What is HR Outsourcing?

Every company deals with daily HR responsibilities. From hiring and firing to management of benefits and payroll taxes, human resources is an integral part of every business. As companies grow, however, so does the time to manage these responsibilities. Instead of focusing on the revenue generating functions of the business, key personnel can get tied up with HR responsibilities. Since HR isn’t a profit-producing department, companies should consider the benefits of outsourcing HR. Human resource outsourcing (HRO) is when a company subcontracts with an outside specialist to handle all or part of human resource functions. By leveraging expert help, companies can focus on their core competencies and grow their business.

Options for outsourcing HR:

Specialist firms – Firms that specialize in one aspect of HR such as payroll or recruiting. Specialist firms allow companies to outsource one specific area and handle everything else in house.

Generalist firms – A generalist firm like a Professional Employer Organization (PEO) provides complete HR support. Similar to a specialist firm, some PEOs offer a la carte services so companies only pay for what they need. The benefit of this option is they can expand their services later if needed.

For companies working with a PEO, this is a co-employment relationship where the company maintains control of the day-to-day staffing and business decisions and the PEO handles administrative liabilities. With access to more benefits and services at better rates, the new partnership can improve recruitment and retention.

Benefits of working with a PEO

  • Competitive rates – With a large pool of clients, PEOs have increased buying power to negotiate pricing.
  • Greater access – Certain benefits are not accessible or too costly for smaller companies. PEOs offer access to benefits from leading providers including voluntary benefits.
  • HR expertise – Local, state and national legislation are always changing. PEOs provide expertise to keep companies compliant and avoid fines. They also provide best practices for employee handbooks including policies regarding paid time off, disciplinary procedures, discrimination and harassment.
  • State of the art integrated HR systems – Helps with recruiting, on-boarding, benefit enrollments, performance management and payroll.
  • Free up time – By directing all HR requests to a PEO, key personnel can focus on strategic goals to grow the business.

Potential risks when considering a PEO

  • Contracts – PEOs require signed service agreements. Make sure you understand any ramifications for ending the partnership including fees and notice periods.
  • Pay for services not needed – Some PEOs only offer bundled packages that may include services you may not need. Unnecessary services cost money, so look for PEOs that offer greater flexibility.
  • Incompatible software – You may have software in place that is an integral part of your company, but incompatible with your PEO’s system. Make sure the PEO will develop a work-around solution to guarantee integration.

MidwestHR, a leading PEO in Illinois, understands that every business has different needs. We offer a la carte solutions with no long-term contracts. Our technology team is dedicated to integrating software systems for optimal functionality. Our top priority is adapting our business to support what our clients needs. Our 96% client retention rate tells us it’s working. Give us a call to see if outsourcing HR is a good option for your company.