There are hundreds of Professional Employer Organizations (PEOs) that take on all Payroll, Benefits and HR responsibilities, and there are hundreds of Administrative Services Organizations (ASOs) that handle parts of a company’s day-to-day workload.

A PEO or an ASO could help any company immensely.

However, every change comes with an inherent risk. Would it be worth the trouble to outsource your Payroll, Benefits and HR? Just how difficult would it be for a company to make the switch to a PEO or an ASO?

The glib answer: It’s easy.

The honest answer: Corporate and personal data is sensitive so an unprofessional migration would not be appropriate.

For more detailed information about the benefits of PEOs and ASOs, go to the following comprehensive blog post. Below is a rundown of some of the steps that such a change would involve.

 

The Migration Process

The actual nuts and bolts of outsourcing a small business are not complicated: Payroll, Benefits and HR are simply taken care of by an outside company instead of a fellow employee on the other side of the open-space office.

Nevertheless, the first time through any process has bumps. Fortunately, PEOs and ASOs have gone through the process of setting up new companies many times before.

There is a lot of data that needs to migrate. Each company has a lot of facts and figures and official paperwork, starting with the simple (e.g., physical and mailing addresses, email addresses, phone numbers) and progressing to the complex (e.g., Workers’ Compensation, Job Codes, General Ledger). The number of employees needs to be established. An allowance for growth should be prepared, and a naming scheme designed. A billing structure needs to be set up. Archives for older documents need to be established. Relationships need to be created and/or adjusted with insurance companies and benefit providers. COBRA needs to be set up. Contractors need to be introduced into the system. Simply establishing the initial automated emails will be time consuming. And this is just a quick, general list.

In the long run, everything will be more efficient, but the short run will require some adjustment.

Each employee is involved in the change, too, from providing personal information to learning to use new software. Each employee needs to add their own data, and some of it is sensitive. Addresses, email addresses, phone numbers are still there, but there is also Payroll and Time Off information, and each has a different level of Benefits that need to be transferred.

Outsourcing companies have done it all before and, like the eventual day-to-day benefits, the initial setup is streamlined and simplified to minimize errors.

Clearly there is a lot of work. But given the advantages of using an HR outsourcing firm, the initial migration and learning phase will grow into an efficient and effective system.

 

Technology Helps

The good news is that the best PEOs and ASOs have embraced technology. Computers have made business transactions quick and painless at the bank, and it has done the same for Payroll, Benefits and HR.

Worklio, for example, is a cloud-based platform that makes the transition efficient with a comprehensive data transfer and help with every additional step. The Worklio system connects the PEO, the client company and the worksite employees into one compatible and secure framework. Plus, customer service is always available to help.

 

There are many benefits to working with one of the hundreds of Professional Employer Organizations (PEOs) or Administrative Services Organizations (ASOs).

Just to name a few:

• More time to focus on the core revenue-generating side of your business;
• Enhanced benefit offerings;
• Bulk purchasing power;
• Mitigation of risk;
• Improved compliance;
• Reduced costs;
• Centralization; and
• Standardization.

Simply streamlining the mundane tasks of employee administration is a significant step in the right direction for any company.

When deciding upon an outsourcing model, you must take into account several factors, including the type of business, the number of employees, the current HR administration costs, employee turnover, employee issues, lost opportunity costs and compliance issues. Then you will be able to reap the many additional benefits by using a PEO or an ASO.

Below are some additional detailed benefits that your company may enjoy by partnering with a PEO or an ASO:

 

Organized Growth

Young companies often grow faster than expected. Hiring a person dedicated to payroll or benefits or human resources is not always cost effective. Yet, nobody in the office has any background in employment law nor have they ever established a 401(k) plan or even a vacation policy. Outsourcing fills this gap, at least until the company grows to the point where it would benefit from an on-site specialist.

 

Shedding HR

An established company can reorganize and streamline operations by outsourcing HR. It may be a radical move, but saving or reallocating salaries puts the focus on the company.

 

Less Paperwork, Fewer Errors

You are an expert in your business. Outsourcing firms are the experts in their roles. PEOs and ASOs are designed specifically to take care of back office operations and they have established systems to streamline the flow of paperwork, anticipate problems and questions, and, therefore, limit mistakes.

 

Enhanced Legal Protection

When a company joins a PEO, it enters a co-employment relationship that provides shared responsibility for employees. According to the National Association of Professional Employer Organizations (NAPEO), the definition of co-employment is the contractual allocation and sharing of employer responsibilities between a PEO and its client. By partnering with a PEO and relying on its expert guidance, client companies transfer a substantial portion of the employee risks to the PEO. Many PEOs also typically provide their clients with an added layer of protection with their Employment Protection Liability Insurance (EPLI), in case a former employee, for example, sues for discrimination or wrongful termination.

