Whenever you make a big decision it is best to weigh the positives and negatives. Outsourcing your company to a Professional Employer Organization (PEO) or an Administrative Services Organization (ASO) would qualify as a big decision.
So which way does the scale tilt?
Every business is different so every situation is unique. For the positives, click here for a blog post with general information about about PEOs and ASOs and click here for a blog post with more specific benefits about using PEOs and ASOs.
For the negatives, read on because there are some potential rough spots that should be clearly understood prior to hiring a PEO or an ASO.
Some Loss of Control
The person who runs the company makes the final decisions. Often that person also wants to make all of the decisions. Outsourcing is, by definition, the delegation of a significant portion of the daily operations of a company. Even though supreme authority is maintained by the client company, it is not always easy to relinquish the day-to-day control.
Possible Insurance Alterations
One of the biggest strengths that PEOs and ASOs bring to the table is also a weakness. Economies of scale lead to good deals on health insurance, but that could mean that there may be carrier changes. Some companies choose to handle their health insurance separately to keep consistency. Also, savings are passed on to the clients, but there may be extra fees that cut into it.
Pricing Schemes
PEOs and ASOs use two basic pricing models: an itemized plan and a flat fee. Once a client has gone through the time and energy of partnering with an outsourcing company, it may be difficult to adjust when business success justifies a change. The flat fee model, which can take up to 10 percent of salaries, may not make sense when your success results in quickly rising salaries. Paying for individual aspects of an HR outsourcing company would be more predictable and not subject to salary fluctuations. Of course, often services are bundled, joining valuable and unimportant aspects together.
Reduced Personal Contact
The fact of the matter is that many problems will not be resolved face to face. Information websites, automated emails and phone calls are the more likely forms of communication. Response time will be longer than walking to the HR department down the hall to ask a question.
Reduced HR Intangibles
There is some value in having Human Resources on site. The department is often tasked with spreading holiday cheer and establishing relationships in the local community. Of course, using an outsourcing company does not mean that local HR cannot exist.
No On-Site Crisis Help
Times of crisis or chaos will, perhaps, be made more complicated. HR is where complaints — legal or otherwise — are officially lodged. Writing an email about sexual harassment is not the same as closing the office door and telling a real person about it.
Sharing Sensitive Data
Because business is so competitive, some companies may be justifiably wary about sharing payroll data and information about internal mechanisms. Outsourcing companies appreciate this concern and have high-level security with proper certification to prove it.
If you can live with these points and if the positives outweigh the negatives, then check out PEOs and ASOs.
Worklio is a software company that works hand in hand with PEOs and ASOs, providing the modern technology that leads to success.