HRO vs. PEO - HR Outsourcing Options
AlignHR is commonly asked if we operate as a PEO (professional employer organization).
The short answer is NO.
AlignHR does not hire any of your employees and put them on our payroll. We are here to help you save time, effort, and money by either allowing you to outsource your human resource function or co-source it with us, meaning that we work with your established team.
AlignHR is a human resource outsourcing company (HRO). We administer HR on behalf of your business, allowing you to focus more attention on growth-related objectives.
What is a PEO (Professional Employer Organization)?
A professional employer organization (PEO) is a firm that provides a service under which an employer can outsource employee management tasks, such as employee benefits, payroll and workers' compensation, recruiting, risk/safety management, and training and development.
It does this by hiring a client company's employees, thus becoming their employer of record for tax purposes and insurance purposes. This practice is known as "joint employment" or "co-employment."
PEOs can acquire your current human resource employees or onboard new employees under their federal employer identification number (FEIN). Some liabilities can transfer to the PEO (benefits administration, payroll, etc.) and some stays with the small business or organization that is in the joint or co-employment relationship. This can cause confusion at times.
Advantages and Disadvantages of PEOs
It is sometimes difficult to explain the co-employment relationship with a PEO company to employees or individuals that are not dedicated to HR. The concept of being an employee of two organizations can be confusing. There is an abundance of PEO companies available, and they do have potential advantages and disadvantages when working with organizations.
Advantages of Using a PEO
Regardless if you work with a PEO or HRO, the problem for small business owners still exists. Finding an easy way to handle HR issues and functions, at an affordable price, is the most common problem. PEOs can help businesses with the following:
- Benefits - as a co-employer you may have access to less costly benefits based on volume
- Payroll - potential to decrease payroll-processing and provide technology for processing
- Retirement plans - managed 401 (k) and retirement savings plans
- Workers' Compensation - provide coverage to employees
Disadvantages of Using a PEO
Having a dedicated HR team has plenty of positives. But there are always some negatives when you open the doors up and bring in a co-employer. Some of the common negatives are:
- Loss of certain control with processes, procedures, and people
- Lack of control/security of employee paperwork/compliance/reporting
- Lack of benefit options/flexibility in changing plans and/or number of plans
- Delayed communication and conflict resolution
- PEO owns your payroll data
- Will generally not conduct HR projects and related work
- No flexibility in changing payroll or related technology provided by PEO
- PEO’s can be very costly – a range of 3% to 15% of employee covered payroll
Depending on your ownership and management style, a professional employer organization might make you feel uneasy, giving up too much authority to an outside vendor, and can be costly. You've taken away the stress of the HR functions but potentially added stress by having a little less control.
What is HRO (Human Resource Outsourcing)?
Human Resource Outsourcing (HRO) is a partnership with an HR firm and a business, providing flexible options to handle some or all of the HR functions. HROs are common for businesses that are looking to spend more time focusing on their business and less on compliance and human resource related activities.
HROs often work directly with internal human resource departments, owners, and management. An HRO allows companies to maintain control over systems, processes, paperwork, and benefits. Many HROs partner to create efficient and better systems, utilizing their HR experience and knowledge.
Although some HROs can handle all functions, there are flexible options that allow companies to pick and choose where they need the added help and expertise. Some companies might need payroll assistance, while others need an entire team managing all of the HR tasks.
Common Services Handled by HROs
Every day small business owners, growing organizations, and SMBs find themselves struggling with a human resource task. In order to be compliant, you have to dedicate time, effort, or money to maintain the HR department and functions. HROs help elevate some of the pain by offering support in the following:
- Recruitment, Interviewing, onboarding and orientation development
- Job description development
- HR Compliance (local, state, and federal)
- Talent and Succession Planning
- Benefits Selection, Planning, and Administration
- Technology and Payroll tools Selection and Planning
- Compensation Reviews, Planning, and Development
- Risk Management and Audits
- Performance Management
- Training and Development
- Employee Relations, Discipline, and Termination
- Engagement and Culture Development
- Behavioral and Strength Assessments
- Background and Pre-Employment Screenings
- HR Administration and Payroll Support
It's very common for HROs to offer several compliance solutions, including managed HR and retainer services that are flexible and meet you where you are in terms of HR function maturity and cost.
Advantages of Using an HRO
If you are not inspired or motivated by the HR functions, changing laws and regulations, and human resource trends - it's easy for you to see why working with an HRO is a good idea. Some additional positives are:
- Save time on repetitive and time-consuming tasks
- Allows management and ownership to focus energy on revenue-generating tasks
- Utilize experts in compliance in employment, labor, immigration, and payroll law
- Streamlined processes for hiring, onboarding, and employee relations
- Reduce cost without sacrificing quality
- Help with performance management, employee engagement, and training
Working with AlignHR - HRO Company
AlignHR is not a PEO. We do not hire any of your employees.
We are here to help you save time, effort, and money by either allowing you to outsource your human resource function or have us partner with your established team.
In the event that you think a PEO is right for your organization, don’t hesitate to contact us as we may be able to refer you to the right people.
AlignHR serves organizations of all sizes and industries, from start-ups to those that have hundreds of employees as external business partners.
We provide our services in three primary components of HR:
We primarily help organizations with 125 employees or less who either have no dedicated or trained HR professional or if the HR function and responsibilities are split between many team members (CFO, Controller, Owners, President, Executive Assistants, Payroll Clerks, etc.).
We also serve organizations that have dedicated HR team members but are unable to manage or complete all HR projects or other work.
We fill the HR gap and support the HR and Business needs of organizations we serve.