What is HR outsourcing?
Outsourcing involves completing a task or service more efficiently by asking someone else to do it. If a company finds someone or another company offering to complete its tasks for less than what they are paying for it now, it is usually favorable. In simple words, Human Resource Outsourcing is a procedure in which a firm relies on a third-party Human Resources Solutions Provider to administer to daily or strategic HR tasks/initiatives.
A great strategy for outsourcing in the area of Human Resources is to partner with a PEO (Professional Employer Organization).
This helps an organization become more time and cost-efficient, to focus on growth and innovation, and to provide a higher quality service to their customers. The company also benefits from other valuable offerings related to Labor Law, compliance, Employee Handbook creation and ongoing management, payroll processing, and much more.
Benefits of HR outsourcing
There are many more advantages of HR outsourcing such as:
- Immediate access to up-to-date HR policies, Federal and State mandates
- No need to hire a full time, internal resource for HR
- Eliminate non-revenue generating activity
- Transferring risk and liability for employee issues
PEO as an outsourcing trend
PEO stands for “Professional Employer Organization”. PEOs provide employee management services, including HR outsourcing, payroll processing and benefits management. From a legal standpoint, the relationship is co-employment, allowing the PEO and client company to share the employees, but for different reasons.
The client company maintains control over managing their employee’s daily tasks, management, decisions for hiring/firing, compensation levels, ownership, everything remains the same as it was. The PEO’s role is simply handling functions such as payroll, benefits, tax remittance, and because of the co-employment relationship, can provide guidance for HR and mitigation of employment-related liability, and provide access to a wider variety of benefits than the company could obtain on its own. These areas may or may not include a Master Employee Healthcare plan, MEP 401k plan, or Master Workers’ Compensation plan. Instead of outsourcing to multiple service providers, the PEO can provide many services and consolidate vendors for the client company. PEO’s can also offer training and leadership development, recruiting support, and performance management support, allowing the business to focus on core operations.
It is important to note that a PEO does not control your business, cause disruption, or replace internal HR staff. It is just a way to help the business focus on more important issues while they handle the less critical tasks of the business.