But part of the deal with a PEO is using their benefits and insurance services, and there's less flexibility to pick your own options. In general, a PEO helps a company provide a more extensive range of benefits and insurance options, possibly at a reduced price. ASOs are ideal for small businesses that already have benefits, workers' compensation or retirement policies and are only looking for extra HR support. A human resource organization HRO works like an ASO but offers extra support for managing employee relations and development.
HR and payroll software help your team with compliance and management of employee files. Some software providers also offer consulting services. Another option is to use payroll services , such as Gusto or Paychex. These provide payroll processing and administration.
In addition, some offer employee benefits. When deciding which type of organization to work with, examine your business's needs and define precisely what you need. Once you know how your business could benefit from these services, reference our guide to outsourcing payroll and HR processes. CO— aims to bring you inspiration from leading respected experts.
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CO— BrandStudio. Looking for your local chamber? Chamber Finder. Interested in partnering with us? Media Kit. By: Jessica Elliott, Contributor Share. ASOs and PEOs are both great options for small businesses looking to outsource administrative tasks — from payroll to benefits.
PEOs deliver proven processes and advanced technologies that help growing companies more effectively and efficiently manage their day-to-day HR functions like recruiting, payroll administration, and employee benefits procurement and administration. The HR solutions they provide are scalable and grow with your company. And because PEOs maintain teams of accredited HR experts, they can also handle the more complex HR matters that often confound business owners—like claims administration and compliance issues.
Some business owners choose to employ a PEO so they can focus more on their core business, others so they can achieve greater operating efficiencies, and still others so they can save money. Companies that use PEOs often realize all of these benefits and more. PEOs leverage the buying power associated with a large client base to negotiate the best rates possible on benefits without sacrificing quality. The savings are passed on to your company and your employees, allowing you to create a competitive benefits package that will attract and retain top-tier talent.
Let our experts keep you compliant with state and federal regulations and take the HR, payroll, and benefits administrative burden off your shoulders so you can focus on growing your business.
To learn more, schedule a consultation with one of our knowledgeable business advisors. What can we help you find? Video Press Release Testimonial News. White Paper Guide. So, what is HR outsourcing, and how can it help your company grow and thrive for years to come?
HR Outsourcing When your business hires an external company to manage some or all of your human resources tasks, you are outsourcing HR. Recruiting services that an HR outsourcing firm can provide include: Candidate sourcing Access to a web-based applicant tracking system Job description support Job postings Resume screening based on client criteria Access to pre-hire job assessments, substance abuse testing, background checks, and medical exams Onboarding new employees Benefits Procurement and Administration An HR outsourcing firm such as a professional employer organization PEO can provide you with access to high-quality, affordable benefits that allow you to better compete for top talent and provide employees with the health and financial benefits they need.
Employment and labor law compliance services that an HR outsourcing firm can provide include: Guidance on federal, state and local laws and ordinances Federal and state wage-and-hour compliance requirements Leave policy and process management Anti-harassment training for management and employees Access to employment practices liability insurance EPLI.
How Outsourcing HR Services Can Benefit Your Business As your company grows, increased HR responsibilities can quickly take over, potentially resulting in the need to hire one or more employees to handle administrative tasks.
Boost Employee Morale Payroll, benefits, career development, and more are vital to maintaining and improving employee morale and productivity. Attract and Retain Qualified Employees A PEO or HR outsourcing firm can help your company take a more proactive and targeted approach to recruiting by actively sourcing and vetting candidates and managing your hiring processes. HR Technology Vendors Some companies have the infrastructure and resources in place to manage their HR functions internally but lack the tools or technology to do so efficiently.
My company is too small to benefit from partnering with an HR outsourcing provider. My company is too big to benefit from partnering with an HR outsourcing provider. If I outsource my human resources, I will lose control of my business. HR outsourcing is too expensive. The way we've been taking care of HR functions ourselves in-house is fine.
