Human Resources (HR) often sits at an uncomfortable intersection, especially for resource-strapped small and midsize firms: it’s a crucial function without which no business can achieve maximum growth or profitability, yet its administrative aspects can drain critical time and focus away from internal HR teams and business leaders.
This is where HR outsourcing with a Professional Employer Organization (PEO) becomes transformative. By outsourcing HR responsibilities to a PEO, companies can reallocate valuable time and resources to their core competencies, driving productivity and growth. But what are the specific mechanics by which PEOs can streamline HR management, reduce administrative burdens, and empower businesses to thrive?
The Core Challenge: Applying HR Expertise Where It Can Do The Most Good
HR management encompasses a vast array of tasks, including payroll, benefits administration, compliance, recruitment, onboarding, training, and employee relations. For businesses without dedicated HR teams—or those with limited resources—managing these functions becomes a drain on time, energy, and focus.
For business owners who handle some or all HR tasks themselves, this work can take time away from business building, eroding business efficiency, slowing business growth, and potentially hurting the bottom line. For internal HR staff, administrative HR can pull them away from the strategic initiatives that turn HR into a value-adding resource. “We used to be about compliance, party planning and benefits,” Tracie Sponenberg, SHRM-SCP, senior vice president of human resources at The Granite Group, told the Society for Human Resource Management (SHRM). “To some extent, there are still some companies that see HR as a purely tactical kind of role. But the good ones, the smart ones, see HR as a strategic partner.”
So how can internal teams refocus on strategic matters and core business while still addressing the critical but more administrative aspects of HR?
The answer is HR outsourcing that can apply the right HR experts to the right HR functions.
Think of it this way: some functions can be done by anyone with HR expertise. Others, like setting HR strategy or doing the core work of the business, require people who also have intimate, specialized knowledge of the business itself. It’s better to allocate the latter functions to in-house staff while bringing in others to do the former.
There’s another dimension to the redistribution of HR expertise, too: it’s impossible for anyone to be expert at everything. If you’re a small to midsize organization whose owner handles functions like payroll, they’re likely undertaking a task in which they have little expertise while spending time away from the work in which they have the most expertise.
In these situations, or in organizations with only a modest HR team, an outside partner becomes a brain trust where you can access dedicated experts on every possible subject, such as people who do only HR compliance, others who do only payroll. You get the best expertise for each function, while you can focus entirely on what you know best. That’s the optimal distribution of expertise to get tasks done most effectively, most efficiently, and most productively.
How PEOs Step In: A Partnership Model
PEOs offer a unique co-employment model that allows businesses to share employment responsibilities. The client company maintains direction and control of the business, while the PEO acts as the employer of record for tax and benefits purposes. This division of responsibilities enables PEOs to handle HR functions more efficiently and at a larger scale.
For example, PEOs take over time-consuming tasks like payroll processing, benefits administration, and regulatory compliance. By leveraging specialized technology platforms and expertise, PEOs ensure these functions are handled accurately and efficiently. This can include:
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Payroll and Tax Administration: PEOs manage payroll processing, including calculating wages, withholding taxes, and ensuring compliance with local, state, and federal tax regulations.
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Benefits Management: Negotiating, implementing, and managing employee benefits is an intricate process. PEOs use their bargaining power to provide access to high-quality, enterprise-sized benefits at economical rates.
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Compliance Expertise: Employment laws and regulations are constantly changing, and staying up to date can be a daunting task. PEOs handle everything from wage and hour laws to workplace safety standards, ensuring businesses remain compliant without having to monitor regulatory updates themselves.
Through HR outsourcing, businesses save significant time and resources, allowing them to focus on strategic growth initiatives instead of being bogged down by administrative minutiae.
Additionally, as businesses grow—whether it’s by hiring new employees, expanding into new markets, or navigating multi-state compliance challenges—their HR needs become more complex. A PEO provides the scalability needed to manage this growth seamlessly.
For example, when expanding into a new state, businesses must comply with that state’s employment laws, tax regulations, and insurance requirements. A PEO already has the infrastructure and expertise to manage these complexities, allowing businesses to focus on the strategic aspects of expansion.
Better Business Outcomes Through PEO Partnerships
Here’s the key question: does working with a PEO actually make that big of a difference in terms of core work? The answer is an unambiguous yes.
The National Association of PEOs (NAPEO) recently released a new study, “PEO Clients: Faster Growing, More Resilient Businesses, With Lower Turnover Rates,” which found that businesses that use a PEO have:
- A growth rate more than 2x higher than non-users,
- An employer turnover rate 12% lower, and
- Are 50% more resilient against going out of business.
“These are the marks of stable, robust businesses that remain better positioned for long-term success,” the report concludes. “This higher growth rate among PEO clients likely reflects primarily their increased capacity to focus on strategic business matters while the PEO provides all of the employee-related services.”
Ultimately, outsourcing HR to a PEO enables businesses to concentrate on their core activities—the areas where they create value and differentiate themselves in the market.
The Benefits of a PEO: Empowering Your Business
Partnering with a PEO isn't just about offloading HR tasks; one of the greatest benefits of a PEO is that it empowers businesses to focus on what they do best. By managing payroll, benefits, compliance, and other administrative burdens, PEOs allow companies to reinvest their time and resources into core activities, driving productivity and growth.
Ready to optimize your HR operations and boost business productivity? Consider partnering with CoAdvantage, a nationwide Professional Employer Organization (PEO). With our comprehensive and cost-effective HR solutions, including but not limited to: HR administration, HR technology, workers' compensation management, and tailored health insurance packages. From payroll to compliance and risk management, we've got you covered.
Let us handle the complexities of HR management so you can focus in growing your business. Contact us to discover how CoAdvantage can support your company's success!