Choosing Between Using an HR Software and Partnering with a PEO: Here's What You Need to Know

Choosing Between Using an HR Software and Partnering with a PEO

HR functions are integral to the success of your business strategies and the overall growth of your company. After all, every organization is no stronger than the collective strengths of all the talents that make up the organization. Therefore, when it comes to HR services, you'd simply want the best for your company.

But even with this in mind, it can often be a challenge to figure out or choose the best way to go about establishing an effective HR unit, even as your business grows. Some organizations prefer to completely outsource all human resource services, while others seek out a co-employment arrangement with a Professional Employer Organization. Another alternative is buying an all-in-one HR software and hiring an experienced user to manage the software and HR administration. 

This article reviews the basic differences between using high-tech HR software vs PEO partnership to provide HR services for your business. Read on to learn which is best for your business.

Understanding HR Software

With the right HR tools , such as  as Human Resource Information Systems (HRIS) or Human Capital Management (HCM) software, you can manage your business`s day-to-day activities effectively, improve your productivity, and achieve your business goals. You can manage your employees better and run a very efficient business. Implementing the right HR technology allows you to streamline your HR processes towards achieving more goal-oriented results and saving more money.

HR software can assist you with functions like payroll management, employee benefits enrollment, staff attendance, and other mundane HR functions, and give you absolute autonomy on how you want to run your HR team. But using HR software may not be sufficient to address all HR-related matters in your business.

However, HR software alone is not enough to achieve a well-rounded human resource solution for your company. In most cases, you will still need additional vendors to access good healthcare plans, manage employee issues, recruit, and onboard new employees. 

Key Features of HR Software

• Payroll Management: Automates payroll processing, ensuring accurate and timely payments.

• Employee Benefits Administration: Manages benefits enrollment and tracking.

• Recruitment and Onboarding: Streamlines hiring processes from job posting to onboarding.

• Time and Attendance: Tracks employee hours, manages leave requests, and ensures compliance with labor laws.

• Data Analytics: Provides insights through reporting and analytics to make informed HR decisions.
  

Pros of HR Software

• Autonomy and Control: Complete control over HR functions and data.

• Efficiency: Streamlines tasks, such as payroll management, benefits enrollment, and attendance tracking.

• Cost-Effective: May be initially more affordable than a PEO for small businesses.

Cons of HR Software

• Limited Scope: May not cover all HR needs like compliance and regulatory issues.

• Additional Vendors Required: Often requires additional vendors for healthcare plans, recruitment, and employee issues.

• Resource Intensive: Needs dedicated personnel to manage and optimize the software.

• Complexity: Often becomes more complex when business need to scale up.

Partnering With a PEO Service

A Professional Employer Organization (PEO) is an outsourcing firm that provides comprehensive HR services to businesses through a co-employment model. In this arrangement, the PEO becomes the employer of record for tax purposes, while the client company retains control over day-to-day business operations and employee management. 

When your business partners with a PEO, you share HR liabilities with the organization even while you have access to full HR solutions. This includes payroll services, employee benefits management, recruiting, training, and onboarding of suitable talents to your company, etc,. You can learn more about partnering with a PEO in our Ultimate Guide to PEO.

Key Features Provided by a PEO

• Payroll and Tax Administration: Handles payroll processing, tax filing, and compliance with tax regulations.

• Employee Benefits Management: Negotiates and administers employee benefits such as health insurance, retirement plans, and other perks.

• Human Resources Compliance: Ensures compliance with federal, state, and local employment laws and regulations.

• Risk Management: Provides services like as workers' compensation insurance and employment practices liability insurance (EPLI).

• Recruitment and Onboarding: Assists with hiring processes, background checks, and onboarding programs.

• Employee Training and Development: Offers training programs and development opportunities to enhance employee skills and performance.

Pros of Partnering with a PEO

• Comprehensive HR Solutions: Full suite of HR services including payroll, benefits, compliance, and more.

• Regulatory Compliance: Helps avoid regulatory sanctions and ensures compliance with employment laws.

• Cost Savings: Can negotiate better rates for employee benefits and reduce HR overhead costs.

• Focus on Core Business: Frees up time to focus on core business activities by handling HR tasks.

• Expertise: Access to a team of HR professionals with extensive knowledge and experience.

Cons of Partnering with a PEO

• Cost: Can be more expensive than using HR software alone, especially for very small businesses.

• Less Control: Shared control over HR functions and processes.

• Dependency: Reliance on the PEO for critical HR functions.

HR Software vs PEO: The Best HR Solution for Your Business

Choosing the best HR solution depends on your business size, growth trajectory, and specific needs. For small and medium-sized businesses, partnering with a PEO often provides the most comprehensive and hassle-free HR solution. In providing HR solutions, PEOs incorporate high-end HR technologies and experienced users based on the needs of their client companies. 

For small and medium-sized businesses, compared to simply buying HR software, a PEO will take care of other liabilities and HR concerns like payroll taxes, sourcing for the best employee health insurance plans, and improving employee satisfaction.

A Professional Employer Organization is versed in current employment laws and helps you avoid regulatory sanctions that you may otherwise find difficult to comply with on your own. Under the umbrella of a PEO partnership, your company can also negotiate better employee health care benefits.

When running an all-in-one, high-tech HR software — which you probably may be quite expensive — you still need a hands-on user to run essential HR functionalities. In summary, you need both the software and the intervention of a HR professional. Having established the importance of both HR software and PEO services, it may not be a good choice to settle for just HR software, unless your business is still very small and does not need to outsource HR services yet.

Do You Need Help in Choosing the Right PEO? 

Now that you have seen how the right HR solution can simplify your business operation and help you achieve your business goals, the next thing you want to do is to partner with the right PEO. This is a concern because not all PEOs can provide you with optimum HR services. You want to work with a PEO that has a proven record of delivering the best services to their client companies, preferably a CPEO.

A CPEO or a Certified Professional Employee Organization is a PEO that meets all the guidelines set by the United States government under the IRS. The certification program is a voluntary exercise, so not all PEOs have the CPEO designation. At The Mission, we can take the burden of finding a reliable PEO service off you. We are a leading partner in the PEO, HR, payroll, and benefits outsourcing marketplace.

The Mission caters to small and medium-sized organizations and government contractors by providing industry-leading HR services. We serve as a trusted partner in integrated human resource compliance, risk management, employee benefits, employment practices liability insurance (EPLI), and payroll processing.