PEOs Deliver Scalable HR Solutions PEOs deliver proven processes and advanced technologies that help growing companies more effectively and efficiently manage their day-to-day HR functions like recruiting, payroll administration, and employee benefits procurement and administration.
These terms refer to consolidation of a business function within an enterprise to a highly skilled internal department or group. Shared services may also be provided to third parties.
When the services offered by the shared services team are combined into a central operation, they are often referred to as shared-services centers. Broadly defined, shared services are marked by the consolidation of administration or support functions for several departments. Among HR processes that may be folded into a shared-services plan are payroll, procurement, accounts payable and receivable, travel expenses, health benefits enrollment, and pension administration.
Under the shared-services model, the administrative functions can be handled in-house or outsourced. Technological advances and increasingly sophisticated use of Internet communications have played a major rule in spurring shared-services arrangements in recent years. A professional employer organization, or PEO, is an organization that provides—via a co-employer relationship or employee leasing arrangement—HR management and benefits to an employers' employees.
Employment responsibilities are typically shared between the PEO and the employer; the employer retains management control over the work performed by the employees, whereas the PEO assumes co-responsibility for benefits, taxes and payroll. As co-employer, the PEO pays the wages and employment taxes for worksite employees out of its own account, collects and reports taxes to state and federal jurisdictions, maintains a long-term relationship with worksite employees, and in theory retains the right to hire, terminate and reassign employees.
The employer reimburses the PEO for these expenses and pays a monthly administration fee based on the number of employees employed. Although some PEOs offer services to larger clients, the majority of PEO business is conducted with companies with 50 or fewer employees. PEOs are increasingly becoming the service model of choice for smaller organizations.
See What is a PEO? What are its advantages and disadvantages? Outsourcing has become increasingly important as HR professionals seek ways to reduce time and resources spent on transactions and administration, so they can concentrate on more strategic activities. This reduction in time and resources also translates to savings for the business. When HR departments decide which functions to retain and which to outsource, many hold on to talent management, recruiting and succession planning, while handing off payroll, benefits administration and other routine tasks to third-party vendors.
Besides giving in-house HR professionals more opportunity to focus on strategy, outsourcing can:. In addition, there can be technology benefits. For example, through the use of a SAAS provider that provides and maintains software, employers gain the benefits of advanced software systems and avoid possible technical hassles of managing programs onsite.
The process of deciding whether to outsource HR functions begins with consideration of how outsourcing could help an organization and includes how well positioned HR would be to help the organization manage a transition to outsourcing. It is important to analyze how the company is currently delivering HR and to identify whatever gaps may exist between the organization's HR needs and HR functions.
Employers should also research the outsourcing industry and its trends and analyze how industry trends could affect their organizations. A key consideration is whether the time is right for the organization to outsource HR functions. Outside advisors can help with that question by analyzing data, financial projections and proposed contract terms. For example, even if outsourcing would ultimately save money for the organization, lost productivity during the transition results in initial costs—costs that must be factored into any financial projections.
When deciding whether to outsource, an organization should be able to answer questions designed to analyze its HR needs, its current HR processes, its business plan and its outsourcing options such as the following:. In addition, it is important to know the ways in which an outsourcing arrangement can fall short of expectations and to mitigate such risks. The main areas of concern are listed below.
It is necessary to determine exactly what compliance services the outsourcing vendor will provide and whether the vendor's services will completely satisfy an employer's legal obligations. This concern is most common when a state requirement is more stringent than a comparable federal requirement.
Confusion can arise if a vendor provides a service at a level below or above the level of service performed in-house. There must be full understanding of the services to be provided. In many instances, outsourcing providers carry out tasks in ways that differ from the methods most familiar to the organization.
The client business must understand the vendor's processes fully and must know how the organization may play a role in those processes.
Selective outsourcing—as opposed to relying exclusively on a single provider—generally means outsourcing routine, transaction-oriented processes and is popular because it can be tailored to meet an organization's exact needs.
