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Why Do Companies Choose to Outsource HR?

Why Do Companies Choose to Outsource HR?

You face constant pressure to reduce your company's costs and increase efficiency. Doing both at the same time can be difficult, but you can maximize your savings by partnering with a Professional Employer Organization (PEO) to outsource your HR needs. 

Outsourcing HR with a PEO is a great way to cut costs while saving time simultaneously. What follows are the key ways of how outsourcing HR reduces costs.  

Saves Time 

Your internal HR team deals with constant pressure to ensure their tasks are done correctly and on time. Many of these tasks are repetitive and mundane but still require intense focus to ensure absolute accuracy.  

By outsourcing these HR tasks, a PEO complements your internal HR team by shouldering the burden of the complex and time-consuming duties. This frees up your staff to put more effort and energy into your core business needs, such as: 

  • Building a culture that benefits your entire organization 
  • Developing a best-in-class benefits package 
  • Working to attract and retain top talent in your industry 

HR Compliance 

HR compliance, employment laws, and regulatory issues create sticky situations for internal HR teams. Many of these laws are difficult to understand, and some are constantly changing. 

When a company does not have a compliance expert, they risk expensive fines from regulatory agencies. Many HR employees attempt to take on this complex task, but even innocent mistakes can be costly for your business. With a PEO, you get to rely on HR compliance experts whose job is to make sure your business remains compliant with all federal, state, and local employment laws. 


Finding the right employees at the right time for your open positions is difficult. Many companies try to bootstrap their recruiting efforts by divvying up different tasks among the HR staff. This is inefficient and a waste of money. 

Recruiting takes dedication and a keen eye for talent. With a PEO, you can use the recruiting services provided by staffing experts. They will craft your job description, post it on relevant job boards, and handle the onboarding process when you find the right person for the job. This process saves you time while also increasing the chances of making the right hire the first time. 


Aside from salary, a benefits package is the most important item a company can offer employees. But for many small and medium-sized businesses, offering competitive benefits is cost-prohibitive. With a PEO, companies can see significant cost savings. PEOs offer your company Fortune 500 benefits at Fortune 500 prices.  

By negotiating at scale, your PEO gives you access to higher quality benefits without the astronomical cost. PEOs pool all of their clients' employees together. This creates a larger risk pool for the insurance company. Larger pools lowers the risk of coverage which means lower premiums. Your PEO gives you access to better plans, giving you the cost-savings you seek and your employees the benefits they want.  

Workers' Compensation Premiums 

Workers' compensation costs can hit small businesses hard. Depending on the industry in which you operate, workers' comp premiums can be a substantial portion of your budget. The higher risk your industry, like construction, the more you pay in workers' comp premiums. 

When you partner with a PEO, you gain access to their workers' comp e-mod rates, which might be substantially lower than yours. This can result in immediate savings by lowering premiums.  

How PEOs Save Even More  

Outsourcing HR may make sense for many businesses. Outsourcing HR to a PEO makes even more sense through additional cost savings. 

A PEO operates on a co-employment relationship with your company. This means the PEO becomes the employer of record for your employees, enabling the PEO to negotiate benefits and get lower workers' comp premiums. These savings are only available by outsourcing your HR needs to a PEO. 

Give your business the best chance of success by partnering with a PEO that gives you the ability to save money and increase efficiency at the same time. 

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