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Benefits and Disadvantages of HR Outsourcing

by: Sarah Joson

Thursday, May 22, 2014 |

HR Outsourcing for Businesses

Business owners are still divided when it comes to HR outsourcing. Some believe that teaming up with a professional employer organization (PEO) has its benefits, while others say it’s a total waste of resources.

A post at BusinessNewsDaily.com lists down things that will help business owners see if HR outsourcing is right for them.

Executives will have more time to focus on the goals.

They will no longer have to lose sleep over processes that they are not familiar with. Through a PEO, the payroll, benefits, workers’ compensation, and IRS will be taken care of. One aspect that they have to consider is the healthcare reform, because companies need to make sure that they are complying with the changes.

Reduce legal problems.
PEOs have been also known to manage legal issues that take place between an organization they are serving and employees. It’s a valuable insurance that can protect a company from employees who want to take advantage or tarnish the reputation of the organization.

Employee benefits are more attractive.
Companies that rely heavily on filling mass positions can take advantage of the ability of PEOs to come up with attractive benefits packages for potential candidates. Some small business owners even say they are able to compete with Fortune 500 businesses because of this.

State rulings and challenges
Some states require employees who work in multiple states to file tons of paperwork before they can even start working, or get the full benefits of their new jobs. PEOs can take care of this for you, so instead of you exchanging emails with the local government, they will iron this out on your behalf.

Information is more accessible.
Any information that a PEO service collects is now made available online. It will be easier for you to store and take an employee’s profile when you need to.


You need to be more lenient to make way for the PEO.

Some small business owners have a hard time adjusting to the changes, especially when it comes to the control and management of employees. However, if they fail to do their job because you wouldn’t let go of control, then you only have yourself to blame.  

The healthcare benefits of employees
Healthcare of the employees is one of the most important aspects of their contracts. You should be prepared in case the HR outsourcing partner decides to part ways with the current healthcare provider. One of the things you need to watch out for is the continuity of the coverage of employees.

Risks in employee leasing
Some contracts are paid in advance, which is why when a PEO goes under, the client company will be liable for paying the employees the second time. Proper due diligence is a must and should be coupled with a gridlock contract to ensure your business from external mistakes.

No sense of ownership
Since some PEO service providers manage several clients at once, there may be employees who will get neglected especially when expediting information needed for claims processing for an incident that happened on-site.


There are also some instances wherein dodgy charges show up in the invoice, but were obviously not discussed during the initial stages of the agreement. Also, rewards and tax breaks are said to be pocketed by some PEOs.

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