For any company, regardless of size, a good HR department is a must-have. But, because HR tasks can be so time-consuming and costly, many companies decide to outsource these services to either a Professional Employer Organization (PEO) or a Human Resources Outsourcing (HRO) agency. Both types of companies offer important HR services, but there are a few differences that employers should be aware of before choosing the right service provider.

What is a PEO?

PEOs are for companies that want to outsource their entire HR department. The best PEOs offer everything from payroll management and employee onboarding to benefits negotiations, and they can completely eliminate the need for an in-house HR department. PEOs are best for companies looking for a ready-made solution to all their HR needs.

Because PEOs usually represent multiple organizations, they can often provide small businesses with better bargaining power for benefits packages. Since employees are part of a larger pool, this also lowers the cost of HR services per employee. These benefits make PEOs a great solution for small businesses or new businesses that don’t already have in-house HR departments.

What is an HRO?

While the best PEOs provide an all-in-one HR solution, HROs provide more of an à la carte option. Instead of taking on all of a company’s HR tasks, an HRO can assume a specific role, customized for each individual business. Many businesses use HROs for a particularly complicated task, like payroll, or help with a major organizational shift. An HRO can be the perfect solution for companies who need assistance with compromising situations or employee recruiting and onboarding. They can also help with tasks like creating an employee handbook, developing training programs, or drafting job descriptions.

HROs are good for businesses with existing HR departments that aren’t ready or able to relinquish total control of all HR tasks to a PEO. Many businesses today manage sensitive data and are unable to turn all their employees’ data over to an outsourced HR agency due to cybersecurity concerns. An HRO allows companies to maintain control over their data systems, while still gaining the administrative benefits from HR outsourcing.

So, how do you choose between a PEO and an HRO for your company needs? The experts at LBMC Employment Partners are happy to assess your needs and help you decide which solution is best. Contact us today to learn how we can help!

All content and services on this page are offered by LBMC Employment Partners, LLC. LBMC Employment Partners, LLC, is part of the LBMC Family of Companies and is an independent entity with services and products being provided exclusively by LBMC Employment Partners, LLC.