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PEOs Vs. Online Cloud-Based (SaaS) HR Services

Today, online cloud-based software platforms, also known as Software-as-a-Service (SaaS), are becoming incredibly popular. This holds especially true for HR functions like payroll, where these cloud services are widely preferred. Such a trend is beneficial for small and mid-size businesses requiring assistance with one or more HR tasks.

These online service providers are often relatively low-cost and effort to start using. While typically limited to a single function, they provide only a narrow range of support services. Overall, how do they compare to a more comprehensive offering like a Professional Employer Organization (PEO)?

Online HR services do less, and PEOs do more

Cloud-based HR platforms almost never provide a comprehensive HR strategy. Indeed, they rarely perform more than one or two HR-related tasks at all. Assembling a complete HR function through online platforms would require a multitude of service subscriptions.

According to consultancy group Deloitte, “the average HR department now has more than nine [cloud-based] systems of record—up from eight a year ago—demonstrating that organizations continue to buy multiple solutions to meet their needs.”

Online HR services don't replace the need for an HR department, even if they assist clients with data and payroll processing. Having an HR department is very important for any organization to keep its operations running smoothly. This is where PEOs stand out by enabling business owners to manage all their HR needs.

As a result, PEOs can offer live, interactive, and expert HR consultations. This helps both with efficient management and improved decision-making. For example, during benefit enrollment periods, a PEO can provide services to assist clients through the necessary paperwork. These services could include a live chat or guided walk-throughs for clients.

PEOs have HR professionals who provide valuable expertise for answering benefit questions and offering recommendations for presented plans. Further helping clients understand their options and choose what works for them. With the HR knowledge of a PEO, they can help clients make the most of their benefits and keep employees happy.

Online HR usually costs less, but you also get what you pay for

Most online HR services charge a simple per-seat subscription fee. They’re also very easy to implement.

Viewed from the client's perspective, HR SaaS products appear as a straightforward solution. It's pure software installation and the client receives a new login. For some employers, that may be exactly what they need.

PEOs, however, typically take a more hands-on approach with their clients. This is the main reason PEOs are sometimes more expensive than online HR for equivalent services. In some situations, you may not need the degree of customization or responsiveness a PEO provides.

However, if a company wants to grow, it often needs to address areas like strategy, recruitment, and turnover. Focusing on areas where high-touch service can make a real difference.

PEOs and online HR offer totally different business models

Ultimately, it can be misleading to compare PEOs to online services on a one-for-one basis. These two kinds of services represent totally different approaches to HR. An online HR solution is a tool that can facilitate the execution of specific tasks. A tool like this can be beneficial in the right circumstances.

PEOs, by contrast, is a service that actually takes over the employment function and its attendant liabilities, like payroll taxes. The PEO approach earns the name of a co-employment model for that reason. As a result, PEOs offer a much more tightly integrated and comprehensive relationship. It’s as much about the partnership as service delivery.

PEOs and Online HR are not mutually exclusive

PEOs can incorporate online HR into their service delivery; however, cloud-based HR tools typically do not include PEO-style service. In other words, most PEOs offer their own HR Information System (HRIS) platforms. Clients can use these provided platforms just as easily as other cloud-based HR tools available.

These systems can generate information dashboards and reports that offer real insights into a company's workforce. Company leaders benefit from this data, while employees have the convenience of using self-service portals. These portals enable them to handle specific aspects of their payroll, benefits, and time and attendance requirements.

In short, working with a PEO doesn’t necessarily mean sacrificing the convenience or power that comes with online HR tools. It’s not a matter of choosing one over the other.

Key Takeaways

The rise of online cloud-based software platforms, also known as SaaS, has made a significant shift in the HR landscape. This change is most noticeable in HR tasks like payroll, where cloud services are highly favored. This shift can benefit small and medium businesses in need of HR support.

While online services are convenient and cost-effective, they often lack the comprehensive approach that a Professional Employer Organization provides. PEOs excel in efficient management and expert HR consultations for informed decision-making. The comprehensive services make them a smart option for businesses aiming to handle human resource needs proficiently.

Moreover, PEOs can integrate online tools into their solutions. Further providing flexibility and effective HR task management for leaders and employees through dashboards and self-service portals.

In short, making a decision between PEOs and online HR tools doesn't necessarily require a strict choice. It's about finding the right fit for your business needs. By understanding the strengths of each option, businesses can make informed decisions that drive their HR strategies. All while reaping the benefits of both PEOs and online HR tools.

CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), is dedicated to supporting small to mid-sized companies with comprehensive HR services. Our services include administration, benefits administration, payroll, and compliance. To learn more about our ability to create a strategic HR function in your business that drives business growth potential, contact us today.