A lot of companies find that maintaining an internal human resource department is more challenging in today’s world. Human resources (HR) have become more regulated and complicated, so companies have to re-examine their strategy when it comes to this crucial part of the business. One option that numerous companies have utilized to meet their business needs is human resource outsourcing.
Your business can have all of its HR needs covered by outsourcing to a professional employer organization (PEO). Your company also has the option to either partially or fully outsource its HR needs how you see fit. In partial outsourcing, your company would share responsibilities and information with a company, where we would manage certain tasks, like payroll or drug screening, to lessen your HR team’s load.
However, the better option for some companies would be to outsource the entire HR operation. Known as joint employment or co-employment, the PEO will take over your company’s HR tasks and will be listed as the employer of record for insurance and tax purposes. Meanwhile, the HR manager or owner of the company would take on the responsibility of being the liaison. Their only focus on HR will be to manage the company-vendor relationship.
The best way to discover the ideal HR solution for your company is to talk to the outsourcing experts at NetPEO. Our job is to match you up with the ideal HR outsourcing company for your business. Fill out our contact form to find out how we can help your business’s HR needs or read on to learn more about outsourcing!
Benefits of HR Outsourcing
Small enterprises and conglomerates alike find that the various tasks assigned to HR can be too complicated to handle on their own. Luckily, outsourcing these tasks can lead to several benefits, like:
Having an in-house HR department can be costly, especially for small and medium-sized companies. A functioning human resources department needs extra office space and experienced staff. Outsourcing HR functions are one cost-effective strategy SMBs can utilize. Having a professional organization handle repetitive and non-revenue generating back-office tasks like payroll or drug screening means management or critical staff can focus on more critical jobs. Outsourcing costs are also flexible as tasks can be reduced or changed as the situation dictates.
Smaller companies often struggle to provide prospective and present employees with competitive benefits, especially now with increasing healthcare costs. An HR outsourcing organization can provide businesses with access to Large Group benefits like:
- Dental plans
- Health insurance options
- Credit unions
- Retirement plans
A lot of job seekers today consider the type and quality of benefits a company offers as a major deal breaker. Plus, excellent benefits mean higher employee satisfaction and lower staff turnover.
Guaranteed HR Compliance
HR rules and regulations have drastically changed over the last decade as human resources and labor laws have become more complicated. This also means there’s more pressure on companies to comply with legislation. Unfortunately, keeping on top of all these rules can be daunting to a small and busy HR department. An HR outsourcing company can help with this as most PEOs employ risk management and compliance specialists. These experts can assist clients to meet all compliance requirements, avoid expensive lawsuits that could be filed by employees and draw up plans for any changes as laws are introduced, or regulations changed.
Better Staff Development
Businesses can also improve how they manage employee development and performance with outsourcing. HR outsource providers can execute performance management plans to make sure all employees follow business procedures and policies and successfully company goals. Outsourcing providers can also monitor staff performance regularly and report results to the management. This lessens manager workload by reducing the number of administrative duties they have to focus on.
HR Functions That Can Be Outsourced
There’s no fixed playbook with regards to outsourcing HR functions. It’s up to your company to decide what tasks would remain in-house and which ones will be operated by a human resource company.
HR initiatives that are often, or better managed, in-house are:
- Capital strategy development
- Compensation development and delivery
- Employee relations
- Performance management
- Talent development/ training
Meanwhile, tasks like the following are usually outsourced:
- Background checks
- Benefits administration
- Developing/ updating employee handbooks and company policy manuals
- Drug screening
- High-volume hiring
- Independent contractor compliance
- Temporary staffing
Types of HR Outsourcing Companies
There are three types of outsourcing companies that you can choose from:
- Human Resource Organizations (HRO)
- Professional Employer Organizations (PEO)
- Administrative Services Organization (ASO)
Most HROs allow corporations or big businesses (those with 1,000+ employees) to choose which human resources tasks would be outsourced. If the company decides to outsource select HR functions, a co-management relationship is put into place. But the HRO takes on full responsibility if all HR tasks are outsourced. However, the strategic and vital HR roles remain in-house while administrative and tactical duties are outsourced.
For small and medium-sized businesses (those with under 200 employees), a PEO can be very beneficial. Companies that outsource their HR needs to a PEO go into a co-employment relationship with them. This means the PEO becomes the employer-of-record while the original company becomes the on-site employer.
As employer-of-record, the PEO becomes responsible for workers’ compensation and taxes. What’s more, the provider can secure lowered rates on health benefits and retirement packages by combining all the employees from their other clients. Businesses often tap PEOs to handle tasks like background screening, payroll, performance management, recruitment, and other administrative tasks.
As the name implies, ASO handles administrative services like payroll processing, conducting direct depositing of payments, and filing taxes. Both outsourced payroll and taxes will be filed under the employee’s Federal Employer ID Number (FEIN). An ASO will also help answer employee questions regarding compliance and legal issues, access to insurance, dental/medical insurance, and workers’ compensation. These benefits are contingent on the company’s employee base and the risks associated with retaining them. An ASO is a good fit for mid-sized businesses who require HR assistance.
Contact NetPEO for Your Company’s HR Outsourcing Needs
Outsourcing all or just select HR functions is now a widely accepted practice in the business world. At NetPEO, we enable businesses of all sizes to focus on the human resource initiatives with the most value. We also offer a number of outsourcing services that will help your business run more efficiently and save you money. Contact us today to find out how we can help you.