PEO vs. Traditional HR: What's the Difference?

A comprehensive breakdown of differences and benefits when hiring a PEO in comparison to a traditional in-house HR individual or team.

A Professional Employer Organization, commonly referred to as PEO, assumes Human Resources (HR) responsibilities when working with a business. Traditionally, businesses will employ an in-house HR team or individual. However, by hiring a PEO to support their internal personnel, the PEO becomes the official employer of record for the business's employees. 

This arrangement offers numerous benefits, including support for internal HR staff, access to extensive tools and resources due to the scale of the PEO, providing employee handbooks and templates, offloading various HR duties, and expert guidance on legal and compliance matters.  

Support for Internal HR Staff

A PEO offers crucial support to internal HR teams or individuals within client businesses. While traditional HR typically involves the employer solely managing all HR functions, hiring a PEO provides internal HR staff access to a wealth of resources and expertise. Furthermore, PEOs assume responsibility for a significant number of your essential documents, handbooks, and applications required by the business. PEOs establish a co-employment relationship with their client companies, assuming HR employer responsibilities like payroll processing, benefits administration, and regulatory compliance. This unique arrangement means that while a PEO does not directly interact with the business' employees, it provides invaluable assistance to the internal personnel in managing employee-related tasks effectively.  

Providing Tools and Resources

A PEO not only assumes critical HR responsibilities for businesses but also supplies them with essential tools and resources to streamline operations. These resources include access to communication with HR experts who can provide guidance on various employee-related matters, ensuring businesses have prompt and reliable support when needed. Additionally, PEOs offer access to advanced technology platforms tailored to HR functions, facilitating efficient payroll processing, benefits administration, and regulatory compliance. By providing comprehensive support and equipping businesses with essential tools and resources, PEOs enable them to focus on core operations while effectively managing their HR needs. 

Vast Scope of a PEO

Traditional HR functions in businesses are often limited in scope, posing challenges in addressing specialized HR needs effectively. While internal HR teams handle core functions like onboarding and employee record-keeping, they may lack expertise in areas such as managing payroll taxes, workers’ compensation insurance, or industry-specific compliance. This can lead businesses to hire additional staff or outsource these tasks, which is costly and time-consuming. In contrast, partnering with a PEO provides access to a broader range of HR expertise without extra hiring or outsourcing. Additionally, PEOs operate on a shared-services model, meaning the costs of HR services are spread across multiple client companies, resulting in efficiencies gained through scope. This allows businesses to access a broader range of HR services and expertise at a lower cost compared to hiring traditional HR staff. 

Offloading Various HR Responsibilities 

Hiring a PEO empowers businesses to offload numerous HR responsibilities, including payroll processing and benefits administration, allowing them to prioritize core responsibilities while entrusting time-consuming tasks to the PEO’s specialized expertise and resources. With dedicated focus solely on these functions, PEOs ensure accuracy and timeliness, mitigating risk of errors or delays that could impact employee satisfaction and morale. Leveraging advanced technologies further enhances efficiency and cost-effectiveness, streamlining operations and freeing up valuable resources. By delegating HR responsibilities to the PEO, businesses can redirect their efforts towards boosting productivity and driving growth, ultimately enhancing their overall success. 

Expert Guidance

In a PEO arrangement, the PEO becomes the employer of record for tax and insurance purposes, sharing employment-related risks and liabilities with the client business. This simplifies administrative tasks and offers compliance assurance. Conversely, traditional HR leaves employers with full legal responsibility, including tax reporting and compliance with employment laws, posing greater administrative burdens and legal risks. PEOs have specialized knowledge and expertise in staying up to date with the ever-changing landscape of employment legislation, which helps ensure that client companies remain compliant with local, state, and federal laws. This includes areas such as wage and hour laws, anti-discrimination regulations, worker classification issues, and workplace safety requirements. Leveraging a PEO's expertise mitigates risks and offers strategic advantages for businesses. 

Additionally, PEOs often provide access to comprehensive insurance coverage, which can further reduce risks for client companies. This coverage typically includes workers' compensation insurance, employee benefits packages, and employment practices liability insurance (EPLI). By offering expert guidance on compliance and providing comprehensive insurance coverage, PEOs help mitigate risks for their client companies. This proactive approach to risk management can ultimately contribute to the long-term success and sustainability of client businesses. 

PEOs offer a comprehensive and outsourced solution to HR management, providing businesses with a broader array of HR services and expertise. By hiring a PEO, businesses can access a full suite of HR solutions customized to their specific needs. This integrated approach allows businesses to streamline their HR functions, improve efficiency, and stay compliant with changing regulations, all while focusing on their core operations.