For Brokers: 3 Questions to Determine if HRO Is Right for Your Clients

Quick look: As you discuss HR pain points with a new business prospect, their organization’s needs may not align with the services offered by a Professional Employer Organization (PEO). Luckily, there are other options for outsourcing HR services. Here’s a look at the benefits of an HRO solution and key questions to help prospects determine the best fit for their business.

Human resource outsourcing (HRO) has continued to increase in popularity as more and more organizations seek to streamline their HR operations, reduce costs, and improve their overall HR performance. According to a market research report by Grand View Research, the global HRO market size was valued at USD 32.08 billion in 2020 and is expected to grow at a compound annual growth rate (CAGR) of 7.6% from 2021 to 2028.

Several factors are driving the increased popularity of HRO, including:

Focus on core business activities: HRO can be particularly beneficial for small- and medium-sized businesses with lean in-house HR teams. Even if a prospect has an in-house HR Manager or professional, outsourcing some supporting functions could help save time and allow that HR team to focus more efforts on other people operations.

Expertise: Providers offer specialized expertise and technology that can improve HR operations and reduce the risk of compliance issues.

Flexibility: Services are often customizable, allowing clients to choose which specific HR functions to outsource.

Scalability: Providers can help organizations scale their HR operations as they grow and expand.

Overall, the increasing popularity of HRO is a reflection of the growing importance of effective HR management in driving business success and competitiveness—making it a valuable recommendation for brokers looking to provide comprehensive solutions to their clients.

However, it’s also important to identify the difference between a PEO and HRO solution. While they are both types of HR outsourcing, they differ in their scope and focus.

PEOs are a type of outsourcing service that involves a co-employment relationship between the PEO and its clients. This means that the PEO becomes the employer of record for its clients’ employees, handling more comprehensive HR functions such as payroll, benefits administration, compliance, and risk management. The client retains control over the day-to-day activities of their employees and the direction of their business.

HRO, on the other hand, is a more narrowly focused outsourcing service that involves delegating specific HR functions to a third-party provider. This may include things like payroll administration, benefits management and administration, and risk management and compliance. HRO services typically allow clients to choose which specific HR functions to outsource.

Use these three questions to determine if HRO is a better option for the prospect.

1. “How many employees does your company have?”

Traditional PEO services are ideal for small- and medium-sized, white-collar businesses with 10-150 worksite employees (WSEs). However, what options are available for businesses with more staff?

Companies with larger workforces have important human resource needs but may not require the same types of HR services as smaller businesses.

We developed our tailored HRO solution specifically for medium to large companies with 150-500 worksite employees (WSEs). Companies contracting HRO services receive the full benefit of our HR expertise while remaining under their existing group medical plans. Our HRO solution includes:

• Expert-delivered HR management
• Payroll administration
• Benefit administration
• Risk and compliance services and support
• Sophisticated HRIS technology and mobile app
• And more

Larger companies finally have an option for outsourcing HR to a reliable partner who understands the unique challenges faced by businesses of their size in their industry.

2. “Do the people in your HR department wear many hats?”

In the push to achieve faster growth, business owners and leaders often forget about expanding their HR department to meet new needs. More employees, multi-state operations, and cross-industry expansion all come with HR-specific challenges and requirements for maintaining compliance.

What may have once been a perfectly sufficient HR department may struggle under the strain of new administrative burdens. In-house HR employees whose titles have evolved into multi-hyphenates (without additional departmental hires) indicate the company is likely operating at maximum internal HR capacity.

HRO alleviates day-to-day administrative burdens and enables in-house staff to focus on bigger-picture issues like company culture, employee training and development, and strategic recruiting efforts.

3. “Have your HR goals taken a backseat?”

Human resource management is a time-consuming job where the realities of daily administration can overshadow larger business priorities. Companies with large workforces often establish ambitious HR management plans but quickly fall behind on accomplishing their goals. As a result, the company’s HR strategies become stagnant. Things like recruiting, professional development, and benefit package creativity suffer, causing the company to lose out on top-level talent or experience trouble retaining quality employees.

Outsourcing HR enables time- or resource-strapped companies to become much more proactive and respond to disruptions more quickly. With HRO, employers work with ExtensisHR’s experienced employment, compliance, and legal specialists. Tapping into this expertise enables businesses to develop actionable strategies to move the needle on critical improvements to HR management.

This access also provides peace of mind when confronting unforeseen workplace challenges, like DOL audits, harassment claims, etc. Guidance and support from ExtensisHR’s experts protect businesses against inadvertent compliance violations or oversights with the potential to harm the company’s reputation, or worse.

A new level of HR outsourcing flexibility

HRO adds unprecedented flexibility to outsourced HR. If PEO is not the right fit for a prospect, don’t abandon the lead. HRO may be the ideal solution to serve the client while unlocking a fresh revenue stream for you.

Do you have a prospect in mind who could benefit from HRO? Contact our success managers to request a quote.