You have three basic options in regards to who can handle your HR function:
Do It Yourself:
The upside is you control everything, which keeps costs low. The downside? You don't have the time to do it all—not when generating business is the main priority. In addition, you own all the liability. One missed deadline or misunderstanding of a regulation, and you could damage your business.
Outsource to multiple vendors-- one for each specific task and area of expertise such as payroll, benefits, 401(k), and so on. The upside is you get experts to do the work, which saves you from doing HR administration tasks yourself. The downside is the amount of time spent managing the vendor relationships and eventually your lack of control over long-term costs.
You could use a Professional Employer Organization (PEO) as a single vendor HRO solution.
You get increased efficiencies, an improved employment brand, and a renewed ability to focus on the core business.
The upside? You manage a single relationship and gain HR expertise, HRIS technology, and a qualified team to manage your HR function. However, the downside is you must find the right HR partner—one that tailors its services and cost structure for your specific industry—because a wrong choice is a costly one.
A Professional Employer Organization (otherwise known as PEO) is a business model in which the PEO and Client Company enter into a contractual Co-Employment agreement. By doing so, this enables the PEO to provide your company with consultative services in the form of: Human Resource Consulting, Safety & Risk Management, Payroll Processing & Tax filings along with Workers’ Compensation Insurance. The goal of a PEO is to be your partner in increasing your organizations profitability by allowing you to focus your time and energy on your core business practices.
Your company enters into an agreement with the PEO to establish a three-way relationship between you, your employees and the PEO. You and the PEO become co-employers, instead of the traditional employer company/employee relationship.
Outsourcing your HR functions allow you to Focus On Your Core Competencies and provides administrative relief from many employer-related responsibilities, so you can concentrate On Developing Strategies That Provide You A Competitive Advantage!!!
Payroll Processing Workman’s Compensation Benefits Administration Risk and Safety Management Human Resources Administration RPO Recruiting PEO Services
What Exactly Can I Expect From A PEO? Detailed Service Delivery Of Your Average PEO
Offers General Payroll Outsourcing for your employees.
Administrative Services (ASO)
Delivers Payroll as well as a dedicated 1) HR Representative 2) Benefits Administration, 3) Risk and safety Assessment 4) Recruitment.
Co Employment (PEO)
Offers all the services of the ASO as well as Payroll but you get a added benefit of taking advantage of the reduction in cost from the discounted negotiated Workman's compensation Rates of your PEO partner.
What Are The Differences Between A PEO, HRO and ASO?
The advantages of PEO’s are somewhat obvious. You no longer have to deal with human resources issues directly. That means you can say goodbye to the days of maintaining payroll records, negotiating health insurance plans, and mediating workers’ compensation claims. This frees up time for you and your office staff to concentrate on growing your company – which is why you became a small business owner in the first place.
Another advantage of PEO’s is their size. Often, PEO’s are able to negotiate better deals for health insurance and other benefits because of the volume of business they offer. There size also leads to economies of scale in human resource staffing. Your savings comes in the money you save by not having to staff human resources in-house.
There are also some disadvantages with PEO’s that you need to know about. Most importantly, you need to realize that legally your company no longer has any employees (including you). When you transition to a PEO your company legally terminates all of your employees, who are then rehired by the PEO. Sure, you retain all of the same employee decision-making power you had before, but paychecks will now be issued under the name of the PEO. Furthermore, your employees may need to identify the PEO as their employer on their tax returns and when they apply for loans. This may seem like a technicality, but unless your employees understand this ahead of time it can create no small amount of concern for your staff. By signing with a PEO, you also lose a certain amount of flexibility in the compensation package your employee’s receive. Again, you decide how much your employees will be paid. However, your options regarding health insurance and other benefits may be extremely limited.