How does HR outsourcing work?

What should you look for in an HR provider?

All PEOs are different, so when you’re choosing the right HR provider for your business, there are a number of questions you should ask yourself along the way. More times than not, the answer will help you determine whether or not a PEO or HR outsourcing company provides the level of service you're seeking. In the following section we have provided some FAQs with transparent answers—we even describe the difference between a PEO and a standard HR provider.

HR outsourcing is a very simple concept—a contractual agreement between an employer and a thirdparty provider (like a PEO) that states the employer has hired the provider to take over management of, and responsibility for, HR functions. This does not mean the employer is losing control over their business. In fact, the employer can specifically lay out exactly what services they’d like from the thirdparty provider. In many cases, services can be added or taken away depending on what’s needed from the employer.

There are many ways outsourcing HR can help grow your business, but the most effective tool that is provided to you once outsourcing HR is time. The thirdparty company you choose to work with takes care of all the backend HR tasks that would normally take you away from running your business and living your life. If this doesn’t seem like much, consider this example: On average, businesses that partner with a PEO experience 9% faster growth compared to those that don’t. They also experience a 10 – 14% lower employee turnover rate.

Outsourcing your HR can have a great affect on the cost of operating your business. By outsourcing, you’ll be working with professionals that know the ins and outs of HR. Working with an HR outsourcing company like a PEO gives you access to enterpriselevel benefits at reduced rates. The thirdparty service provider can also help with things like workers’ compensation claims and tax compliance—making sure you aren’t paying too much for anything that isn’t necessary.

Your needs will be unique based on your number of employees, industry, and location, and other factors. Consider your current situation and determine what you need most so that you can make sure the HR provider can deliver it. This might mean help handling payroll or it could be that you’re hoping to begin to offer health benefits. Talk to HR provider candidates about your goals to make sure they can help. And keep in mind that HR companies are all different; some may have solutions that are too big or too small for your business today and as you look towards the future.

Start with features and functions that fulfill your basic needs, then build from there. For example, you may have not been able to offer benefits on your own, so partnering with a company that offers competitive, comprehensive benefit options makes sense. Doing so may make it easier to attract and retain great workers. For a mid- to large-size organization, it’s important to understand what kind of benefits your employees want and need for health coverage, and your budget for it. Aside from health benefits, also consider ancillary benefits like an employee assistance program, employee wellness, commuter benefits, pet insurance, and tuition reimbursement.

When you choose an HR solution, an integral part of your decision will likely come down to budget. Comparing price tags is a must. Pricing will usually vary from solution to solution. For example, choosing a payroll-only provider will likely be more affordable than an all-in-one solution or a PEO. However, bear in mind that in order to access additional services down the road, you’ll likely need to increase your budget to achieve that goal.

Your level of support will range depending on the HR provider. That’s why it’s so important to establish your expectations of the level of support you want to receive, then find a provider who aligns with those expectations. If you tend to work overtime on the weekends or evenings, you might consider a provider that offers 24/7 support. Do you prefer to talk to someone on the phone or video, or does email or a live chat feature fit you better? Know what the provider offers and determine if it fits your business needs.

Any HR solution should simplify and streamline your business processes, and most providers use technology to help achieve that goal. So how do you know if their system is right for you? The answer is to request a demo. It’s the best way for you to see how the technology functions, if it is compatible with existing technologies, how data is safeguarded, and whether it is overall a good investment for your business.

If you do opt for a PEO or all-in-one solution, most charge either by a per-employee or percentage-of-payroll model to use their services. And while a PEO is likely to be more expensive at first glance, it’s wise to factor in health insurance savings you may get by switching, as well as time savings you might gain by using a tech-forward platform, like having self-service onboarding. No matter the HR solution you’re considering, always request a quote to get a clear picture of pricing.

Still have questions?

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