Outsourcing refers to the practice of hiring external third-party companies or service providers to manage specific HR functions or tasks on behalf of an organization. This strategic approach allows businesses to streamline their operations, reduce costs, and access specialized expertise while focusing on their core business activities.

Example
A medium-sized tech company outsources its payroll processing to a professional HR outsourcing firm. This external provider takes care of calculating employee salaries, tax deductions, and issuing paychecks, relieving the company's HR department from this administrative burden and ensuring accuracy and compliance with tax regulations.