Many Utah businesses have found that HR outsourcing an excellent way to help their business grow and succeed. However, their level of success depends on the kind of outsourcing service they choose.
When it comes to comprehensive HR outsourcing services, you have three options: Dedicated payroll processors, Administrative Service Organizations (ASOs), and Professional Employer Organizations (PEOs). Which one is best for your business?
The best strategy is to find a high-quality PEO in Utah. Let's delve into why.
3 Types of Outsourcing Services
As mentioned, there are three basic types of HR outsourcing services.
Payroll Processor
For many business owners, the most obvious HR function to outsource is payroll. It's tedious, requires no deep knowledge of your company, and can carry severe consequences if you make a payroll mistake. Unfortunately, the return-on-investment (ROI) of just outsourcing payroll tends to be negative, and many payroll processors have pricing structures that disincentivize growth.
Administrative Services Organization
This is a more comprehensive solution. In addition to processing payroll, an ASO can handle benefits administration, posting requirements, compliance, and risk management. They are sometimes called "Administrative Services Only."
Professional Employer Organization
The last, and best, choice is a PEO. PEOs do everything ASOs do, reducing your HR overhead and freeing up your in-house team to do their job. But there is a huge difference between an ASO and a PEO.
When you partner with a PEO, they become the employer of record for your staff through a mechanism called "co-employment." While you retain full control over hiring, firing, and work conditions, the PEO is their employer for taxation and benefits. So, instead of just preparing payroll and telling you what taxes to remit, they can remit taxes for you. Better yet, you can get access to better benefits for your employees at a lower cost. A PEO is the only way to get these advantages.
Why PEOs Are Perfect for Utah
There are specific reasons why Utah businesses should choose to partner with a PEO.
Workers' Compensation Insurance
Utah has tight rules on which businesses are required to buy workers' comp insurance. Virtually all businesses are required to have it, and it can drain your cash flow substantially.
One reason why it does so is the way you pay for workers' compensation. You pay a large deposit at the start of the year and may or may not get some of it back at the end. This deposit can mess with your cash flow, and it only gets worse as you hire more employees.
A PEO will pay the deposit for you and then charge you the month-by-month premiums. This protects you from a potential cash flow issue in the month your renewal comes up.
Health Insurance
You are legally required to provide health insurance if you have fifty or more "full-time equivalents."
Providing competitive healthcare plans can be prohibitive for smaller companies; the legal minimum may not be enough for your most valuable employees. PEOs give you access to their master healthcare plan, negotiated using their expertise and giving you the economies of scale of a much larger business. This means you can offer Fortune 500 benefits at a price you can afford, helping you attract and retain top talent and improving employee engagement and morale.
HR Compliance
Not only do you have to follow all federal laws, but you have to worry about Utah-specific laws. For example, the Final Paycheck Law requires that you pay a terminated employee within 24 hours. Many other states, in contrast, only require you pay them within a week or even on the next scheduled payday.
Furthermore, these laws can change at any time. Keeping on top of it all is a full-time job, and you can easily get sued for compliance errors.
Payroll & HR Administration
To grow, you need the best talent you can find. Finding, attracting, and retaining that talent takes time and effort, and that should be the primary focus of your in-house HR team.
With a PEO taking on the routine tasks, you can have your HR staff focus on developing the company culture that will turn you into an employer of choice. In turn, this will lower your turnover and hiring costs.
HR Outsourcing Beyond Payroll
While payroll outsourcing can free up time, by itself it rarely results in a positive ROI. Taking your HR outsourcing beyond mere payroll processing is vital. However, while an ASO reduces the need to hire another HR employee and frees up HR's time further, it has no direct cost savings. A PEO, on the other hand, does come with direct cost savings.
With an average ROI of 27.2%, PEOs are by far the best HR outsourcing option for smaller businesses in Utah. Partnering with a PEO means more affordable benefits and workers' compensation insurance, expertise to help with compliance, and more time for your HR staff to do the critical part of their jobs.
