Is This Your Situation: Wondering What Types of Outsourcing Exist
When you choose to outsource HR functions, you must look for companies that fit your business and lean on experts who can implement best practices and policies to boost employee morale and company culture. But you don’t need to make an all-or-nothing decision about whether to keep HR in-house or contract it out. HR covers a variety of personnel issues — many can be performed by staff, while others should get the benefit of HR professionals.
If you plan to outsource your HR, you have three main options:
- HR Outsourcing.
- A Personal Employer Organization.
- An Administrative Services Organization
With an HRO, your employees stay on your business’s books, so you bear legal responsibility for their actions. Instead of managing all or most of your HR functions, HRO provides a selection of services to choose from. You may find an HRO firm that specializes in recruitment and hiring or in employment law — targeted aid in one or more areas where you need help.
With a PEO, you still have control over what your employees are working on and whether they’re promoted or fired. But the PEO bears the full legal and financial weight of your firm’s employment practices as it handles your HR tasks. A PEO uses a co-employment model, which means your employees will appear on the PEO provider’s books for legal and tax purposes. PEOs shoulder a good portion of your business liability.
With an ASO, you get a full suite of HR services, remaining wholly separate and acting more as a partner than a co-employer, working directly with your team. Do you want to maintain more direct authority over your company while obtaining more operational support? Then an ASO may be for you.
That’s the key — what strategy suits your firm? You may want greater organizational support and flexibility but to keep some HR functions in-house, offloading just your software function. Use an HR outsourcing firm to save overhead costs: software as a service outsourcing lets you transfer applicant tracking systems, training and performance tracking, and payroll and benefits management to the third party. You get new updates, features and fixes, as well as security protocols. You can still actively use, manage and champion the software in-house, determining its functional place in your business.
Thinking about your needs
Maybe you envision outsourcing a single HR function to obtain personalized support and service management in addition to a software solution. In this case, you can use business process HR outsourcing to outsource benefits administration to, for example, obtain expert-level knowledge about benefits enrollment and administration.
Perhaps you want a single third-party firm to support your full employee life cycle. With single-source outsourcing, you can hand off talent acquisition, time and labor management, payroll and benefits administration, performance management, and employee separation or termination duties — and maybe even accounting and other business function management. With this strategy, you dictate exactly how involved the HR outsourcing firm should be, and you can keep the big decisions, like hiring and releasing employees, mostly in-house. But what you get is a chance to build a long-term relationship with outsourced HR professionals.
In shared-services outsourcing, HR services such as payroll and benefits administration performed by several employees in different departments are centralized and shared. You can streamline the process via software, effectively lowering costs.
Are you confused? No need to be! We just want to let you know you have plenty of choices based on your preferences, the kind of business you run and your long-term goals. Give us a call and we can discuss the right choices for your situation.
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