Workers’ compensation
  • Employee benefit security
  • Family and medical leave act
  • and more; for a full summary of the major laws of the Department of Labor visit their website.

Below you can find a brief introduction of each one of them.

Wages and hours

About the wages, one of the most important aspects to consider is the minimum wage. The federal minimum wage is $7.25 per hour for workers covered by the FLSA (Fair Labor Standards Act).

Many states also have minimum wage laws. In cases where an employee is subject to both the state and federal minimum wage laws, the employee is entitled to the higher of the two minimum wages. 

Click here for a list of the minimum wages in the different states.

The standard working hours are set to 40 hours per week. In the case of overtime work, under the FLSA, employers are required to pay for hours worked in excess of 40 hours per week.

Workplace safety and health

Three U.S. Department of Labor (DOL) agencies have responsibility for the administration and enforcement of the laws enacted to protect the safety and health of workers in America.

OSHA administers the Occupational Safety and Health Act.

The Occupational Safety and Health Act of 1970 is a US labor law governing the federal law of occupational health and safety in the private sector and federal government in the United States. 

Its main goal is to ensure that employers provide employees with an environment free from recognized hazards, such as exposure to toxic chemicals, excessive noise levels, mechanical dangers, heat or cold stress, or unsanitary conditions.

Worker’s compensation

The U.S. Department of Labor’s Office of Workers’ Compensation Programs (OWCP) administers four major disability compensation programs which provide to federal workers (or their dependents) and other specific groups who are injured at work or acquire an occupational disease. These programs provide the injured with:

  • Wage replacement benefits
  • Medical treatment
  • Vocational rehabilitation
  • Other benefits

Employee benefit security

The Employee Benefits Security Administration (EBSA) is an agency of the United States Department of Labor responsible for administering, regulating, and enforcing the provisions of Title I of the Employee Retirement Income Security Act of 1974 (ERISA).

The Employee Retirement Income Security Act of 1974 is a federal United States tax and labor law that establishes minimum standards for pension plans in private industry.

ERISA is sometimes used to refer to the full body of laws that regulate employee benefit plans, limited not only to pension plans but also health benefit plans.

Family and medical leave act

The FMLA (Family and Medical Leave Act) entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave.

The FMLA allows eligible employees to take up to 12 workweeks of unpaid leave during any 12-month period to care for a new child, care for a seriously ill family member, or recover from a serious illness.


What are the HR functions in the U.S. and what are the ones commonly outsourced?

HR outsourcing involves hiring an outside firm or service provider to manage personnel functions such as payroll, taxes and benefits, workers compensation, and more.

This is especially helpful in the U.S. because every state has different laws pertaining to employees. If you do not outsource your HR, you and your team should be an expert in the constantly changing state-level laws and regulations, but with HR outsourcing that responsibility is passed to the service provider who is an expert in the area.

Typically, the HR functions that outsourced are:

  • Background checks and drug screening
  • Hiring and payroll
  • Benefits administration
  • Creating/updating employee handbooks and policy manuals
  • Providing training such as sexual harassment training

Prior to outsourcing your HR, it is important to come up with your goals and requirements. Then create a task force to oversee and manage the outsourcing before you find a trusted ‘plug-and-play’ solution such as NNRoad.

The plug-and-play solution is vital whether you are onboarding one employee or numerous employees in a new location or various new locations as this means you have the ability to be efficient and scale quickly.

For more information on when you should or should not outsource your HR visit NNRoad’s article.

Benefits and disadvantages of HR outsourcing in the U.S.A

Using an HR outsourcing company comes with many benefits, but it is also important to watch out for pitfalls as well.

  • Advantages:
    • HR partners who help companies outsource often have better access to healthcare plans, retirement plans, and other benefits than if a company would do the HR alone. This means better benefits to the employees and therefore happier employees.
    • Because companies do not have the burden of HR tasks, they can focus on their core business and become faster-growing companies, with a lower turnover of staff.
    • Companies can save money by outsourcing HR rather than hiring in-house staff as the cost of hiring, training, and compensating the in-house team can add up quickly.
  • Disadvantages:
    • If the wrong HR partner is selected it can create a big headache for companies. A common problem is the lack of communication between the HR partner and the company. You want to ensure you choose an HR outsourcing partner who has clear processes and protocols in place for employees and company contacts.
    • Employees may feel disenfranchised if they are treated as outsourced employees. So even if you are working with an HR outsourcing company, be sure to include the employees as if they were your own. Include them in events, meetings, and the company culture overall to ensure they are treated the same as any other employee.

For a complete guide of hiring employees in the U.S. visit NNRoad’s guide.


How NNRoad can help you to outsource HR in the U.S.

In conclusion, HR outsourcing can be a great solution for companies with the need for HR assistance. There can be disadvantages to HR outsourcing, but when done right, with the right partner, HR outsourcing can help your company grow quickly and make your employees happier.

NNRoad has HR outsourcing experience in nearly 50 countries with the U.S. being the main market for their work. NNRoad knows how to operate in this market with efficiency and ease. Reach out to us today to explore working together.

Scroll to Top