Ahh, the age-old HR question: Professional Employer Organizations (PEOs) or HR software? Especially for small businesses with limited HR resources, it may be difficult to identify which route is best for streamlining various functions, like onboarding, benefits, payroll, and employee engagement. On one hand, PEOs offer to take all aspects of HR off the plates of a company. HR software, on the other hand, often serves as more of a tool or a partner in managing and streamlining HR tasks.
To ease the burden of HR duties at a small business, leadership often turns to PEOs to handle all HR, payroll, and compliance responsibilities. And while this decision might make sense for a period of time, it often becomes less than ideal when businesses start to grow, and a dedicated internal HR admin or team is needed. If you’re considering leaving your PEO, here are 6 key signs that it’s time to make the switch to an HRIS.
Before we begin, though, let’s define both options.
What is a Professional Employer Organization (PEO)?
PEOs help small businesses manage all aspects of human resources. From duties ranging from payroll to benefits to recruiting and compliance management, PEOs are often a great starter option for businesses looking to outsource HR. Unfortunately, PEO services often come at a whopping price — which is hard to sustain in the long term, especially at a per-employee, per-month price.
What is a Human Resources Information System (HRIS)?
HR software also helps businesses manage HR tasks but acts as more of an internal tool rather than an outsourced service. Business admins and managers can view and manage various aspects of their HR workflows within a platform while choosing to automate manual tasks. The administrative burden is still alleviated, but an HRIS tends to give HR more control over their employee data and tasks.
6 Signs It’s Time to Leave Your PEO
#1 Tech Limitations
If you feel restricted by the technology offerings provided by your PEO, it’s probably time to consider a modern HRIS. As a “full-service” option, PEOs come pre-set with certain HR technology platforms and features, many of which provide old-fashioned and disjointed user experiences and little room for change. While this might work when you’re just starting out, outdated technology with no flexibility will catch up with you as the business grows.
#2 Expensive Pricing
Like HR software, most PEOs charge businesses on a per-employee, per-month (PEPM) basis. However, the pricing structure is much steeper than that of an HR platform (many of which start as low as $5 per employee per month). Fees can skyrocket into hundreds of thousands of dollars and only get pricier as your business and employee size scales. Pricing is impacted by pre-set insurance packages, additional compliance management fees, administration fees (per employee), and beyond. If you’re bringing on more employees as you grow, the pricing of a PEO might become unsustainable.
#3 Lack of Customization & Control
One of the key factors businesses quote when leaving PEOs is the lack of customizability and control over their business functions. With a PEO, you don’t have the option to change your benefits and payroll without disrupting the other pieces of the HR puzzle. While it may have made sense when you first signed on, if your needs change, you will have to rip and replace the entire HR “package” to make a move somewhere else. If you’re currently feeling this type of restriction within your HR offerings, you’ll want to consider moving towards a more customizable, all-in-one HRIS model.
#4 You Don’t Have a True Employer-Employee Relationship
When PEOs take “everything” off of your HR plate, that often means the employer-employee connection as well. People Operations plays a huge role in modern HR, and outsourced HR services take away the opportunity to internally engage with team members. Employees are accustomed, by default, to speaking with someone within the business for HR questions, needs, and concerns, and this piece is often taken away when PEOs assume responsibility for HR activities. Switching to an HRIS can open up the lines of communication between employers and employees, whether that’s in the form of onboarding documents, new policies, or even something as simple as reviewing a paystub in the platform.
#5 You Have an HR Admin
Perhaps when the business was getting off the ground, there wasn’t a dedicated team member for managing any HR activities. As you continue to grow, chances are you’ll have at least one HR admin or operations specialist handling HR-related tasks. Once you have an HR admin, it might make sense to take back control of HR responsibilities from a fully outsourced PEO while still automating the workflows involved. HR administrators or HR departments can simply facilitate and review HR tasks within the software, without having to do the tedious and manual tasks involved.
#6 Impersonal Customer Service
PEOs come naturally with a full-service package, but because they often support a large number of employees, it can be difficult to get support when you need it. If you struggle with slow or impersonal customer service, or don’t even have a dedicated support admin, it’s time to consider an HRIS like GoCo, where you won’t need to wait days for assistance, and always have a dedicated customer support representative.
Finding the Right HRIS to Make the Switch
If you’re seeing signs to leave your PEO, your next step should be finding the right match in an HR software. Here’s what to look for:
Strong Support. Finding the right HRIS should not mean that you’re on your own. Modern HRIS like GoCo are known for top-notch client support. Your HR support team should be a call, email or chat away, and be by your side from kickoff to benefits testing and finally to launch. And even after launch, look for an HR software with On-Demand HR support for any compliance, engagement, or COVID-19 related resources you need additional assistance around.
Modernity. Both employees and HR alike should be able to quickly adopt new HR software, and the cost of educating and transitioning employees to HR software should be little to none. Easy-to-use, modern software comes with streamlined digital onboarding, at-a-glance benefits previews, and seamless document management.
All-in-One. The point of leaving a PEO is to find a tool that is a complete HRIS solution but doesn’t force you to mold to its ways. If you don’t want every single feature from the HRIS, you should be able to pick and choose what you need. Happy with your payroll service? Find a Payroll Feature like GoCo’s that gives you the ability to sync existing providers. Don’t want to part ways with your broker? Find a platform that allows that.
If you’re ready to explore a flexible, automated HR software built that ticks all of the boxes, take a free interactive tour of GoCo today!