One of the most frustrating aspects of working in HR can be the repetitive and sometimes tedious nature of the role. Research from isolved finds that 42% of HR leaders are spending between 4 – 10 hours a day answering repetitive questions from employees (e.g., how much PTO do I have, when am I scheduled).
That’s over half of their day, so it’s no wonder HR teams are struggling with burnout and fatigue more often than other departments. In fact, 98% of HR professionals say they’ve felt burned out at work in the last six months and 88% have dreaded work.
One solution? Employee self-service, which many organizations are encouraging as a way to give HR leaders more time back in their day. Today’s tech-savvy workers generally prefer a high level of self-service anyway, especially those who are accustomed to using these tools in their everyday lives.
However, sometimes self-service isn’t enough — and that’s where outsourcing comes in. Isolved’s research found that nearly 2 out of 3 leaders (64%) feel they could benefit from outsourcing HR tasks, and 58% plan to do so this year. Benefits administration and employee relations support top the list of tasks that HR leaders say they’re most likely to outsource.
There are several different approaches to outsourcing, but many companies choose to work with either an administrative service organization (ASO) or a professional employer organization (PEO). In fact, 74% of organizations currently work with an ASO and 59% work with a PEO.
If you’re just beginning to look into your options for outsourcing, then these terms may not be familiar to you. In today’s article I’ll discuss the key differences between these two types of HR service providers, summarize the benefits and disadvantages of each, and describe how they work with your organization and your HR team. Let’s take a look.
An ASO (administrative services organization) is a service provider that assists businesses with certain HR functions while allowing the company to maintain control over strategic decisions. ASOs typically handle administrative tasks such as payroll processing, benefits administration, compliance, and sometimes recruiting and onboarding. By outsourcing these administrative responsibilities, businesses can focus on core operations and strategy. The company remains the employer of record for its employees, meaning it retains legal and tax responsibilities.
A PEO (professional employer organization) is also an HR service provider but operates in a slightly different way compared to an ASO. In a PEO arrangement, the PEO becomes the employer of record for the client company's employees. This means the PEO handles various HR functions, including payroll, benefits administration, HR compliance, risk management, and sometimes even recruiting, training, and development. The PEO essentially co-employs the client company's workers, which allows the PEO to pool together multiple clients and leverage economies of scale for benefits and insurance purchasing.
It's crucial to carefully evaluate the advantages and disadvantages of both ASO and PEO models to determine which one aligns better with your organization's needs, resources, and long-term HR strategy. While they have some similarities, they also have distinct differences. Here are some of the benefits of ASOs and PEOs to consider:
While ASOs and PEOs each offer several benefits, they also have their respective disadvantages to consider. Here are some of the disadvantages of these models:
Ultimately, the choice between ASO and PEO depends on your organization's specific needs, preferences, and existing HR infrastructure. Consider factors such as the level of control desired, the services required, and the size of your company to determine which option aligns best with your goals. And look for providers that have invested in scalable and secure product suites and partners, for example the isolved Network and the isolved People Cloud.
Thanks for reading — be sure to join the conversation on LinkedIn and let me know your thoughts on this topic!
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