Deciding whether to hire internally for your HR function or outsource HR is a critical decision, especially for organizations experiencing fast growth. If you are currently outsourcing HR functions to a Professional Employer Organization (PEO) and are considering bringing your HR in-house, there are several considerations you need to take into account before pulling the trigger.

For those not familiar with how PEO services work, companies contract with them to provide HR support and assistance, including policies and procedures, payroll services, insurance benefits, Workers’ Compensation and other HR processes. Outsourcing HR to a PEO can allow an organization to concentrate on the operational and revenue-generating side of the business while saving costs. While PEO organizations are a great option for small businesses, they can be quite a headache to outgrow.

3 Tips to Unravel from a PEO Organization

If you are unsure of whether to continue with PEO outsourcing or to bring HR in-house, here are some of the factors to consider:

1. Know the Cost of PEO Services - Within a PEO employer, costs are tough to measure. In some cases, fees can exceed 15% of your total payroll. Analyze your monthly bill and determine what you are paying per PEO employee each month. Understand what costs are included (i.e., taxes, administrative fees, etc.) so that you can determine what the true total cost is. If your business has grown to more than 100 employees, one area to look closely at is Workers’ Compensation costs, which can become a large expense if not managed correctly. For example, in a PEO employer environment, a universal classification code may be used instead of an industry specific code, which could be costing you money.
2. Update your HR Technology - Ensuring your HR technology systems are up to date is critical. You’ll need to determine how to transition payroll, HRIS, and benefits administration systems from the PEO services. Clearly understanding what systems you currently have and what you need, will help you address systems issues up front and to conduct research on what technology is available and appropriate for your business if there’s a gap.
3. Review and Revise Company Policies - Many times your PEO doesn’t have any internal policies, which are company specific. This is a great time to design policies specific to your culture. A good place to start is the employee handbook. Does your organization have any stand-alone policies? They would all need to be reviewed and possibly revised to ensure they are compliant with current rules and regulations. Make a schedule and prioritize the order of importance to accomplish this task.

Knowing when to transition your HR function from a PEO is a crucial decision. Make sure you have all of the facts to ensure that you make the best decision for your business. And lastly, know that you have options! Unlike a PEO, Helios provides HR outsourcing services that are scalable and can be a great alternative to PEO models for growing organizations and government contractors. And when you are ready to bring HR in-house, we also specialize in HR placements.