Taking care of your staff is essential as they are one of the most valuable resources for your company. When your employees are well-cared for, they are more likely to have a positive daily experience and perform their daily duties more effectively.
However, not all businesses have the resources or desire to handle every aspect of effective staff management internally. Therefore, many business owners choose to outsource their HR. This HR outsourcing guide will explore scenarios where HR outsourcing can be beneficial, the various HR outsourcing services that third-party HR companies offer, and the pros and cons of outsourcing HR.
What is HR outsourcing?
HR outsourcing is when a business owner contracts with a third-party organization to manage some or all of the HR services for the company. Your business can outsource payroll processing, employee benefits administration, talent recruiting, and more.
Types of HR outsourcing: Global PEO
If you are considering outsourcing your HR, you have two main options: a PEO (professional employer organization) or HR outsourcing (HRO). Both options offer similar services, but their legal structures set them apart.
A PEO uses a co-employment model, meaning your employees will be listed on the books of your PEO provider for tax and legal purposes. However, you retain control over your staff members, including their work, promotions, or terminations. While some service providers allow you to select specific services, a PEO typically handles all HR-related responsibilities. In this approach, the PEO carries the full financial and legal burden of all employment practices used by your business.
In contrast, an HRO does not operate under the co-employer model, and your employees remain on your company’s books, making you liable for their actions. The services provided by an HRO are more flexible; you can outsource one or two duties or all of them, depending on your needs.
What HR outsourcing services are available instead of using PEO UK?
If you think your company could benefit from HR outsourcing, compare your requirements with what outside HR specialists can provide using this list of typical HR outsourcing tasks. (Note that these are only the most common HR outsourcing tasks; some service providers offer a wide range of additional services.)
Payroll processing is perhaps the most common HR task to be outsourced. Calculating all the deductions to withhold from employees’ paychecks can be complex and challenging, and errors can lead to problems with the IRS and courts, as payroll deductions also include wage garnishments. For this reason, many businesses opt to delegate the process to payroll specialists rather than manage it themselves.
Employee benefits administration
A robust benefits package that includes health insurance, a retirement plan, and more can help retain current employees and give your business a recruiting advantage. However, benefit administration is not simple, and many businesses outsource the management of their employee benefits to save themselves the work of researching plans and adhering to benefit laws.
Compliance with labor laws
As a business owner, you have obligations beyond just benefit and tax regulations. Equal employment opportunity (EEO) rules and workers’ compensation standards must also be followed. Employing HR compliance professionals can help you comply with all EEO and workers’ compensation regulations on a daily basis with little to no additional work on your part.
If you’re not excited about the prospect of sorting through mountains of applications and scheduling interviews to find the perfect new employee, you can hire outside HR experts to manage your hiring process and relieve yourself of this duty.
Background and reference checks
It’s always a good idea to conduct background and reference checks before hiring new employees. However, both of these processes can be time-consuming, particularly the phone calls required for reference checks. That’s why many businesses use outside sources to perform their background and reference checks.