HRO vs. PEO Services: Which Is Better?
Human Resource Outsourcers (HRO) and Professional Employer Organizations (PEO) are two different outsourcing solutions. HRO services are separate entities that are responsible for some or all human resources services of your clients. On the other hand, a PEO is responsible for all HR functions and may act as a co-employer of your company. Although these HR solutions mostly go hand-in-hand, there are some differences between the two.
An HRO service provider helps you with your HR tasks, payroll, benefits, trainings, and compliance, based on your needs. This set-up is flexible because you can choose the services that you want to assign to the third-party company while retaining control of major HR management and admin decisions. An HRO provider can scale up its operations when the company is expanding, but it cannot interfere with the business processes.
Bigger and more established companies use this type of HR solution because they have already established their HR units and only need assistance with more tedious HR responsibilities like payroll and benefits administration. However, having a separate entity that decides for a different department in the company can be a source of discord or antagonism.
In contrast with an HRO service provider, a PEO takes over the entire HR responsibilities and acts as a co-employer of the company. The agency does everything from payroll to training, benefits and workers compensation, hiring, and more. It is an extension of the firm so that you will be required to surrender all of your HR data and responsibilities to the PEO provider.
There are many advantages to this solution. A PEO shoulders the federal taxes as well as workers’ legal issues and liabilities for your company, it also helps you save tons on health insurance and retirement payments since they can put together all “employees” from all of their clients to lobby for lower premiums.
Start-ups and small businesses that can’t afford a standalone HR department can benefit from a PEO better than hiring an HRO provider. They can have an independent agency to help them set up the right number of people, saving them money, time, and the effort of figuring out how to build an efficient HR unit.