 

Savings

Typically, outsourcing companies are able to reduce, contain and offset many employee-related costs for their client companies. For instance, PEOs enjoy large-group purchasing power by aggregating their client companies for the purposes of getting a lower rate for workers’ compensation and health insurance. This provides access to group rates that would be unavailable to small and mid-sized companies that make their own deals. Professional companies are also constantly looking for better deals, and they are often willing to change from one insurance carrier to another.

 

Due Diligence

Outsourcing companies keep tabs on the general workings of their client company to make sure that nothing falls through the cracks, from important details like contract expiration dates and insurance renewal periods, to something as simple as birthdays and anniversary dates for employees.

 

Compliance

Outsourcing companies assist in maintaining payroll, benefits, HR and tax compliance for their client companies so that they can focus on growing their business.

 

Legislative Oversight

PEOs and ASOs stay on top of the changing landscape of federal, state and local regulations to provide timely and expert information about requisite changes. The Affordable Care Act. Occupational Safety and Health Administration laws. Equal Employment Opportunity Commission regulations. Should management spend time keeping track of all of the changes? Professional outsourcing companies even exert lobbying power in order to shape beneficial legislature.

 

Experience

Outsourcing companies have extensive experience. They have started and established many companies and they have seen it all. Fledgling companies benefit from this guidance to avoid the pitfalls that have stalled or finished lesser projects.

 

Recruitment

When a company is growing fast, adding the hiring process overburdens management. PEOs and ASOs can coordinate head-hunting for executives and scouring the workforce for employees so that company growth is not stunted by empty desks. Client companies, of course, are able to influence any part of the process and are brought in to make the final decisions.

 

Onboarding

Once the decisions have been made for new hires, the many steps of getting the new employee situated within the company starts: the paperwork, the rules, the office tour, the introductions. Much of this must necessarily be done on the job site, but a lot can be completed online with customized company administration software. Companies who hire a lot of people stand to save a lot of time and energy with online employee onboarding.

 

Training

Those first few days are when the new, wide-eyed employee is trying to figure out how things work. Very little of this helps the company move forward. Allocating an established employee to serve as a tour guide is even more of a loss of production that hampers the company. Outsourcing companies that are part of the hiring process are set up to provide the basic training that new employees need in order to get them through the learning process quickly and efficiently.

 

Attract and Retain Talented Employees

Leveraging size to get the best possible insurance leads to savings for the company but also better quality for the employee. There may be specific aspects that could be used as perks for higher level employees. Orthodontia, for example, is not often covered by basic insurance, but braces for Junior are very expensive. That coverage may mean the difference between getting an expert employee or losing her skillset to the competition’s better dental plan.

 

Employee Manuals and Forms

As a specific example, established outsourcing companies have created many manuals to outline procedures and regulations for companies. New companies shouldn’t have to reinvent the wheel when customizing existing manuals or forms is easier and faster.

 

It’s definitely worth taking a look at partnering with a PEO or ASO.

Worklio is a software company that works hand in hand with PEOs and ASOs, providing the modern technology that leads to success.

Facebook has millions of daily users — yet it creates no content.

Uber transports millions of people in cities around the world — yet it owns no taxis.

Airbnb provides accommodations in thousands of cities and dozens of countries — yet it owns no hotels.

NetFlix provides online video for countless users around the world — yet it owns no theaters and only recently started to create its own content.

Facebook, Uber, Airbnb and NetFlix have all found a place between the consumer and the provider. They concentrate on what they do and they do it well.

Outsourcing is similar. There are hundreds of Professional Employer Organizations (PEOs) that take on all Payroll, Benefits and HR responsibilities, and there are hundreds of Administrative Services Organizations (ASOs) that handle parts of a company’s day-to-day workload. Both PEOs and ASOs provide the bridge to help client companies and their worksite employees concentrate on their core business and provide for their end customers.

 

Outsourcing Options

Outsourcing is not the only available option for contemporary companies. The most common options are 1, Do It Yourself or 2, HR Outsourcing with a PEO or an ASO.

 

The DIY Approach

It is not so long ago that large corporations had career employees, hosted annual picnics and provided full and generous pensions, all under the supervision of a hands-on Human Relations department. Today’s companies — technology startups, restaurants, law firms — don’t have the luxury of creating and staffing an in-house HR infrastructure. The intense competition inherent in today’s business world requires focus on the final product. That is why small and mid-sized companies forego worrying about many time-consuming tasks, like health insurance; withholding and paying employment-related taxes; complying with hundreds of employment laws, rules and regulations; obtaining Workers’ Compensation insurance coverage; dealing with COBRA, ADA, OSHA, EEOC, FICA and FUTA. Many small and mid-sized companies use HR Outsourcing instead.

