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How Do I Outsource Payroll and HR?

How Do I Outsource Payroll and HR?


Payroll and human resources are two of the most complicated and technical aspects of running a business. It’s easy to miscalculate payroll, and HR is a minefield of laws and regulations. Without the right expertise, you can violate laws unintentionally—leaving you vulnerable to fines, enforcement actions and lawsuits.

For this reason, many small and mid-sized businesses outsource payroll and HR to a firm that specializes in these functions. These firms do more than provide you with the key services you need—they can save you money, keep you in compliance and help reduce your risk as an organization.

Most HR outsourcing organizations will offer two different levels of outsourcing:

  • A comprehensive or “full-service” solution that includes payroll and all HR functions, or
  • An “a la carte” approach, allowing you to outsource some things while keeping others in-house

Many organizations will start by outsourcing a few key duties and then scale up if needed in the future.

How does comprehensive HR outsourcing work?

Sometimes it makes sense to outsource an entire department—especially if you don’t have an HR department. This often happens when organizations grow rapidly, leading to more complex HR needs without the in-hour staff to oversee them. Essentially, if you don’t have the bandwidth to manage your own HR and payroll then a comprehensive solution might make the most sense.

There are two main arrangements you can use:

  • An Administrative Services Organization, or ASO. An ASO manages all of your payroll and HR services for you, but they remain a separate, outside entity (basically a contractor). Their services include payroll and payroll taxes, workers compensation insurance, employee benefits management, and all other aspects of human resources. You can customize a package of services to fit your needs. (ASO is often used interchangeably with HRO, or Human Resources Organization.)
  • A Professional Employer Organization, or PEO. PEOs offer the same type of services as ASOs, but in a different way. When you contract with a PEO, the PEO becomes your workers’ employer for certain legal purposes. By pooling groups of smaller employers in this way, PEOs are able to negotiate better benefits packages, provide a stronger HR team, and make you more competitive with larger employers. A PEO does not reduce your authority over your workers or your business, it just lets you tap into a better benefit network.

What if I prefer to outsource a few standalone HR tasks?

If you’re not looking for an all-in-one solution, you have many options for outsourcing payroll or certain aspects of your HR. Areas to outsource might include:

  • Pre-employment screening
  • Onboarding of new hires
  • Benefits administration
  • HR for hiring, evaluating and terminating employees
  • Payroll software providers
  • Payroll administration

Most payroll outsourcing organizations will offer any or all of these services and allow you to choose what you outsource.

What should I look for when I outsource my payroll and HR?

There are a wide variety of companies and consultants providing payroll and HR services, but it’s important to choose one that is reputable and has the skill and resources to keep you in compliance with the law. When choosing an outsourcing company, look for these additional qualities:

  • A firm that has been in business for a while and offers a broad enough array of services to grow with your needs. This makes it more likely that the company you choose now will still be around and able to serve you in five years.
  • Good customer support and training to increase the chance that you will have a successful transition and positive relationship in the future.
  • The flexibility to let you choose the types of services that you need and that will be the most cost-effective for you. For example, if most of your workforce isn’t eligible for benefits, you don’t need to pay extra for a sophisticated benefits administration package.
  • Especially with a PEO, choose a company with a good track record of enhancing benefits and saving its clients money.

At Einstein HR, we don’t believe in a one size fits all approach to outsourcing HR and payroll. We offer our service as an ASO, a PEO or on an a la carte basis, so you can customize a plan that works for you.

Don’t risk an HR or payroll mishap. Let Einstein HR give you a free consultation on your PEO needs. Fill out the form to your right or contact us and get your free consultation today.

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