What is the difference between HR outsourcing and PEO?

Running a business in any country in an efficient and profitable way can be a challenge for many company owners. Therefore, in cases like these, the best option is to request services to outsource several key functions that require expertise. For example, HR outsourcing and PEO services are some of the most recommended ones, but knowing their difference is important.

In this article, you will learn everything you need to know about PEO and HR outsourcing services in the UAE. We will briefly explain the concept of each element, their characteristics, and the most important differences between each other. In this way, you will be able to choose between these services to outsource your company’s functions and improve its operations. Let us observe:

  1. What is Human Resources outsourcing (HRO)?
  2. What is a Professional Employer Organization (PEO)?
  3. How many differences can you find between PEO and HR outsourcing services?
  4. Learn how to choose an option that meets your company’s needs
  5. What are the advantages of outsourcing your HR functions with a PEO?
  6. How many advantages can you get by using HR outsourcing services?
  7. How can Connect Resources help you choose the most convenient option for your company?

1. What is Human Resources outsourcing (HRO)?

For many small and medium-sized UAE companies, carrying out HR functions and tasks can be a challenging thing to do. That is because these operations are usually complicated and time-consuming since they involve many details and other valuable information.

Therefore, many business owners opt for getting HR outsourcing and PEO services to carry out these functions without wasting time. In the case of HR outsourcing, it consists of services that certain agencies provide to other companies to help them manage HR operations.

In other words, companies can transfer some of their HR functions to a third party that offers HR outsourcing services. As a result, that third party will be able to efficiently manage those operations on your behalf.

2. What is a Professional Employer Organization (PEO)?

Before getting requesting HR outsourcing and PEO services, it is important to know the differences between them. We previously explained what HR outsourcing is, and now it is time to learn about the benefits of a Professional Employer Organization (PEO). A company that offers PEO services will also be able to handle certain HR tasks on your behalf.

Nonetheless, PEO providers are known for offering a comprehensive solution that focuses on handling many business operations. Therefore, if you have a small or medium-sized company, getting these services can help you improve your company’s management significantly. But, it is important to avoid confusing HR outsourcing and PEO services because they offer solutions for different situations.

3. How many differences can you find between PEO and HR outsourcing services?

Although both HR outsourcing and PEO are services that help you handle HR functions on your behalf, they are different. As a matter of fact, there are 4 key differences that you must take into account when choosing between these services. And we will explain and compare them below to help you understand these elements better.

But first, let us quickly summarize it by explaining that HR outsourcing is when a company contracts with an independent provider to manage HR functions. The company may request several services, like basic HR or more complex, robust, and strategic offerings.

3.1. HR services

PEOs and HRO providers can offer as many HR services as the client desires, but there is a difference between them. HRO firms are usually more widely associated with a model known as “à la carte”. This model allows the client to choose the services they want to receive to improve their company.

On the other hand, PEOs usually offer higher quality services and they can sponsor the client’s health insurance and workers’ comp. Therefore, it is possible to find more comprehensive plans that some clients cannot on their own. But, compared to HRO providers, PEOs provide a narrow breadth of plans.

3.2. Setup

A PEO acts as a co-employer, therefore, your PEO services provider will enter an arrangement with you to take on all risks of the company. In other words, in case there is a tax audit, for example, both you and your PEO will be liable. But when you work with an HRO company, things are different.

If you request the services of an HRO provider, it will be your responsibility to handle your company’s information during an audit. However, you will also need to get relevant documents from your HRO provider as well.

As PEO contracts focus on shared risk and employment responsibilities, HRO providers can advise you on other matters. For example, they can give advice on legal compliance and organizational strategy without becoming a co-employer.

3.3. Benefits flexibility

Another outstanding difference between HR outsourcing and PEO services is the set of benefits that each of them offers. In the case of a PEO provider, they will be able to offer an exclusive, rigid set of insurance plans only. Even though these plans are popular for being among the best, it is not possible to customize them.

On the other hand, HRO agencies are known for offering a wider variety of plans to choose from. However, the diversity that HRO companies provide does not include the substantial premium savings that you can get with a PEO.

3.4. Cost

Lastly, the costs of HR outsourcing and PEO services are part of the most outstanding differences between these services. Usually, HR outsourcing services are cheaper than a PEO’s services, which is a significant difference if you have a limited budget. You should also know that even though a PEO can be expensive, it can sometimes mask lower overall costs compared to an HRO agency.

