Once you’ve decided that your organization is ready for outsourced HR, you’ll need to decide what type of solution will work best. This will depend on factors like the services you need and the size of your organization.
Perhaps you only need one specific HR task, or you want a firm that will take care of all the administrative work. You may even be ready to outsource the entire HR department!
First, evaluate what HR functions your business would most benefit from outsourcing. Then, consider one of the five types of HR outsourcing solutions below.
1. HR Software
Investing in the right HR software can be an affordable way to streamline your HR functions — and is often a good starting point for young and small businesses. There are two general buckets of HR software.
Software-as-a-Service
With Software-as-a-Service (SaaS), your organization licenses software programs from a supplier or service provider, which you use via a web server. SaaS solutions include essential HR functions such as:
- Recruiting
- Employee performance
- Payroll
- Recordkeeping
- Reporting
- Compliance
Additionally, this type of software often includes cloud backup and mobile apps. SaaS products are an effective way to improve efficiency and productivity in your business.
Human Resources Information System
A Human Resources Information System (HRIS) is an all-in-one software solution for transactional, administrative HR tasks. The beauty of an HRIS is it supports the whole employee lifecycle, including:
- Recruitment
- Hiring
- Benefits
- Time management (vacation, sick leave, PTO)
- Termination
- Compensation
- Organizational management
While an HRIS doesn’t provide employee benefits, it does feature a platform for administering and managing benefits. Many benefits brokers offer this type of system.
2. Professional Employer Organization
A professional employer organization (PEO) offers HR management and benefits to employees through either a co-employer agreement or an employee leasing agreement. Basically, the PEO hires and leases your employees back to you.
The PEO becomes the employer of record. It pays employee wages and payroll taxes, receives taxes, and has the legal authority to hire, fire, and reassign workers. Your business reimburses the PEO and pays a recurring administrative fee determined by the number of employees. This type of HR company is typically best for small companies with 50 or fewer employees.
Many small organizations opt for PEOs because they:
- Have their own health plans and benefits solutions, which could lead to savings.
- Take responsibility as the employer of record, meaning less stress and legal responsibility.
- Provide all benefits, including workers’ compensation, retirement plans, and health insurance.
- Are perfect for those looking for payroll, taxes, and benefits access and management but not HR tasks.
However, the drawbacks of PEOs include:
- The risk that benefits could be more expensive than what you’re used to.
- Their one-size-fits-all strategy doesn’t allow for customization in benefits or payroll.
- These inflexible benefits can also be challenging as you try to hire in this competitive job market.
- Confusion for employees, as the name on their paychecks and benefits documents will be the PEO’s.
3. Administrative Services Organizations
Administrative services organizations (ASOs) are similar to PEOs as they manage a lot of the same administrative HR functions but don’t become the employer of record. You remain the employer of record and responsible for legal obligations.
ASOs will manage:
- HR administration
- Payroll support
- Regulatory compliance
- Benefits administration
- Safety program support
- Unemployment claims (optional)
The ASO supports your company’s HR responsibilities, but you are responsible for ensuring your policies are compliant with laws and regulations. An ASO does not offer:
- Workers’ compensation coverage
- Benefits coverage (ASO only assists with administration)
- Claims management
ASOs have similar pros and cons as PEOs. The key difference is since you stay the employer of record, you retain control of your employees and avoid confusion. The ASO takes care of administrative tasks and helps you access benefits. They are ideal for those who only need help with administrative functions rather than complete outsourced HR.
4. Business Process Outsourcing
Business process outsourcing (BPO) refers to outsourcing a single HR function to a specialized vendor. You can pick and choose what tasks you outsource and to whom.
The BPO model allows you to eliminate your least favorite tasks and focus more on running your business and doing what you love most. BPO options can include:
- Payroll and benefits administration
- Recruiting
- Developing and implementing training programs
Unlike SaaS, a BPO vendor offers support, taking care of the entire process for you.
5. Single-source Outsourcing
With single-source outsourcing, your HR team selects one solution for all their HR needs. One supplier manages the entire employee lifecycle, including:
- Recruiting
- New hire orientation
- Time and labor management
- Payroll
- Employee performance management
- Managing turnover
- Benefits administration
- Separation of employment
The benefit of working with a single-source HR firm is they’ll gain a deep understanding of your operations and employees. This streamlined service is perfect for employers who want one trusted outsourced HR partner, ideally one that can accommodate them as they grow.
Hopefully, we’ve got your wheels turning on what type of HR consultant you need. Of course, there is much to consider — but we’re happy to answer any questions and guide you to the right decision! Contact us today at 603-818-4131 or info@bluelionllc.com to find out how we can help you find the right solution for your business. Or, feel free to explore our HR services.
The information on this website, including its newsletters, is not, nor is it intended to be legal advice. You should contact an attorney or HR specialist for advice on your individual situation.
