of Human Resources Outsourcing
- Integrated human resources service providers, known as human
resources outsourcers (HRO) or professional employer organizations
(PEO), can provide more and less in the right circumstances:
less as in less liability, lower fees, and smaller benefit
hikes, and more as in more choices, more available time, greater
competitiveness, and greater overall value. HRO and PEO services
have been growing in popularity, especially with smaller businesses,
which can leverage such services to compete with larger businesses
in terms of employee benefits options and costs.
stay afloat while healthcare costs continue to climb, many
companies either slash coverage options or pass increases
on to their employees; both approaches are unlikely to help
attract and retain quality personnel. To remain competitive,
more companies are outsourcing their benefits programs to
third-party providers that can leverage their cumulative
roster of participants in order to qualify for substantially
to the Small Business Administration, business owners spend
up to 25% of their time on employee-related paperwork. Additionally,
smaller companies are less likely to have a dedicated human
resources specialist. The compliance requirements of 401(k)
programs, the ADA, FLMA, and COBRA also represent significant
liability issues. Many payroll service companies will claim
they offer built-in compliance, but if an employee’s
benefits are interrupted because a deadline is missed, a
lawsuit might ensue. One major advantage of a PEO-style
benefits provider is the limitation on liability; only a
PEO will contractually assume most, if not all, liabilities
related to the services it provides.
advantages of contracting a third-party, integrated HRO
can go beyond the time and money saved by automating payroll,
leveraging group benefits, and handing off liabilities.
Returns can include increased satisfaction and retention,
for both employees and employers.
must take care in selecting a provider, because not all
provide the same quality of service. Useful resources include
the National Association of Professional Employer Organizations
(NAPEO) website (www.napeo.org),
as well as
following are things to look for when selecting a provider:
Check client and professional references.
Check whether the provider is a member of the NAPEO and
accredited by the Employer Services Assurance Corporation
Check the provider’s bank and credit references.
Understand how the employee benefits are funded and insured.
Make sure the employee risk pool matches the employer’s
Confirm that participating employees will receive first-day
See if the provider contractually assumes compliance liabilities
in the applicable states.
DeWitt, CPA, is vice president of finance for the
national HR services provider the TriNet Group, Inc. (www.trinet.com).