Apart from this, it is possible that both types of services require the client company to pay a flat fee per employee per month. But in some cases, PEOs may charge a percentage of the total amount that the client company pays their employees each pay cycle. By using this model, the client company may pay administrative fees as well.

4. Learn how to choose an option that meets your company’s needs

The best way to choose between HR outsourcing and PEO services is by following certain tips that we will give below. With these tips, you will be able to know whether your business requires the services of a PEO or an HRO agency. As a result, searching for a services provider will be easier and your company will get the solutions it needs.

These are the most important tips that you should consider when choosing between HR outsourcing and PEO services:

  • Learn about the differences between both types of services.
  • Identify your company’s needs and requirements.
  • Find the best services provider by reviewing all available options.

4.1. Step 1: Learn about their differences

HR outsourcing and PEO services have many differences, and besides the ones we previously mentioned, there are others you should know about. For example, these are some key differences between these services:

  • While a PEO acts as a co-employer, an HRO agency does not. That is because PEOs technically hire their own employees. If you work with a PEO, they will be responsible for providing payroll services compliant with federal and state employment laws.
  • Unlike HRO agencies, PEOs pay taxes and manage tax liabilities related to payroll. Furthermore, a PEO may also provide you with unemployment insurance, and employee’s compensation insurance, and also handle claims against them.
  • By working with an HRO agency, you can pick and choose the agency’s responsibilities. For example, you can choose responsibilities like payroll, recruitment, benefits management, administrative functions (like creating employee handbooks), etc.

4.2. Step 2: Identify your business needs

One of the most important things you need to take into consideration is your company’s needs. By identifying your company’s requirements, it will be easier to determine which services will fit better.

For example, if you are sure you would like to offer robust benefits to your employees, then you should consider working with a PEO. But, in case your company is growing and requires in-house HR resources, then your best option would be HR outsourcing services.

4.3. Step 3: Review your options and search for a provider

If you have already chosen between getting HR outsourcing and PEO services, it is time to look for a provider. It is recommendable to search for a services provider by pursuing a list of trade associations. However, you can also ask for client references to gain assurance of a provider’s ability to deliver excellent services and solutions.

5. What are the advantages of outsourcing your HR functions with a PEO?

If you request the services of a PEO in the UAE, you will be able to get many benefits, such as these:

  • Having a PEO by your side can be a cost-effective solution when it comes to employee benefits. That is because you will have access to benefits that are usually only available to large companies. As a result, your company will save money and will be able to offer more competitive benefits to employees.
  • Since a PEO is a professional that specializes in HR management, your company’s payroll management will also get improvements.
  • Your company will get amazing results when it comes to recruitment processes.

6. How many advantages can you get by using HR outsourcing services?

On the other hand, getting HR outsourcing services from a specialized agency can also bring you many advantages, including the following:

  • Your company will be able to reduce expenses, increase efficiency, and stay compliant with all laws and regulations.
  • HR outsourcing is a perfect solution for carrying out recruitment tasks since your provider will help you find the best candidates.
  • While your HRO services provider takes care of your HR functions, you can focus on more important activities that require your attention.

7. How can Connect Resources help you choose the most convenient option for your company?

Our agency is specialized in all types of HR services for companies of all sizes operating in the UAE. With more than 20 years of experience in the market, we have helped lots of companies to move forward and grow. Therefore, if you request our services and outsource your HR functions, your company will quickly become more efficient and productive.

Depending on your business needs, we can provide you with HR outsourcing to let our experts manage important HR functions. But in case your company requires other solutions, Connect Resources can also provide you with effective Professional Employer Organization services. Let us know about your requirements and our specialists will quickly start working on the perfect solutions for your company.

Besides HR outsourcing and PEO services, we also offer many other services that can benefit your company, including the following:

Would you like to get PEO and HR outsourcing services to make significant improvements in your company? With Connect Resources, you can get these and many other similar services to improve your business operations and increase efficiency. However, it will be necessary to contact us by calling us at +971 43 316 688 or sending us an email at contact@connectresources.ae. You can let us know about your company’s needs and our specialists will provide you with the best solutions.

In case you are a professional looking for an excellent job opportunity in the UAE, we can provide you with other solutions. You can use our platform thetalentpoint.com to explore the best job offers in the country without wasting time. Besides, we can provide you with further help if you get in touch with our team. All you will need to do is to send an email to  contact@thetalentpoint.com and let us know about your professional profile.

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