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When should you Outsource Human Resources?

Today several professional employer organizations are rising. They help business owners hire capable hands; thereby freeing the time it consumes to hire staff. It is frustrating for a small business owner to spend time on non-revenue generating activities. Employers see activities related to hiring, compensation and management of human resources as time consuming, taking up to 40% or more of business time. The solution? Hire a professional employer organization (PEO) and make them the legal employers and handlers of the HR, payroll and other related activities.

But should you hire a PEO? Well, not every company should, to know whether or not to hire a PEO; there are several questions you need to consider before making a decision:

  • The size of your company: Different experts have varied opinions as to how large a company should be before it can hire a PEO. A general rule of thumb however is that when you notice a slowing down of the productivity of the firm due to administrative processes, you should consider hiring a PEO. While this depends on the uniqueness of a company, this starts to happen when a company gets 10 to 15 employees a week.
  • The number of your employees: A company with very few employees or very large employees may not need a PEO. Smaller staffed companies may find it too expensive to hire a HR company, while bigger companies tend to find it easier to have their own in-house HR department. PEOs love to work for companies that have (or want) between 16 and 80 people.
  • The composition of your workforce: Hiring a PEO is great for you, if you need various skills that would require painstaking efforts to hire the very best. Companies that only offer a certain product and need just one set of staff may not benefit from PEOs.

Cost of PEOs

Like all other professional services, PEOs prices their services according to the client company and what they require. Industry experts estimate their charges to be from about 2 to 11 percent of wages. They may also charge based on the expense is per employee. With that yardstick, it would run between $500 and $1,500 per employee every year. PEOs usually charge a flat fee for small companies with perhaps two to eight employees. They could charge around $150-200 per month.

Would you like to control your HR functions? A PEO usually partners with the client company and suggests and makes recommendations in their area of expertise.

When you outsource your human resources, they own the employees most of the time, and handles the payment, management and coordination of their affairs. Doing that yourself after hiring them may defeat the purpose. What services do you need? Pick the right PEO, Ensure they are certified and qualified, then hire them. Focus on your business and allow them employ and manage the very best hands for you

Daven Michaels is a New York Times Best Selling Author and CEO of premiere global outsourcing company, 123Employee. The company employs hundreds of young bright individuals on three continents. His International event, Beyond Marketing Live! Inspires entrepreneurs build & grow their business with revolutionary new theories and systems allowing them to design the business and personal lifestyle of their dreams.

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