How Much Does HR Outsourcing Cost?

Every business of every size requires HR services in one form or the other. Some rely on their in-house HR team, while other businesses choose HR outsourcing services providers.

When it comes to HR outsourcing, there are many options that you’d like to explore. You can choose an HR services provider based on the range of services they offer. From dedicated services to complete HR solutions, you can get them all. The cost of HR outsourcing depends on the range of services and the HR outsourcing company you choose.

Let’s see the factors that determine the HR outsourcing cost:

PEO Services

A professional employer organization (PEO) is a third-party company that hires employees on its own payroll. These employees are then leased to other companies where their skillset is required. A PEO will take care of the recruitment, payroll management, benefits, and termination of employees on your behalf.

As far as cost is concerned, a professional employee organization charges a business on either of the two bases:

  1. Percentage of payroll
  2. Per employee per month (PEPM)

The cost of PEO services ranges from about 2 to 12 percent of the payroll, and if it’s PEPM,  then there’s a fixed monthly cost that is billed annually.

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Administrative Services Organizations

Administrative services organizations (ASOs) do not become the employer on record, but they handle almost all the responsibilities that PEOs handle. Some of the responsibilities that are not in an ASO’s scope of services are:

  • medical coverage
  • workers’ compensation
  • Employee insurance
  • Other benefits

However, ASOs do assist their clients will these tasks from time to time.

ASOs charge companies a fixed rate on the abscess of the number of employees and the services offered. ASOs generally cost less than PEOs.

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HR Organizations

Human Resources Organizations, or simply HR organizations, work quite similarly to administrative services organizations.  The primary difference is that, unlike ASOs, HR organizations don’t have employees on their payroll.

In simple words, the client is the employer and there is no co-employment relationship between the HR organization and the client. Typically, HR organizations don’t manage benefits, tax, or payroll-related issues.

The cost of HR organizations varies widely, and that’s due to the variability of services. HR organizations charge on various bases such as:

  • Per employee per month (PEPM)
  • A fully fixed price for a defined scope of services
  • A fixed price with variable adjustments.

The third option mentioned above has a variable charge that depends on the number of resources and transactions required

Other Options of HR Outsourcing

If you don’t need HR outsourcing, you don’t need to spend money on it at all. However, you definitely need good software to carry out all the HR processes accurately, timely, and effortlessly.

Thoughtfully created HRMS/HRIS help you streamline your business for growth and development. Take Gretis HRMS/HRIS for example.

It’s a complete human resource management system and human resource information system that helps you manage all HR functions throughout the employee lifecycle.

While an HRMS/HRIS doesn’t provide access to benefits, you can accurately calculate the benefits for efficient and timely payroll processing.

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When you come to think about it, HR outsourcing is not a costly affair but a smart investment. When you have an experienced and expert HR services provider by your side, you will be able to focus on your business with a sharper vision.

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