Why Should I Outsource HR and Payroll?
This question is very easy to answer. That’s because Professional Employment Organizations lend value in a number of high-impact ways. Outsourcing often has a negative connotation, but in this case, outsourcing your human resources and payroll functions is a really good thing.
But employee leasing with a PEO isn’t necessarily a one-size-fits-all value proposition. That’s where having a good partner, who takes the time to understand the strategy and needs of the business, comes in so priorities can be assigned to the values. So once I understand the businesses needs, I can answer the question using a unique combination of the following five ways I’ve found that a PEO can lend value:
Most companies outsource business functions for one of two reasons: 1.)they lack the resources or 2.)the business activity can be more cost effectively conducted by dedicated experts. With a PEO or payroll services firm, both are likely to be the case. Sometimes PEO’s cite compliance as a top reason to consider outsourcing to a PEO: compliance with federal and state tax laws, immigration laws, and the myriad of other regulations employers have to deal with. But that’s just the tip of the iceberg; a good partner does all that, but a great partner will truly lend expertise on aligning the workforce to business goals.
Economies of Scale
Another classic value delivered by PEOs is the economies of scales through sharing benefits across a much larger pool of employers and their workers. While this is still very much a high-value reason to consider outsourcing your HR and payroll functions, the Affordable Healthcare Act has caused some uncertainty with employee benefits (that uncertainty, by the way, goes back to why having a PEO’s expertise on hand is valuable). But I think an overlooked aspect to the economies of scale of a PEO are the pooling of resources to provide employers with tools and technologies that they wouldn’t otherwise be able to provide: not only enterprise-grade payroll and benefits software, but also timekeeping and screening solutions.
It is so frequently cited it might be a bit cliché, but outsourcing your HR and payroll will indeed help business owners and managers focus more on growing their business. With almost all of the clients I’ve worked with over the years, the initial interest is in saving money and ensuring compliance, but after a year the top benefit they brag about to their colleagues is that they have much more time to work on their business instead of in their business.
Different PEO’s offer different degrees of liability associated with the services they offer, but federal definitions of employee leasing mandate a minimal assumption of certain liabilities. PEO’s assume the liability of unemployment insurance (UI), for example.
A good PEO partner will help clients respond to the constantly changing business environment and take advantage of opportunities as they arise. Do you have a new project in a state where you’ve never done business? No problem: a PEO can help get you setup to hire employees in that state. Do you need to hire a bunch of new people quickly? A PEO can help you ramp up more quickly.
In a field as complex as Human Resources, there are potentially dozens of other ways a PEO can lend value, but I’ve found these five offer a great summary of most of them. If you have a need for our expertise so you can better focus on your business, we’d love to hear from you. Einstein HR is a PEO company offering Atlanta Payroll Services, outsourced HR and a full suite of employee leasing solutions.