The Advantages of Using a PEO vs. Hiring an HR Person

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Do you really need an HR person to handle your company’s human resources needs? Or could you simply turn it all over to a professional employer organization (PEO)? Let’s take a look.

Human resource management is a vital part of every business. Your HR department has to be capable of handling the many challenges HR management comes with.

But many companies use outsourced services to meet a variety of business needs, including services such as human resources. For example, professional employer organizations, or PEOs, provide numerous valuable HR services to businesses in various industries and of different sizes.

But you might be asking a common question about a professional employer organization (PEO) vs. HR person: That is, how do these two roles differ?

Professional Employer Organizations: An Overview

A PEO can assist your company in several ways. Some of the most common tasks include payroll processing, assistance with employment laws, administrating workers’ compensation cases, filing business taxes, and assisting with training new hires.

Some PEOs also assist with health insurance plans for your employees. This is because, since a typical PEO works with several large companies, they can offer your employees a broad range of health benefits and options. In short, a PEO can give your employees access to plans that might otherwise be too expensive for midsize and small companies.

You will sign a service agreement when you hire a PEO. This agreement will clearly outline and define their responsibilities. Their costs will be calculated based either on a set fee or on a percentage of employee wages.

Advantages of Using a PEO

Among the advantages your company will gain from using a PEO is a fully functional HR department. Moreover, you will gain this advantage without having to invest in hiring the personnel and establishing the department on your own. This saves your company money while also supporting your employees.

You will also gain access to highly experienced HR professionals who will manage your company’s needs. This can be quite a useful benefit, especially if your local job market does not have exactly the hires you are looking for.

Also, labor and employment laws can be complex, but PEOs have the experience to ensure all of your company’s policies are legal and above board. Finally, there are additional benefits a PEO can offer your employees. These include healthcare, retirement plans, life insurance, disability insurance, and several other benefits.

PEO Compared to HR Rep

A key difference between a PEO and a traditional HR person is how a PEO will fit into your wider company structure. Simply put, a PEO is your co-employer. This is due to how they manage your employees’ benefits, payroll, and tax needs.

Conversely, an HR person is like any other employee you would hire who would work on behalf of your business. An in-house HR person is also limited to offering the features and benefits your business directly has access to. Contrast this with the expanded benefits a PEO has access to, due to their larger size and their wide range of other clients. Generally, PEOs work best with small to medium-sized companies that lack regular HR staff or the resources to manage such needs.

Understanding Key Differences and Knowing What’s Best

Every company’s needs are different, and knowing what works best for you is important. Suppose you are the owner of a large business or you have access to considerable resources. In that case, hiring your own HR employees to manage and oversee HR administration may be practical.

However, for some smaller companies, the cost of managing HR needs may be prohibitive. This is because the expenses and complexity of maintaining an HR department may be beyond their scope. With a PEO, however, a small company can save money while gaining access to benefits typically only found with larger companies. When you work with a PEO, you can also rest easy knowing that skilled professionals are managing your HR needs.

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