Here is a link to an article in Entrepreneur Magazine that is at the heart of why small and mid-sized businesses should be outsourcing their HR, in particular, PEO is mentioned as a more cost-effective way of doing business.
This is a pretty concise overview on the cost of payroll services for small businesses.
Of course, if you bundle in additional HR services like software, benefits, compliance and workers comp, there are greater savings to be seen. That is why for small businesses, we recommend PEO and other total HR outsourcing solutions to gain economies of scale so the payroll is basically free.
I always get a chuckle out of small business owners who will not make a change to PEO or other HR outsourcing solutions because they say that their accountant does their payroll and they are the only ones they trust to do it.
News Flash: Most accountants don’t do the payroll themselves. They farm it out to a clerk in their office…or more often they have ADP or Paychex do it, then pass if off as their own work and up-charge their clients for their “expertise.”
So, instead of saving money using PEO, a small business is paying, on average, $100/hour to their account for a service that only costs $100 per employee per year to do.
“Instead of doing your own payroll in-house, consider a PEO (Professional Employer Organization) to take over the administrative and legal responsibilities of managing your employees. You are not selling your employees to someone else- you are just using their service to help your small business save money while offering your staff better benefits to boot! This means, no inside human resource personnel costs, reduced legal liability for your company and better benefits packages for your staff. Look to a professional employer organization to help you save money.”
For the full article…
Administaff, also a PEO, is mentioned in this blog, but they are among the most expensive solutions on the market.
A common misconception is that HR outsourcing will take over jobs and move the offshore.
A search for outsourcing leads to this article:
Totally different concept. What we (HROplus) is talking about is lowering your overall labor costs by more efficiently handling non-revenue generating operations within a small business (payroll, workers compensation, risk management, benefits administration, labor law compliance) and saving client companies thousands in administrative and hard-dollar costs thanks to immediate economies of scale.
Just got off the phone with a small business owner that is facing a $2,000 fine for non-compliance for some labor law paperwork they had no idea that they were responsible for. Pretty hefty stuff for a 5 man company, right?
Just another reason that small businesses should consider HR outsourcing models like PEO. Imagine having a staff of 50 employees, but no employer liability. Not to mention the savings in a major medical health plan, workers comp and other benefits.
Found a great (older) article on HR outsourcing…basically, it indicates that smaller businesses are better off going with an HR outsourcing model, such as PEO or ASO, which offers a free HRIS, then buying their own and piece-mealing it all together.
Here is the link…
We have seen this time and again. In fact, we just got off the phone with a prospect that has an HRIS that will not allow for performance appraisals. Okay, simple enough. Whatever system they employ would have a module or an add-on that would allow for this functionality, right?
Well, who’s to know. This prospect is a 50 person company that bought a system that is way over their heads. The do not have an on-staff IT person. The company they bought the system from does not return calls. So now they need to either buy another system that can “talk” to their current system or hire an in-house IT person (labor cost on that is at least $50,000 annually).
What they should have done, and this is what we recommend to our clients and prospects with less than 1,000 employees and/or an IT staff that is not willing to put a couple of hours per day into HRIS, is to go with a pay-as-you-go HRIS that includes payroll and support. The annual costs of this solution may look like more money at $250 – $400 per EE, but do the math on having to hire an IT person to run your HRIS.
Or worse, would your represent yourself? Of course not. You would hire a lawyer.
Well, first you would ask friends, family and other business associates for their recommendations. Then you would meet with a handful of these recommendations. Make a decision based on their expertise and your specific needs and away you go. Right?
Why not take the same steps when thinking about your company’s human resources? Most likely, if you are a small business, the idea of hiring a certified HR professional is daunting. The labor cost for that individual is prohibitive.
Your employees are most likely your most valuable asset, but they can turn on you. That is why a professional employer organization (PEO) is the most cost-effective way to keep your employees happy. And trained.