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How Does Worksite HR Outsourcing Work?

How Does Worksite HR Outsourcing Work?


Worksite HR outsourcing is another term for employee leasing. This is the traditional name for an arrangement where a company’s workers are legally employed by a partner HR firm, allowing that firm to take tax responsibility for them and other legal duties. Today, it’s more common to call this arrangement co-employment.

Under worksite HR outsourcing, the HR company is known as a professional employer organization (PEO). The PEO becomes the employer of record of all worksite employees, but the client company—the one that actually hired the workers—retains control over its workforce.

Do I give up any power by entering a worksite HR outsourcing agreement?

As the client, no, you still make all the decisions about your employees’ work plans and activities, and you keep the power to hire and fire. In fact, in terms of the day to day operation of your business, there is no change—it is just like working with employees where you are the sole employer. The difference comes in terms of the level of HR responsibility and support your PEO gives you, and the tremendous savings you can achieve on insurance.

Why use worksite HR outsourcing?

There are several advantages, including:

  1. Insurance savings. Many types of insurance, such as health insurance and unemployment insurance, are based on the number of employees you have. Since a PEO legally “employs” the workers at dozens of organizations, worksite HR outsourcing lets you count as a much larger organization. That makes you a big fish and can allow you to save substantially on insurance costs.
  2. Full-service HR outsourcing. Many companies will outsource only a small portion of HR work, such as payroll. With worksite HR outsourcing, however, you get everything: the PEO manages your payroll, benefits, unemployment and workers comp claims, employment taxes and all other functions related to HR. This gives you comprehensive HR support, reducing complexity for you and your managers and potentially saving even more money.
  3. Risk mitigation. Your PEO can help you predict and minimize risk from compliance, employee disputes, safety issues, unemployment and more.

What kinds of organizations benefit most from worksite HR outsourcing?

We have seen organizations of all sizes use PEOs, but the reasons vary depending on organizational size. Small companies with 5-50 employees tend to benefit the most in terms of raw savings on insurance and benefits administration. Mid-size and larger organizations can also realize savings, but are more likely to look at their ROI in terms of compliance and risk management, professional HR services, and the savings that come from streamlining existing HR functions.

Does your company need to save money on insurance—and avoid the headache of complex compliance issues? Let Einstein give you a free consultation to discuss your HR needs. Fill out the form to your right or contact us and get your free consultation today.

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