Gaining Maximum Benefit from HR Outsourcing

The economic downturn placed a heavy burden on many businesses. More than ever, resources were needed to help contain costs, streamline operations, mitigate risks, and reduce costs. All the while, employers had to continue to build employee morale. Recession or not, it is not unusual to hear an owner say, how much more can I do, there are just so many hours in the day.

One way many small and mid-sized companies are achieving these objectives is by outsourcing Human Resources (HR) to a Professional Employer Organization (PEO). A PEO serves as its clients’ HR partner, managing all aspects of their clients’ employee-related services, including: payroll, tax and employee benefit administration, regulatory compliance, Workers’ Compensation, unemployment claims, Employee Assistance Programs and value-added employee services (e.g., discounts for transportation, shopping, travel and entertainment, fitness club memberships, etc.). A PEO helps the business owner to focus on the all important business of business while improving employee work-life through enhanced programs and communication.

The relationship is not a one-way street, however, as organizations that enter into a relationship with a PEO also have certain responsibilities not the least of which are open communications.


In the beginning of the relationship, the PEO/HR partner will review the organization’s policies, procedures and programs in light of the rapidly changing regulatory environment we are now experiencing. Then, in order to assure regulatory compliance where necessary, the PEO will bring their new client into compliance by instituting new policies and procedures. New benefits programs will also be recommended and implemented. This information will be exchanged first with management and then with employees so that everyone understands the PEO’s role and the new benefits and services the company will be providing. As part of their continuing relationship, the PEO will keep the client up-to-date with regard to the new laws and regulations that are now emanating from Federal and State Governments.


A PEO plays a major role in recommending courses of action and solutions which help its clients minimize risks. To best fulfill this role, the PEO must be kept apprised of payroll, wage and hour, employee relations, discrimination complaints, new hires, terminations, workplace injuries, and other HR issues where the PEO can help achieve important goals such as cost savings, employee retention and enhanced training — both on soft skills and compliance.


In PEO/HR outsourcing relationships that work best, clients designate an employee to serve as a “point person” with the PEO’s specialists who manage key areas (i.e., payroll, employee benefits, compliance and risks, etc.). The client should select who would be the best person to interface with the HR service provider. In all cases, there should be a procedure established for how information should be exchanged with the PEO’s representatives.

The true value of the relationship with a PEO is realized as the client comes to rely on on-target advice relating to specific areas of service. In this way, the best decision-making will be facilitated stemming from the PEO’s experience and knowledge thereby mitigating potential risks and intercepting issues before a problem becomes serious. In instances where problems could not be averted, the PEO should be informed early, providing the PEO with the opportunity to conduct an investigation and risk analysis. The PEO will offer solutions to minimize exposures, and prepare the client for any outcomes.

In conclusion, clients who remain informed and involved in their PEO relationship gain the greatest value from this HR outsourcing partnership. While the PEO does assume the administrative burden in the relationship, the client must assume the role of communicating, following PEO-established procedures and maintaining an active interest in the relationship. Clients who are in regular contact with their PEOs and who regard them as a trusted advisor, much in the way they view their CPA or attorney, will benefit most from HR outsourcing.


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