Following are major areas of HR expertise and the ways in which they can be outsourced. The compensation functions commonly outsourced are payroll, job evaluation systems, salary surveys, executive compensation design and expatriate compensation. Outsourcing to third-party administrators for payroll and related tax duties helps employers meet filing deadlines and deposit requirements.
The reasons for outsourcing may include cost savings, a need to improve customer service, the decision not to develop internal expertise, the ability to take advantage of technology not available in-house, or a desire for the HR department to work more strategically and less transactionally. Third-party services and systems have historically been used to provide or support complex aspects of compensation administration, including job evaluation systems, salary surveys and executive compensation design, whereas actual administration remained an internal function in large organizations.
As outsourcing continues to evolve, marketplace options for truly outsourcing compensation administration are becoming available, including point solutions, single-process outsourcing and integrated HR outsourcing. Point solutions. In this approach, the vendor provides hosted software to support the compensation administration process, and sometimes also provides a degree of call center support. However, the client retains responsibility for the overall success of the compensation administration function and for any aspects of the administration not performed by the vendor.
Point solutions for compensation administration are limited in scope and are usually associated with the adoption of an external portal for employee self-service. Single-process outsourcing. In this approach the organization selects one vendor to perform all of its compensation administration. Integrated HR outsourcing. Under this approach—currently the most commonly used—compensation administration is outsourced in conjunction with a larger outsourcing arrangement that includes workforce administration.
In fact, compensation administration can be a natural extension of the outsourcing of workforce administration. Most workforce administration vendors have at least salary and bonus administration capabilities that are linked to their employee and manager self-service capabilities.
Those tools make them well positioned to take over many of the more routine tasks associated with compensation administration. Organizations with specific needs in compensation administration should search for more tactical, subprocess outsourcing arrangements to supplement or enhance their current services. An example of this approach would be to outsource expatriate administration, which is a subprocess specialty within compensation administration and has an established vendor community.
The term workforce administration refers to the following set of HR functions and activities:. Outsourcing workforce administration is often considered the foundation for the outsourcing of many other functional areas.
In fact, many functional areas within HR, such as compensation administration and performance management, are typically outsourced only in conjunction with workforce administration. Outsourcing is not a panacea for recruitment, but many organizations are testing it and finding it useful.
Success in outsourcing external recruitment depends on defining and deploying an effective talent-sourcing strategy, selecting an appropriate area for testing recruitment outsourcing in the organization, establishing clear performance expectations and measures, and carefully selecting a recruitment partner. The potential benefits include building a strategic partnership focused on obtaining top-quality talent critical for the organization's success.
With recruitment-process outsourcing RPO , buyers take full advantage of flexible options that turn a fixed expense into a more manageable variable expense—a flexibility that enables the organization to adapt to the ups and downs of a fluctuating marketplace. The need to deal with the unexpected is one reason many HR professionals consider outsourcing various relocation functions.
These include claims assistance, audit and payment of invoices, shipment monitoring, expense tracking, reimbursement, and supplementary services. International organizations are much more likely than national companies to outsource relocation services. See Managing Employee Relocation. Recognition and rewards programs are taking their place among services better handled by outside specialists. Recognition programs can provide incentives and reinforcement for desired employee behaviors in areas such as productivity, sales, workplace safety, years of service and cooperation with peers.
But the programs can be time-consuming to administer. Even a program that simply recognizes employees for years of service involves several tasks for obtaining accoutrements for the program, such as plaques, certificates or gifts. Administrative tasks increase as the program becomes more complex and specialized. Outside vendors can be enlisted to handle many of the routine tasks of rewards programs, freeing HR for other responsibilities. See Managing Employee Recognition.
HR managers, who spend an estimated 25 percent to 30 percent of their time managing employee benefits, must protect their organization's bottom line while maintaining employee satisfaction.
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