Human resources is a critical component within any organizational structure. With employees being the lifeblood of a business’ growth and success, it follows that effectively managing them is essential.
When it comes to outsourcing your HR functions to a professional employer organization (PEO) or other agency, it can be difficult to anticipate how that will impact your business. Some employers equate outsourcing with losing control over a significant aspect of their business and struggling to find a balance between which entity manages which responsibilities. When partnering with a PEO, however, you enter a co-employment relationship, which means each party becomes responsible for certain obligations to help the system run smoothly.
To clear up the confusion and uncertainty sometimes associated with outsourcing HR, it’s important to understand what exactly outsourcing entails – as well as what it doesn’t.
What Outsourcing Your HR Is
Building a long-term relationship
When businesses join forces with PEO companies to handle HR functions, they develop a co-partnership relationship with the outside agency.
Your contract with the PEO will outline how this relationship will work, who will assume what responsibilities, what sort of communication is expected, and other guidelines for streamlining the process. By handling your HR management or various parts of it over a long period of time, the PEO will become deeply familiar with your company, personnel and processes. It is in their best interest for your organization to thrive, which is why they will dedicate themselves to building a robust, profitable relationship that serves both parties’ best interests.
Sharing responsibilities
Outsourcing HR also means splitting administrative tasks to ensure they are accomplished in the most cost-effective, productive way. In general, the PEO will assume a majority of the non-revenue generating responsibilities, such as benefits management; payroll management and taxes; and enforcing compliance with the complicated and ever-changing regulatory environment, which includes the Affordable Care Act, HIPAA, FMLA, COBRA, and others. These responsibilities can include issuing W-2 forms for compensation, remitting wages and withholdings of the employees, and fulfilling duties associated with employment taxes.
You will maintain responsibility for day-to-day operations, which include recruiting and hiring personnel; managing their performance and conducting reviews; and determining pay scales.
Certain responsibilities may be shared between the PEO and client company, with the outside organization providing important guidance and consultation that allows businesses to manage risk, focus on business growth, and access trusted solutions to increase productivity and profitability.
What Outsourcing Your HR Isn’t
Losing control of the company
Outsourcing can trigger fear of losing control. The word itself encapsulates the idea of displacement. In reality, though, companies still maintain control of worksite employees, their performance, and providing them with the necessary environment and tools to carry out their professional tasks.
The more accurate way to view outsourcing HR is sharing the burden of employee management and having another entity handle a number of the tedious administrative tasks associated with that role. A PEO can become a dependable partner that increases your regulatory compliance, provides valuable insight on employment practices, navigates thorny HR issues with expertise, and develops risk management strategies to improve workplace safety and efficiency.
You can tailor you contract with the PEO to include only the services that you need or want – as well as what you can afford. For example, a mature company will have different needs and require different tools for growth than a startup that is still looking to attract talent. As your company progresses or changes, the services you have provided by your PEO may be adapted accordingly.
Wasting company time and resources
HR management and the benefits offered by a company are increasingly important to success in light of the current emphasis on “company culture and loyalty,” according to an article for Forbes magazine. However, many small and medium-sized businesses don’t have the budget to be competitive in these areas, or they have other uses for their resources than staffing a full-time HR department. That’s where outsourcing your HR can play a pivotal role.
“If money can be saved using some form of outsourced HR, more funds will be available to invest in core activities—areas that will, in the long run, fuel success,” the Forbes article states.
Because HR management is their primary focus, PEOs, such as PRemployer, will have cutting-edge technology, tools and other resources, giving SMBs in particular access to workplace solutions they would be unable to afford on their own.
Expanding your support system
At the end of the day, outsourcing your HR to a PEO is like bringing on a new team of experts who are well-versed in employee administration, competitive benefits, and state and federal employment laws. With the help of PRemployer, you can rest at ease that this critical aspect of your organization is in capable hands so you can focus your time, energy, and resources on other areas equally integral to your company’s success.
