How does outsourcing affect the role of human resources professionals? HR outsourcing is not meant to replace your existing team — it complements your team. By outsourcing the mundane administrative tasks, you give your HR team time to focus on revenue-generating tasks and building an attractive culture to help you find and keep great talent in your industry.
Types of Outsourcing
When looking to outsource some HR functions for your company, you have options. Choosing the best fit requires an analysis of your goals and a calculation of your ROI.
Payroll Service Providers
Payroll Service Providers (PSP), as their name suggests, provide payroll services to companies looking to outsource that activity. A PSP will handle your payroll, make sure direct deposits are correctly set up, and prepare your federal taxes.
But that is it — they do not even remit your payroll taxes. They will not provide your company with any compliance assistance, workers' compensation insurance, or any other HR administrative need. The problem is that outsourcing payroll only eliminates a small slice of the HR pie. If you want more, you should turn to either an Administrative Services Organization or a Professional Employer Organization.
Administrative Services Organization
Administrative Services Organizations (ASO) provide a level of HR outsourcing beyond a PSP. An ASO can take on your payroll responsibilities like a PSP but can also provide your company with benefits administration and risk management. While an ASO will save you time in this regard, they will not necessarily save you money.
Professional Employer Organization
A Professional Employer Organization (PEO) is the gold standard of HR outsourcing. With a PEO, you get the same service as a PSP and an ASO combined, along with additional benefits. You can join a PEO's healthcare plan without, and your company saves money on the premiums because the PEO has negotiated better rates than you could get on your own. With a PEO, your ROI vastly exceeds the other HR outsourcing options you have available.
Reasons for HR Outsourcing
All three options can process your company's payroll. However, only a PEO can remit your payroll taxes. A PEO is also uniquely qualified to provide your company with expert level HR compliance while also serving your employees’ needs through co-employment. When you fail to comply with employment laws, you can face stiff fines and penalties that not only hurt your bottom line but also hurt your company's reputation. Staying compliant while offering your team the benefits they seek is a win-win.
Posting requirements, handbook creation and review, and payroll processing are mundane HR tasks that your current team will happily shed. Removing these tasks also allows your internal HR team to focus on employee engagement and building a positive work environment. This has been shown repeatedly to reap significant benefits for small businesses.
Benefits of HR Outsourcing
There are many benefits to outsourcing HR administration needs. Your in-house HR team can focus on your core business needs through HR outsourcing and increasing employee engagement by strengthening your company culture.
Some HR tasks can be cumbersome. By removing these tasks from your internal team, your team can align their focus on building a great company culture and not worrying about handbook updates or crafting policies around new employment laws. Business process outsourcing can take this burden off your HR staff, allowing them to thrive and help your company reach new levels of growth.
With a PEO partner, you also gain access to HR experts to help keep your business compliant and away from costly fines. Leaning on the experience of your PEO's expert HR professionals, you can provide top-notch benefits to help your business attract and retain top talent in your industry. This leads to your business's growth and profitability.
Outsource HR with a PEO
So, why outsource human resources? Between the cost savings your business will see and the boost in morale of your employees, outsourcing HR makes good business sense.
When seeking an HR outsourcing solution for your business, you have several options. The only option that gives your company a positive ROI through many cost-saving measures is a PEO.