3 Questions to Determine if HRO Is Right for Your Clients

Quick look: As you discuss human resources (HR) pain points with a new business prospect, you may find their needs don’t align with a professional employer organization (PEO) solution. Luckily, there are other options that can help them reach their goals, like human resource outsourcing (HRO). Here’s a look at the benefits of HRO and key questions to help clients determine the best fit for their business.

HRO has continually increased in popularity as more organizations seek to streamline their HR operations, reduce costs, and improve their overall performance. 

According to a market report by Grand View Research, the global HRO market was valued at $27.5 billion in 2024 and is expected to grow at a compound annual growth rate (CAGR) of 14.4% from 2025 to 2030.

Several factors are driving the rise of HRO, including how it enables clients to do the following:

• Focus on core business activities: HRO can be particularly beneficial for small and medium-sized businesses (SMBs) with lean in-house HR teams. Even if a prospect has an in-house HR Manager or professional, outsourcing some supporting functions could help save time and allow internal HR staff to prioritize other projects.
• Access expertise: HRO providers offer specialized knowledge and technology that can improve HR operations and reduce clients’ risk of compliance issues.
• Personalize their solution: Services are often customizable, allowing clients to choose which specific HR functions to outsource.
• Scale as needed: HRO providers can help organizations scale their HR as they grow and expand.

Overall, the rising demand for HRO reflects the growing importance of effective HR management in driving business success and competitiveness—making it a valuable recommendation for brokers looking to provide comprehensive solutions to their clients.

HRO vs. PEO: what’s the difference?

While HRO and PEO are both types of HR outsourcing, they differ in scope and focus.

PEO is an outsourcing service involving a co-employment relationship between the PEO and its clients. This means that the PEO becomes the employer of record for its clients’ employees, handling more comprehensive HR processes such as payroll, benefits administration, compliance, and risk management. Meanwhile, the client retains control over who they employ, the direction of their business, and the organization’s daily activities.

HRO, on the other hand, is a more narrowly focused outsourcing service that involves delegating specific HR functions to a third-party provider. This may include payroll administration, benefits sourcing and administration, and risk and compliance. HRO services typically allow clients to choose which specific HR tasks to outsource.

Which solution is right for your client?

While there is some overlap between HRO and PEO services, there are distinct ideal use cases for each. The following three questions can help brokers determine if HRO is the best option for their prospect:

1. “How many employees does your company have?”

Traditional PEO services are ideal for small and medium-sized, white-collar businesses with 10-300 worksite employees (WSEs).

HRO, however, is best for companies with larger workforces that may require a lower level of outsourcing than smaller businesses.

For example, ExtensisHR’s tailored HRO solution is designed for medium to large organizations with over 300 WSEs. With our HRO offering, customers remain under their existing group medical plans but receive a full range of HR expertise and the following services:

• Dedicated HR management
• Payroll and benefit administration
• Risk and compliance support
• A mobile-first HRIS platform and app
• Access to additional tools for performance management, learning and development, etc.

2. “Do the people in your HR department wear many hats?”

During periods of rapid growth, business owners and leaders may find they require a larger HR department to meet new needs. More employees, multistate operations, and cross-industry expansion all come with HR-specific challenges and compliance requirements.

A once-sufficient HR department could become strained with new administrative burdens. In-house HR employees whose titles have expanded (without additional departmental hires) indicate the company is likely operating at maximum internal HR capacity.

HRO alleviates day-to-day administrative burdens and enables in-house staff to focus on bigger-picture initiatives like company culture, employee training and development, and recruiting efforts.

3. “Have your HR goals taken a backseat?”

Human resource management often involves time-consuming daily tasks that can delay progress toward other business priorities. Companies with large workforces sometimes establish but fall behind on ambitious HR goals. As a result, the business’s HR strategies become stagnant. Recruiting, professional development, and benefit package creativity could suffer, causing the organization to lose out on top talent or experience employee retention difficulties.

Outsourcing HR enables time- or resource-strapped companies to become more proactive and quickly respond to disruptions. With HRO, employers work with ExtensisHR’s experienced employment, compliance, and legal specialists. Tapping into this expertise enables them to develop actionable strategies and significantly improve their HR management.

This access also provides peace of mind during unforeseen workplace challenges, like Department of Labor (DOL) audits, harassment claims, etc. With guidance and support from ExtensisHR’s experts, businesses avoid inadvertent, potentially harmful compliance violations or oversights.

HRO that stands out from the pack

Even if PEO is not the right fit for a prospect, HRO may be the ideal solution to meet a client’s needs while unlocking a fresh revenue stream for your business.

And while many HRO providers exist, not all provide the same level of flexibility, expertise, and support. Here’s what sets ExtensisHR apart from the rest:

• Unparalleled customer service provided by a team that answers the phone in 10 seconds or less and solves 95% of cases on the same day.
• Multiple credentials, including the trifecta that only 1% of PEOs hold (IRS Certified PEO [CPEO], Certification Institute [CI], and Employer Services Assurance Corporation [ESAC]).
• Optional recruiting support that encompasses everything from job advertisement creation to offer letter consultations.
• A broker-friendly philosophy designed to help you grow your portfolio and preserve client relationships.

For many larger organizations, HRO is the perfect way to tap into additional HR expertise and services while remaining the employer of record. And with decades of experience, multiple accreditations, and a focus on personalization, ExtensisHR is a standout HRO provider to add to your broker toolkit.

Do you have a prospect in mind who could benefit from HRO? Learn more about ExtensisHR’s HRO solution, or contact us today to request a quote.