 

The Outsourcing Approach — PEO or ASO

Clearly, HR takes care of a lot of essential parts of a company. There are questions, however. How many resources should be dedicated to that expertise? Who should become the expert in liability and compliance? When should a company start a retirement program? Should it be just a 401(k) option? Will the company match employee contributions? Can an employee have an Individual Retirement Account, too?

When does a company become big enough to hire a dedicated HR person? Ten employees? 20? 50?

Most are not expert in workplace best practices, nor do they want to be. That is where professional help makes sense. PEO and ASO models enable companies to rid themselves of many in-house tasks in order to concentrate on their field of expertise.

There are more than 900 different HR Outsourcing companies in the United States alone. These provide access to the comprehensive benefits that much larger companies enjoy without using up too many resources. As mentioned, HR Outsourcing companies fall into two basic categories: PEOs and ASOs.

 

What is a Professional Employer Organization (PEO)?

The Professional Employer Organization model is an all-in-one solution, including Human Resources, Benefits, Payroll, Compliance, Workers’ Compensation and more. PEOs take care of the whole spectrum of services in order to increase employee productivity and engagement.

Startup technology companies are a perfect example of those who would benefit most: The general office work is outsourced so that these companies can focus on their own growth and their own effective revenue generation. Management has the final say, but the PEO removes burdensome tasks by handling the daily back-office work.

As companies grow, the PEO also acts as a co-employer, absorbing a lot of responsibility and liability.

Technology has made the PEO relationship even more efficient and effective. Company administration software enables PEOs to help clients consolidate their operations with a solid technical foundation for all of their many moving parts, including seamless communication, centralized operations, standardized procedures, the efficient handling of benefits, comprehensive HR support, the maintenance of a reliable Payroll system, the elimination of the inefficiencies of manual processes, transparency and superior service for management and employees.

There is nothing new about this arrangement. The PEO industry is already huge. There are hundreds of PEOs that are being used by thousands of companies employing more than 3 million people in the United States and generating gross revenues of between $136 and $156 billion.

Industry reports show that, since 2010, the growth of businesses that use PEOs is 9 percent higher than among other small businesses (based on the Intuit Small Business Employment Index) and 4 percent higher than overall U.S. employment growth. Businesses that use PEOs have 10 to 14 percent lower employee turnover, and are 50 percent less likely to go out of business.

Every PEO is slightly different just like every business is unique, but they generally provide:

• An HR department, including administration and support for the entire workforce;
• Employer of record status, with a federal tax ID, for some of the company’s employees, thus allowing for a shared employment / co-employment system;
• Protection against some risk, liability and occupational hazards, including Employment Protection Liability Insurance (EPLI);
• Consolidation of state and federal unemployment taxes;
• Retirement systems, including 401(k) and Individual Retirement Accounts;
• Social Security management;
• Access to technology that is not affordable for small companies, including company-management platforms, time and attendance counters and employee dashboards;
• Payroll processing and the completion of Payroll taxes;
• W-2 form preparation and distribution;
• Management of a wide range of Benefits administration, including health, dental, vision, life and Workers’ Compensation insurance;
• Verification that workplace policies are in compliance with federal, state and local regulatory standards;
• Best practices gleaned from years of professional experience;
• Direct and readily available support for all types of HR situations;
• Numerous paperless options to save resources and money;
• Fully licensed and regulated status in the states where it is necessary;
• Business plan development and guidance;
• Assistance with creating office policies, including attendance systems and paid time off policies;
• Development of guidelines for home office privileges for employees;
• Establishment of branch offices;
• Soft skills instruction;
• Leadership training;
• Career transition options for departing employees;
• Grant writing expertise; and
• Workplace safety regulations.

 

What is an Administrative Services Organization (ASO)?

The Administrative Services Organization model is a more traditional business relationship. It is basically an a la carte version of the PEO model: only some services are outsourced. Some companies, for example, only want help with Payroll. Other companies want to also establish a Benefits program. Ambitious groups want help with establishing vesting options. Even the old-school behemoth manufacturing companies used a Payroll processor instead of doing it all in-house.

Nevertheless, the basic principle is the same: management can outsource tiresome tasks to a professional organization in order to have more time to work on their core business.

Unlike PEOs, an ASO does not become the employer of record for any employees and does not take on any liability. ASOs take on specific tasks for their client companies, including every feature listed for the PEO model. General differences include:

• The client generally outsources one or more services, oftentimes to multiple vendors;
• Savings result from using strategic providers;
• The client retains employees under its own Federal Employer Identification Number (EIN) for the purposes of Payroll taxes, Benefits and Reporting;
• The client may negotiate its own insurance packages; and
• The client uses its own policy and rates for Workers’ Compensation coverage, including the required down payment and liability for audits.

In a nutshell, HR Outsourcing companies provide the professional foundation so that companies can concentrate on their core product.

PEOs and ASOs may be the answer for your business.

Worklio is a software company that works hand in hand with PEOs and ASOs, providing the modern technology that leads to success.