Who knows the market better than a professional? By working with an HR outsourcing consultant, you get fast-tracked to the front of the line. HR services providers are increasing relying upon outside consultants and sales personnel to assist them in bringing in new business. Because the outside consultant has moved the client from lead to certified prospect, the provider is more willing to price on smaller accounts. In addition, since hr outsourcing consultants are considered big producers by the vendor, their clients are often given preferred pricing.
By working with a PEO (professional employer organization) or other HR outsourcing provider, you have taken the first step in making your business one that potential employees will flock.
How so? Due to the nature of most HR outsourcing providers, including PEO, you are now able to offer a benefits package that is as good, if not better, than most Fortune 500 companies. Full health, dental, vision, 401k, short and long term disability…all at your employees’ fingertips.
In addition, due to the immediate economies of scale that you will recognize, these benefits will likely be priced lower than you can get on your own.
We have been speaking with micro and small businesses for the past 5 years about their HR outsourcing options. Obviously, we thing the best model is a Total HR outsourcing model, such as PEO or ASO. But some small businesses insist on getting their own HRIS. This is usually a very costly mistake. The price-tag on these systems is often a roadblock in and of itself. But the real issue is who is going to service and maintain the system after purchase?
We recommend taking a hard look at PEO or ASO or employee leasing companies, as they have already bought the software and are running it for the benefit of their client companies. At a much more reasonable price.
I have heard more and more about States coming down on businesses that misclassify employees in order to avoid paying payroll taxes (and workers compensation insurance).
So far, Florida and New York are leading the battle.
Be sure that if you are using sub-contractors/1099’ed workers, that you are playing by the rules and conform to the 20 questions that the DOL puts out there.
Be careful when you are talking about employees versus sub-contractors (aka 1099’s). Although a lot of business owners like the flexibility of having contracted out some core business functions to sub-contractors, if your State’s department of labor finds out that these sub-contractors are really employees, then you will have lots of legal fees and fines to sort through.
So, can an HR outsourcing provider handle a W-2 (employee) as well as a 1099 (sub-contractor)? Depending on the provider, sure. All you have to do is ask your current provider, or if interviewing a payroll company or other hr outsourcing provider, such as an ASO (administrative service organization) or PEO (professional employer organization).
The payroll provider or ASO should be a no-brainer. The PEO is a little tricky. By definition, if you contract with a PEO, you do not have employees, thus the PEO would need to take over payroll and workers compensation insurance for all persons that are defined as employees. They do not want the risk of having sub-contractors that are not covered by workers compensation insurance, attempting to file a claim. Some PEO’s will reject potential clients that use 1099’s as they do not feel the risk is worth the reward.
So many models…so little time.
Which is best for my company? Should I go PEO? What is PEO? How about an ASO?
HROplus’ mission is to assist small and medium-sized companies figure out the best overall model for HR outsourcing. And we mean outsourcing, not offshoring. Big difference.
We’ll get more technical in upcoming blogs and try to answer questions on each model. PEO, which stands for professional employer organization.
ASO, administrative service organization
HRIS or HRMS, software for human resources functionality
We are always searching for newer and better solutions to human resources, so drop us a line and we’ll discuss.
Kristian, Jeff and Tom