Outsourcing human resources is a good way to ensure all your important, HR-focused tasks get done while also cutting business costs. When you outsource HR, you don’t have to hire as many HR specialists in-house, which means you don’t have to factor in and be accountable for the cost of their wages. And with your HR partner handling much of the tactical (and most time-consuming) work for you, everyone on your team can spend more time on the high-value, strategic work that will help grow your business.
While outsourcing business services is a generally cost-effective approach, it can sometimes come with a different kind of price: the hassle involved with managing multiple vendors. With HR specifically, you could offload risk management to one HR firm, payroll to another, and benefits administration to a third. This means you would have multiple contracts to keep track of, performances to manage and evaluate, and point persons to communicate with—not to mention potential conflicts with different technology systems and software applications to mitigate. One of the biggest benefits of outsourcing HR—getting time back in your day—could get wiped out if you end up spending the same amount of time, or more, juggling relationships with all of your vendors.
Another major benefit of outsourcing HR—cost savings—can be jeopardized as well when you’re working with multiple vendors. One group of experts put it like this: Let’s say you work with four vendors and are contracted to have 30-minute meetings at $150/hour with each of them every two weeks. That means you could potentially spend over $15,000 per year in meetings alone.
While these potential red flags are important to understand, this is not to discourage you from outsourcing HR. In fact, outsourcing HR makes great business sense for any sized organization but especially if you run a small- to mid-sized business with limited staff and big goals. Rather, the type of HR outsourcing partnership you enter into matters, and one that can meet most, if not all, of your needs can be the most beneficial.
A full-service, one-stop shop like a Professional Employer Organization (PEO) eliminates the need for multiple HR vendors.
How a PEO reduces vendor management headaches
A PEO operates through a unique business model called co-employment. As a co-employer, the PEO shares many responsibilities with your organization and can take on the time-consuming administrative functions of HR for you.
A PEO’s staff is comprised of experts who can handle a range of tasks, including:
- Compliance and legal issues
- Workers’ compensation
- Benefits research and administration
- Day-to-day HR management
- Employee hiring and onboarding
- Employee training and development
Because they are a co-employer, a PEO is as invested in your business as you are, aligning to your strategic goals and helping your business meet them. And since a PEO shoulders a significant portion of your organization’s risk and liabilities, it’s in their best interest to stay updated on and keep your business compliant with laws, regulations, and best practices.
With all of your HR bases covered by one PEO, you can avoid having to contract with multiple vendors who may only be able to take on a small portion of your HR workload, depending on what they each specialize in. Instead of dividing your time between multiple vendors with varying services and capabilities, your PEO is well-versed in and has the capacity to handle nearly all HR capabilities. They can also provide:
- Answers to employee questions and concerns
- Advice and help during an emergency or crisis
- Support for proactive initiatives such as helping to evaluate your future workforce needs or develop your company culture
With less time spent managing vendor relationships, you can get the most out of outsourcing HR and grow your business to boot using a trusted, full-service partner.
A PEO is one type of HR outsourcing business model that’s growing in popularity. To learn more about how a PEO compares with other HR outsourcing business models, download the eGuide.