Did you know that a lot of businesses are outsourcing their HR to save time and money? That means your competition has more bandwidth to focus on tasks and opportunities that move the needle forward while you try to research the latest HR laws and regulations.
When you outsource HR, you can focus on your business while leaving the compliance burden to someone else. It can also help you save money on things like benefits, payroll, and training. When you outsource HR, you can be sure that your employees are getting the best possible service.
Three Types of Outsourced HR
There are three main types of outsourced HR: PEOs, ASOs, and HROs. Each has its own benefits and drawbacks. Let’s take a closer look at each one:
Professional Employer Organization (PEO)
PEOs are companies that enter into co-employment relationships with their clients. In other words, they become the “employer of record” for their clients’ employees in addition to your own organization. This arrangement allows businesses to outsource the management of payroll, benefits, compliance, and other HR functions.
The main benefit of working with a PEO is that it allows small business owners to
offload the administrative burden of HR so they can focus on running their businesses. PEOs also have the buying power to negotiate better rates on things like health insurance and workers’ compensation for their clients.
However, PEOs can be expensive, and some small business owners feel like they lose control over their employees when they outsource HR to a PEO. Another potential downside is that if a PEO mishandles your payroll or benefits, you could be held liable as the employer.
Administrative Service Organizations (ASO)
This is similar to a PEO in that they provide outsourced HR services to businesses. Unlike PEOs, ASOs don’t actually become the employer—they simply handle some of the behind-the-scenes work associated with being an employer. Instead, you only turn over certain HR functions to them.
This means that the business remains the primary employer and is responsible for all employee-related matters. For example, you might use an ASO for payroll and benefits administration but continue to handle recruiting and hiring yourself.
Human Resources Outsourcing (HRO)
HRO firms provide companies with a wide range of HR services, from payroll and benefits administration to employee training and development. This allows companies to outsource as much or as little of their HR functions as they want.
The main benefit of working with an HRO is that it gives businesses the flexibility to outsource as much or as little of their HR as they want. This can be a great option for companies who want to keep some HR functions in-house but don’t have the resources to handle everything themselves.
How to Choose the Right HR Outsourcing Provider
Now that you know a little bit more about the different types of outsourced HR, you might be wondering how to choose the right provider for your business. Here are a few things to keep in mind:
1 – Consider your needs.
What HR functions do you want to outsource? Do you need help with payroll and benefits administration? Or are you looking for someone to handle all of your HR needs?
2 – Think about your budget.
How much can you afford to spend on outsourced HR services? Keep in mind that you’ll get what you pay for. If you go with the cheapest option, you might not get the level of service you’re looking for. When you outsource HR, you’re already saving time and money — you can receive expert HR support in several different areas without having to hire an entire HR department.
3 – Look for experience.
When you’re outsourcing something as important as HR, you want to make sure you’re working with a provider that has a lot of experience. Ask for references and check out online reviews to get an idea of what other businesses have to say about the provider.
There’s no one-size-fits-all answer when it comes to deciding whether or not to outsource HR for your small business. It depends on factors like your budget and how much control you want over your employees. However, outsourcing HR can be beneficial in terms of freeing up your time as a business owner and reducing your liability exposure as an employer. Be sure to weigh the pros and cons carefully before making a decision! If you’re interested in outsourcing your HR, reach out to The HR Ally to get started.