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

CoAdvantage- Online, cloud-based, software-as-a-service (SaaS) platforms that focus on a specific HR function (like payroll) are incredibly popular today, especially for small and midsize businesses that need some help executing one or more HR tasks. These online service providers are often relatively low-cost and effort to start using, but they are also typically limited to a single function and offer limited support services. Overall, how do they compare to a more comprehensive offering like a Professional Employer Organization (PEO)?

Online HR services do less, 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.

Moreover, online HR services that allow clients to manage their data and payroll processing don’t exempt them from the need for an HR department. Having an HR department is very important for any organization to keep its operations running smoothly. This is where PEOs stand out by enabling businesses to manage all their HR needs.

As a result, PEOs can offer live, interactive, and professional HR consultation capabilities that power not just effective administration but better decision-making. For example, during benefit enrollment periods, a PEO can provide services like live chat and walk-throughs that help clients navigate through the paperwork. In addition, they can also answer benefit questions and make recommendations regarding the plans that are being offered.

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. When you look at HR SaaS products from a client’s perspective, it’s just a pure software installation, and the client gets a new login. For some employers, that may be exactly what they need.

Bear in mind, however, that the total cost of ownership of a PEO’s offerings is affected by the hands-on approach that they take with their clients. For instance, if a company wants to grow, then it’s important to consider other costs that are not directly related to the platform, like the cost of turnover in the organization.

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 can facilitate the execution of specific tasks, which can be helpful in the right circumstances.

PEOs, by contrast, actually take over the employment function and its attendant liabilities, like payroll taxes. That’s why the PEO approach is called a co-employment model. As a result, PEOs offer a much more tightly integrated and comprehensive relationship. It’s as much about the partnership as service delivery.

Every employer is unique, and the answer is never as simple as saying one approach is always the best one. It depends on the employer’s needs. That said, for a service that can do more than just execute a transaction but instead produce real value and satisfy all of the employer’s HR needs, nothing can beat a PEO.

CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with HR administration, benefits, 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.