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Why Companies Outsource HR To PEOs

Today, almost every organization outsources some aspect of its human resources management. Even companies who have an entire staff of HR professionals on the payroll likely outsource at least one their business’ HR functions, such as payroll processing, employee onboarding or learning management.

Many companies take HR outsourcing a step further by engaging professional employer organizations (PEOs) to provide comprehensive HR and administrative services. PEOs provide proven processes, expertise and advanced technology to help growing companies manage their day-to-day HR more effectively and efficiently.

So why are so many companies outsourcing their human resources to PEOs? While every company might give a slightly different answer if asked why they chose to outsource some of their HR, most of these explanations boil down to three main reasons: minimizing costs, reducing risk, and increasing productivity.

Minimizing Costs

Every business is always on the lookout for ways to cut costs, and one of the biggest expenses a business has is its workforce. Beyond the actual wage or salary a company pays its employees, there are several other “hidden” costs employers incur, such as unemployment and payroll taxes, workers’ compensation insurance and health insurance. But without said workforce, businesses can’t function: products don’t get made, orders don’t get filled and customers are definitely not kept happy.

The goal for businesses is to find the most cost-effective solutions to the challenges they face as an employer. Often, the best solution is to outsource your human resources through a PEO company. By pooling their clients’ employees, for example, PEOs are able to generate considerable buying power and procure health insurance, workers’ compensation and other employee benefits plans at steeply discounted rates. A study commissioned by the National Association of PEOs found that businesses that use a PEO enjoy a 21 percent savings on HR administration costs compared to the average employer.

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Reducing Risk

The US Department of Labor enforces more than 180 federal laws that affect 10 million employers and 125 million workers every day. When combined with the hundreds of state, local and regional laws and regulations, it can be downright overwhelming for business owners and HR professionals to protect companies against all the potential liabilities associated with being an employer.

PEOs help business owners and managers understand and comply with the applicable labor and employment laws affecting their company and expertly execute administrative and procedural tasks surrounding government compliance.

Increasing Productivity

Today’s HR professional is expected to be able to tie HR initiatives back to company goals that have a quantifiable (positive) effect on the organization’s bottom line. While this shift in focus from transactional (processing payroll, managing employee benefits plans, processing workers’ comp claims) to strategic (designing succession plans, recruiting top talent, creating performance management processes) responsibilities was a welcome change, the transactional tasks couldn’t just be ignored.

For many organizations, the answer to this dilemma was to outsource functions like HR compliance, payroll processing, employee benefits administration and workplace safety to external providers like PEOs. By assuming the burden of these tedious and time-consuming administrative tasks, PEOs allow HR professionals and other employees to refocus their time on assignments that have a more direct impact on the organization’s overall mission.

Outsourcing human resources to a PEO doesn’t just improve the productivity of in-house HR professionals, though. PEOs employ highly trained professionals who are experts in their respective fields and have created proven processes that benefit from proprietary human capital management technologies. As a result, they are able to provide high-quality service and results with little to no errors, something that is not often the case with internal HR departments. When workers know that their paychecks and benefits are consistently accurate, they spend less time worrying about those issues and more time focused on performing their job duties.

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Whether companies are looking for an all-encompassing solution to their HR needs or just a supplement to their current people and processes, PEOs are able to offer products and services that address all of their specific needs while also minimizing costs, reducing risk and increasing productivity.

Learn how G&A Partners, one of the nation’s leading PEOs, can help you grow your business, take better care your employees and enjoy a higher quality of life by contacting us by phone at 1-800-253-8562 to speak with an expert or visiting to schedule a business consultation.

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