Examining Human Resources Outsourcing Options
If you think all HR outsourcing arrangements are the same, read on. A quick google search reveals a dizzying number of options available: PEOs, ASOs, and HROs. While all are similar in some aspects, there are nuances that make each very different.
Here, we’ll help you decipher the alphabet soup of choices available.
What is a PEO?
A PEO (acronym for Professional Employer Organization) is a firm that enters into a joint employment or co-employment relationship with an employer. The PEO handles most or all of the organization’s human capital management tasks including payroll, employee benefits, human resources, workers’ compensation, recruiting, and risk/safety management.
This is accomplished by hiring the organization’s employees and becoming the employer of record for tax and insurance purposes.
PEO Pros and Cons
- Staff needed for HR functions are reduced or eliminated so the organization can focus on bigger-picture goals.
- The employer has access to human resources services and expertise that they might not otherwise be able to afford.
- The arrangement reduces liability since, as “employer of record,” the PEO assumes most of the responsibility if legal issues arise.
- Many PEO providers bundle these services into one package so the employer may end up paying for services they don’t need.
- While PEOs promise cheaper benefits rates due to their large pool of employees, options are limited since they cannot customize a plan based on the employer’s needs.
- Despite the fact that most PEOs will allow the company to retain control over operations, management of employees, and culture, many organizations feel they need to give up some control.
What is the Difference Between a PEO and an ASO?
An ASO (or Administrative Services Organization) is similar to a PEO in that it performs the same Human Capital Management (HCM) tasks as a PEO. The major difference is that the employer remains under their own tax identification number.
ASO Pros and Cons
- Since ASOs typically do not sponsor benefit or workers compensation coverage, the employer has flexibility in choosing their carriers.
- The employer remains in full control of their organization.
- While they will help an organization maintain compliance, they are not ultimately responsible for it as is the case with a PEO.
What is an HRO?
Last, but not least, is HRO or Human Resources Outsourcing. HRO is the more all-encompassing option. Like an ASO, the employer remains the “employer of record.” Typically with HRO, the entire HR business process is managed by the HRO provider; they act as the employer’s HR department.
How Does BPHR Differ?
Services, like Balance Point Human Resources (BPHR), not only help ensure clients’ compliance by handling daily operational tasks in accordance with labor laws, they assist with strategic efforts as well. Long-term staffing, succession planning, defining of company culture, and employee development are just a few of the strategic tasks they can help you tackle.
BPHR Pros and Cons
- With a high-touch service like BPHR, a dedicated HR Generalist will fully integrate into the company, to ensure the employer is taking full advantage of the HRO services.
- HRO is the most customizable option of the three. A service, like BPHR, will tailor a menu of services based on the client’s needs and individual input.
- With compliance concerns out of the way, the employer can utilize the service to focus on strategic HR efforts.
- HRO may not be the best option for large companies that have an in-house HR team. However, they can still outsource certain projects that require extra time or expertise.
A More Balanced Approach to HR
Balance Point provides a different Human Resources consulting experience. BPHR is a constant touch service that will help maintain your compliance, freeing you to focus on your strategic goals.
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