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How To Evaluate A PEO, ASO or BPO For Outsourced HR

By November 19, 2012 February 19th, 2015 No Comments

27_2520977Outsource human resources can be an effective solution for many businesses.  There are alternatives to PEO (professional employer organizations) that should be considered.



What is a PEO?

PEO’s act in a way similar to ‘employee leasing’.  The advantages to utilizing a PEO originally was the leverage of a large group when it comes to reducing the cost of benefits.  Over time, these types of advantages in reduced group medical, group dental or other group benefits have been decreased because competitive rates are now available through savvy benefits brokers.  Plus most PEOs usually have one or potentially two benefit carrier options.
With the growth of BPO and ASOs (Business Process Outsource and Administrative Services Offering) the list of outsourced human resource options has grown.  An ASO or a BPO (Business process outsource) company, the field of alternatives to a PEO now has less expensive alternatives.  Many of the PEO’s relied upon offering payroll or human resources support, much as an outsourced human resources department.

A BPO or ASO can help with adding a level of professionalism to a company’s human resource department that the company would not have otherwise.  Utilizing the expertise and knowledge of an outsourced human resource team can also have ramifications when it comes to avoiding expense or prolonged litigation that stems from human resource related situations.  Simply having a well defined employee manual can be an important step to support the organization.   Most BPO’s or ASO’s have the experience of working with other companies and therefore the human resource policy manual has been ‘tested’ in other environments as well.  This can be the key to avoiding confusion and situations where an employee indicates that they were not aware of the company policy.

A business process outsourcer for human resources acts like an outsource hr department.  The key tasks and responsibilities of the human resource team are outsourced to a team of human resource pros who assist or replace an internal human resource department.  An advantage of working with a BPO is that they are experts in human resources and can efficiently assure your organization is compliant.

One downside of the PEO model versus the BPO model is that a PEO is generally more expensive.  Some ASO’s may try to sell a PEO option.  This may be due to the fact that the PEO margins are higher because there may be hidden expenses in fees paid along with payroll and payroll taxes.

The bottom line is that it’s important to understand what your organization needs in an outsourced Human Resource model, and to match the company need with the best outsource solution provider that can meet that need.  To right size your human resource solution may entail interviewing several outsource HR providers, and then selecting the one that seems to best fit the situation.

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