How to Cut Costs and Relieve Stress with HR Outsourcing for Small Business

Stressed Business Owner HR OutsourcingIt’s the middle of a busy week, and your to-do list just keeps growing. Your tasks range from creating employee schedules to figuring out why your laptop is running slowly. You also need to find time to review resumes for the opening you have and pay the bills to keep the lights on. Later this week, you need to cover part of a shift for one of your employees who has an appointment.

Sound familiar? As a small business owner, many important tasks fall in your lap. You are the finance, human resources, information technology, and marketing departments all rolled into one busy, and sometimes stressed, person. As you juggle all of these critical responsibilities, one of the most important questions you can ask yourself is this: “To whom can I delegate some of these tasks?”

That’s where a PEO can help.


What Is a PEO? 

Professional Employer Organizations (PEOs) exist to relieve the burden of HR administration through outsourced HR services. HR outsourcing might make sense for your small business if you find yourself overwhelmed with paperwork or unable to provide employees with a competitive benefits package. The PEO co-employs the people that work for its clients, allowing it to pool resources to lower risks and costs.

A PEO is not a staffing company or temping agency. Those companies hire workers and place them in companies that have temporary needs. In a PEO relationship, the PEO co-employs your people (and other clients’) so they can pool resources and provide more cost-effective benefits like insurance, retirement, and even workers’ compensation. They also help you with administrative tasks like compliance, taxes, and employment paperwork.


Benefits of HR Outsourcing for Small Business Owners

The next question in the minds of most business owners is this: How much does it cost? In most cases, working with a PEO is less expensive than staffing an HR department on your own. It can also save you money by reducing your risk of compliance errors, preventing missed deadlines, and lowering insurance costs.

A PEO supports small business owners by:

  • Reducing your administrative workload
  • Taking care of payroll and taxes
  • Dealing with the regulations of multiple states, which is especially helpful if you have shifted to a more remote workforce
  • Giving you access to experts who can answer questions
  • Helping you deliver more competitive benefits with access to better insurance rates
  • Handling open enrollment as well as COBRA benefit administration
  • Improving employee retention
  • Reducing the liability of being an employer
  • Freeing up your time to focus on the direct operations of your business, including customer service

If you’re considering hiring an HR person to handle many of these tasks, remember that with a PEO you get the varied expertise of many people handling your HR services for the same or even less than the cost of hiring one person. Access to many experts can be a serious benefit over hiring internally.

Will I Lose Control of My Business?

When you work with a PEO, you shift the burden of HR administration off your shoulders so you are free to focus on core business needs. But will you lose control of decision-making and business direction?

The short answer is no, you won’t lose control. Instead, think of the PEO as a partner who supports you and serves as an extension of your team. Here are some ways you can expect to work with the PEO:

  • Hiring - A PEO does not make hiring decisions for you, but it can help you with recruitment and retention strategies. 

  • Payroll - The PEO will help you manage payroll, but it does not dictate wages or other compensation packages. It can also work with your internal HR person or team if you have one.

  • Taxes - A PEO can help you prepare and file your taxes, ensuring that you don't miss critical deadlines and that all of your data is correct. 

  • Compliance - Never worry about staying up to date on OSHA regulations or EEOC requirements again. The PEO does that heavy lifting for you to keep your business compliant. 

How to Know If a PEO Is Right for You

If you’re feeling stressed, overwhelmed, and burned out with the responsibilities of your business, then it’s time to hire a PEO. But how do you know which services to outsource?

The three D’s of productivity will help you here: do it, defer it, and delegate it.

  • Do It - Certain aspects of your business are critical to your success and should be yours to do. Customer service, for example is one area that you must manage. Likewise, your strategic business plan has to be yours. Think about areas where you do not feel a sense of urgency but you know the tasks are very important, and spend as much of your time on those as you can. Urgent tasks often get most of our attention, but they offer little long-term gain.

  • Defer It - These are tasks that are not absolutely necessary. Erase as many of these tasks from your day and your to-do list as you can. And do not hire someone else to do them, either. For example, perhaps you spend too much time glued to your email or catering to needy clients. Set boundaries to determine how much time you are willing to spend on these tasks (if any) and stick to your plan.

  • Delegate It - The tasks you can delegate are the ones that have to get done, but someone else can do them for you and probably can do them better. Outsourcing HR administration allows you to partner with experts to handle these tasks efficiently, freeing up your time for the tasks in the first category. Consider each offering the PEO has and decide whether your time is best spent doing the task yourself or delegating it to the PEO.

HR Outsourcing for Small Business: Choosing Your PEO

If you decide to move forward with outsourcing, your next task is choosing your PEO. Here are a few tips for navigating this process:

  • Get quotes from several PEOs and choose one with a great reputation and a custom package that best suits your needs.

  • Have a clearly defined plan for what the PEO will handle and what you are still responsible for.

  • Determine whether you can get better insurance rates through the PEO or through your own policy. (Here are some tips to help you with that.) 

Need some help finding the right PEO?

That’s why we created our PEO Matching Tool! Simply take our 20-minute survey about your needs and requirements, and we’ll create a PEO vendor short list for you! Try it today and get a free ranking report of PEOs that work within your state, industry, and size based on the requirements you select.


 PEO Comparison Tool