Why is Human Resource Outsourcing (HRO) and Professional Employer Organization (PEO) a $ 51 billion + industry? Why are there are over 700 HR Outsourcing / Peosta work in all 50 states? Why have 50,000+ small and mid-sized organizations bought into the concept?
Are the business owners that are in human resources outsourcing just not bright?
Are they wasting their money? All HR Outsourcing / Peosta have the task of selling to small and medium business market. They sell turnkey systems of human resources that includes all or part of:
- Wages + job costing +
- employee benefits +
- OSHA Regulation +
- + Ancillary Benefits Benefits
- Human Resources Administration +
- Regulatory Compliance
Peosta contractually assume substantial risk and with the establishment of a co-employer relationship with the workers. Simply stated Peosta reduce risk client company. HR Outsourcing sells its services à la carte. When you start looking at the reasons a PEO might be bad for the company, the list ends up being short. In most surveys, you will find three main reasons that people list as potential hazards.
1. The loss of loyalty from employees = all enter PEO arrangement seems to have this first concern – the answer is Peosta are co employer record for management only. You’re still the boss. If you do not like them, you terminate the contract.
2. Loss of control of the main issues that could face my business = fear may exist, but fortunately, this objection is not real. The only control the question is one of the benefits. You control your costs and find someone else to do the paperwork, and you will spend more time with your employees because. A PEO relationship allows companies to achieve greater control.
3. Cost = there is confusion in this area. The reason for the confusion is very simple. Sustainable schools, business schools and most other schools do not train people in this area. Literally, it is left out of general-curriculum for business people. I went to Ernst & Young to get the answer. It has to do with the definition and understand the concept of “Payroll Burden.” Payroll Burden is all those things you spend, or support staff who contributes to the overall cost. Business people do not know what they are spending now. A lot of things get left out or feel wrong. Business owners now use hard costs as Fica, Suta etc. speaking as well guesstimate on soft costs, or they use a hard cost plus SBA numbers (which is better). The fact is – a typical company does not really know the magic numbers. Therefore, when HR Outsourcing / PEO company says all the talk, there is no data to compare it to. This means that the cost may seem high, when it may be the same or even lower. The answer is a soft cost, most companies now have to help the business owner find exactly what they are spending, so they have that comparison. Historically, the payroll burden rate as part of payroll can swing 1 to 3 percent. It might be a good idea just to talk to industry consultant to speak. It sure would help with the organization, and it’s usually free. Key point: Peosta take the variable costs of having employees and make it to the “fixed costs” – how does one measure the importance of the world today? When you look at the ability of PEO or HR Outsourcing company that delivers:
- Regulatory compliance,
- 401 (k),
- Medical programs
- program administration,
- Human resource consulting
- Better cash flow,
- Predictability personnel costs,
- reduce risk,
And the list goes on … There is no larger purchase of the ground. Plus, customers get a focus on core competencies to drive more dollars to the bottom line. This equals more profit. Finally, it is also a fact that most companies can not afford the kind of jobs HR Outsourcing / PEO company has. The talent pool within the HR Outsourcing / Peosta is overwhelming. The benefits professionals, human resource professionals, lawyers, payroll professionals, tax and compliance specialists and security experts could make you drool in envy.