Every employer wants to avoid making mistakes in their hiring process, and this is one of numerous areas where outsourcing often makes the most sense. If you’re looking to outsource this area, how should you be considering your options of a PEO vs HR outsourcing?
At WTA Inc., we’re proud to offer the best PEO services available around Salt Lake City, helping businesses with all their recruitment and hiring needs. How do PEOs compare to traditional outsourcing, and how should you be framing the PEO vs HR outsourcing conversation as you decide between these options? Let’s dive in!
Basic Definitions
When it comes to outsourcing your hiring and other HR needs, PEOs and traditional HR outsourcing differ in a few key ways. Here are their basic definitions:
- Traditional HR outsourcing: With traditional HR outsourcing, a company partners with an external firm to handle specific HR tasks and functions. This can include things like payroll processing, benefits management, and compliance support.
- PEOs: A PEO (Professional Employer Organization) is a company that acts as a co-employer for its clients’ employees. This means that the PEO takes on certain employer responsibilities, such as payroll and benefits administration, while the client retains control over the day-to-day operations and management of their employees.
Key Differences
There are a few important differences to know about when it comes to PEO vs HR outsourcing:
Co-Employment Model
As noted above, PEOs build a co-employment relationship with their clients. This means that the PEO takes on some employer responsibilities while the client retains control over the operations and management of their employees.
On the other hand, HR outsourcing is typically an arrangement between two separate companies where one provides HR services to the other. There is no co-employment relationship in this model.
Risk Sharing
This co-employment relationship for PEOs means that they share certain employer responsibilities and risks with their clients. This can be beneficial for both parties as it allows the client to focus on their core business while the PEO handles HR tasks such as payroll, benefits administration, and compliance.
However, it’s important for both parties to have a clear understanding of which responsibilities are being shared and how any potential risks will be managed. This requires open communication and a well-defined contract between the PEO and its client.
Payroll Integration
In many cases, PEOs are able to integrate their payroll systems with their clients’ existing HR and accounting systems. This streamlines the process and reduces the potential for errors or delays in payment processing.
Benefits Administration
PEOs also handle benefits administration, including enrollment, changes, and terminations. They are able to leverage their buying power to offer competitive rates for health insurance, retirement plans, and other employee benefits.
Advantages of PEO Services
There are several reasons why PEOs might be beneficial for helping you avoid hiring mistakes and other HR pitfalls:
- Scalability: For one, they can help your business scale up or down as needed, adding employees without having to worry about managing increased administrative tasks. This makes it easier for businesses to focus on growth.
- Cost savings: In addition, PEOs may be able to offer better rates for benefits and other services due to their large employee pool. This could result in significant cost savings for small businesses that might not have the same bargaining power.
- Unified benefits management: Because PEOs handle benefits administration for multiple clients, they often have streamlined processes and technology in place. This can result in more efficient and error-free benefits management for your employees.
- Compliance expertise: PEOs are well-versed in employment laws and regulations, which means they can help ensure your business stays compliant with all applicable laws. This can be especially beneficial for small businesses that may not have the resources to stay up-to-date on these complex matters.
Hiring Mistakes PEOs Help Avoid
When it comes to hiring in particular, PEOs can be a valuable resource for avoiding common mistakes. These include:
- Poor candidate screening: Small businesses may not have the resources or expertise to properly screen and vet potential candidates, leading to hiring mistakes that can be costly in terms of time, money, and overall productivity. PEOs can use their experience and expertise to help identify top talent and make more informed hiring decisions.
- Inefficient onboarding: Onboarding new employees is a critical process that sets the tone for their entire employment experience. If done improperly, it can result in disengaged or dissatisfied employees. PEOs can streamline this process by providing templates, checklists, and guidance to ensure that all necessary steps are taken and new employees feel welcomed, informed, and supported.
- Compliance complexities: With ever-changing labor laws and regulations, it can be difficult for small businesses to keep up and ensure they are in full compliance. PEOs stay updated on all relevant laws and regulations and handle the necessary paperwork, reducing the burden on small businesses. This also helps protect them from potential legal issues or penalties.
At WTA Inc., we’re proud to offer the best PEO services available around Salt Lake City, helping clients with everything from recruitment and hiring to benefits, compliance, and more. Contact us today for more information or to get started!