Effective management of staff is imperative to running a successful business but in some business cases, having an internal human resource department to achieve this doesn’t make sense. In this case, some companies can opt for two options to outsource their HR functions; Human Resource Outsourcers (HROs) or Professional Employment Organisations (PEO’s).

HROs and PEOs represent two different outsourcing solutions, despite sharing many of the same functions. HRO involves outsourcing some or all of the non-core human resource functions to an external supplier while PEOs perform bundled services for businesses like payroll, benefits and HR support.

What is a PEO?

A professional employment organisation gives wide-ranging HR solutions to small and medium-sized entities. Functions such as payroll, HR support, immigration and visa management are just a small list of services Australia PEO offers to their long list of clients. These functions are bundled as a packaged plan. A PEO employs their clients’ staff on behalf of them and leases them back to the client.

What is an HRO?

HROs are independent entities that offer end-to-end support for every internal HR needs their customers have. In a client and HRO provider’s relationship, the client remains the employer of record as HROs don’t provide an employer partnership.

What’s the difference?

While HROs offer a customised solution to clients, by allowing them to tailor their service to the immediate needs of the business, Australia PEO acts as a co-employer to their customer and offers a ‘package’ solution.

The relationship between Australia PEO and our clients is more partnership focused and our services are considered and intricate extension to their business. PEOs retain control of the direction of an organisation including the management of their staff and take care of most of the core functions of an ordinary HR department, from payroll to workers’ compensation, hiring and more. As is the case with all professional employment organisations, Australia PEO fronts government taxes as well as workers legal issues and liabilities for your company. In addition to this, you can save on costs such as Worker’s Compensation as we are able correctly assign relevant codes and manage economically. A PEO is ideal in situations where companies are looking for a ‘turn-key’ solution that minimises costs associated with HR administration and limits liability.

HROs offer a more customised and pick-and-choose solution for their clients. They offer a long list of services from which customers, based on the individual needs of their customer, can select from as they deem necessary. As a client of an HRO service, you can choose some of the HR services on offer by an HRO and keep others in-house. Such services include recruitment, onboarding, training, development, employee services, marketing and communications, employee relations and so on. While their service offerings are more in-depth then those typical of a PEO, they don’t provide an all-in-one solution.

Both styles of outsourcing can offer expert advice in human resource management, help manage compliance, reduce overheads and take care of many HR functions intrinsic of human resources. Neither option is more or less legitimate or beneficial than the other but how advantageous they may

be to your business will depend on individual business needs. To find out if Australia PEO is the right option for your business, speak to someone from our team by clicking here.