Three Types of HR Outsourcing

PRemployer on April 6, 2021

Three Types of HR Outsourcing

Your company culture is one of the most crucial pieces of your employees' experience and one of the most challenging to develop. Whether you have an inexperienced HR team or have not been able to devote time to HR as your company grows, looking at options now can help ensure your employees receive the support they need.

HR outsourcing can help ease that burden off you and your internal HR team with several options available to you. Here is an overview of the three most common types of HR outsourcing to help you determine which option is best for your company.

What Is A Payroll Processor?

The first option for outsourcing your HR needs is using the services of a payroll processor. These vendors provide your company with payment services to efficiently run your payroll.

A payroll processing company will:

  • Manage your employee's hours
  • Calculate employee's wages
  • Withhold deductions
  • File taxes
  • Make payments

Part of running your business requires absolute accuracy and one working with a payroll processor gives you a payroll expert to handle your payroll needs instead of trusting this complex task to one employee in-house.

Ensuring your payroll processor provides you with confidentiality and accuracy is of the utmost importance. It is a huge responsibility to place on one employee, and using the services of a payroll processor can alleviate this burden.

What Is An ASO?

An ASO is an Administrative Services Organization. These companies provide you with payroll services, just like a payroll processing company. But ASO's will do a lot more.

An ASO may also be able to provide your business with the following services:

  • Benefits administration
  • Regulatory compliance
  • Administrative HR duties

However, an ASO does not involve entering into a co-employment relationship like you would with a Professional Employer Organization (PEO). Your company remains solely responsible for any mistakes an ASO may make on your behalf. That could require extra time and care on your part and reviewing work to ensure accuracy. 

What Is A PEO?

A PEO provides your company with the most comprehensive HR service. All facets of HR management may fall under your PEO's purview but is not meant to replace your in-house HR staff. Instead, this relationship can complement your internal team by providing them with HR experts and additional resources to shoulder some of the complex and mundane HR tasks.

  • A PEO can provide your company with all of the services an ASO offers, plus they offer access to benefits and payroll tax remittance.  PEO’s enhanced services are offered through a co-employment relationship, which makes the PEO the employer of record for your employees. You retain all control over your day-to-day operations, including hiring, firing, and disciplining your employees. Co-employment allows your company the ability to share liability with your PEO, meaning they have a vested interest in your company's compliance and accuracy.

Through this relationship,  PEOs save your company money. That happens by reducing your expenses and increasing the level of benefits you can offer. Aside from salary, employees’ most frequently requested benefit is access to quality and affordable healthcare. By partnering with a PEO, you can give your employees exactly what they want while also saving your company money.

Which Is Best For You?

The differences between payroll processing companies, ASOs, and PEOs are stark. The services provided by each vendor vary greatly, as does the amount of control you retain with each partnership.

Depending on your exact needs, you may only require payroll services. If that's the case for your business needs, a payroll processor might be the best choice for you. But if you require more flexibility in your company’s services, you may need to choose between an ASO and a PEO.

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ASOs are more similar to PEOs than payroll processing companies are, but PEOs still provide a more extensive service offering. Because of the co-employment relationship, your company can hand off all responsibility and collaborate with your PEO to retain your company culture but outsource the mundane and complex HR duties.

Keep Control With A PEO

Choosing the full suite of HR outsourcing services from a PEO may provide you with precisely what your company needs. Because a PEO shares liability and provides enhanced HR services, you can focus on your core business needs. Knowing that your HR needs are cared for by experts gives you peace of mind and lets you worry about growing your business. 

Even providing all of these services to you, a PEO partnership still allows you to retain complete control over your company. Keeping control of your business is vital because it allows you to keep your company moving in the right direction.

No matter what option you choose, you need to make sure your HR outsourcing choice fully takes care of your business needs. HR outsourcing can provide you with much-needed HR support and a positive RO.

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