Are you confused about the advantages of choosing a PEO vs HRO for your company’s HR needs? If you don’t know what the acronyms signify, choosing between the two can be difficult. Because the selection you pick will affect how your HR operations run (perhaps dramatically), you should make sure you understand how both types of HR outsourcing alternatives provide value to your firm. We compare and explain the differences between a PEO and HRO in the sections below, as well as provide some guidance on how to choose the best solution for your company’s needs.
What is a Professional Employer Organization (PEO)?
A PEO is a Professional Employer Organizer, which is a company that provides packaged services to businesses. Benefits, payroll, workers’ compensation, recruiting, and risk management are some of the services offered. When a corporation uses a PEO, the PEO hires the employees and becomes the employer on record for tax reasons, resulting in co-employment.
What is a Human Resources Outsourcing (HRO)?
Human Resources Outsourcing (HRO) is an independent organization that takes care of some or all of a company’s HR needs. An HRO business may offer simple HR services or extensive and strategic HR services, thus it’s critical for a corporation to thoroughly investigate different HRO firms before making a decision. Some HRO organizations allow businesses to combine services or pick and choose whatever services they want to scale with their demands and pay for them appropriately.
HRO versus PEO
An HRO firm has the benefit of being more flexible, allowing businesses to choose which functions to outsource and which to handle in-house. A PEO, on the other hand, handles all HR duties, which may be advantageous or disadvantageous depending on the needs of the firm. Smaller or developing firms may find it beneficial to have all HR operations taken care of so that they may devote more time and attention to revenue-generating activities.
With as many as 30 customers assigned to one employee, a PEO is frequently less service-oriented than an HRO. A human resources organization serves as a partner to the corporation, offering advice and direction on problems such as compliance and organizational planning. Having a qualified HRO person assist with these difficulties is frequently beneficial to businesses.
Brand and Nature of Business
When business partners with a PEO, the company’s brand name and employees become components of the PEO rather than the original business. It might be tough for a growing firm to create brand awareness and generate staff loyalty as a result of this. It might also be difficult to exit a PEO since when an agreement is signed, the PEO owns all employee data.
An HRO firm operates independently of a company, allowing the company to continue to grow and expand without hindrance. In most cases, HRO businesses will support expansion by allowing customers to amend their service agreements to meet new requirements. HRO businesses also do not interfere with or impact a company’s brand loyalty or recognition in any manner.
How To Make the Choice?
Consider the following questions while determining how to outsource your HR administration:
What are you struggling with that you would like to offload to a partner?
First, make a list of the activities you’d like to delegate. Make a list of how the options you’re evaluating align with your requirements. You could opt to have an HRO if you just require someone to manage one component of HR because you already have a dedicated staff taking care of other areas. A PEO would be your best choice if you don’t have a dedicated HR team and need assistance with HR administration, payroll, compliance, and benefits.
What level of experience does the staff handling your account have?
It is critical to have prior experience. Examine the team’s turnover rates, if they’re a relationship-focused firm, and how many years they’ve dealt with your specific needs. How do your clients like to collaborate with your team?
Do you have the time and resources to handle the HR work yourself?
A PEO is a perfect alternative for you if you are taking time away from your core business capabilities to deal with HR, payroll, benefits selection and administration, regulation and compliance concerns, onboarding, and training. They’ll take care of everything for you so you can focus on operating your business. If you answered yes, an HRO could be a suitable fit for your organization.
Do you have confidence in your ability to handle compliance-related issues?
If you answered yes, you could be looking for an HRO. Compliance is up to you with an HRO.
A PEO is a better option if the answer is no. The PEO and your firm share the risk in a co-employment arrangement. In the same way, a PEO and its client share some duties, particularly when it comes to employer compliance.
The PEO, as a co-employer, provides you with information on state and federal compliance concerns that affect you and your company. Your PEO representative will explain the criteria and, in many situations, offer suggestions on how you satisfy them. It may be up to you, the employer, to take the necessary action in some instances.
Why you should choose Khawaja Manpower as your PEO
Khawaja Manpower meets the “gold standard” of service and will be an important addition to your company as one of the first accredited PEOs in the country. We’re proud of the relationships we develop with each and every one of our clients—you’re never simply a number to us!