This research paper is based on a recently published report by The Aberdeen Group, which revealed that the top barrier hindering HR's ability to be strategic to business objectives is "too much time spent on day to day tactical activities". This study also found that more than half the companies studied outsource some HR processes without sacrificing employee service or business outcomes.
Further, this study examines data from nearly 170 companies in the small and mid-size segment (up to 250 in headcount) to determine whether working with a professional employer organization (PEO) is a valid alternative to managing HR processes in-house.
This paper acts as a well-qualified resource for those desiring quantitative data to support the validity of how outsourcing key HR functions can produce positive business results.
PEO: Taking Outsourcing a Step
Beyond Pays Off for Small and Mid-
PEO: Taking Outsourcing a Step Beyond Pays Off for Small and Mid-Sized Companies
Aberdeen's recently published The 2011 HR Executive's Agenda benchmark Research Brief report (December 2010) revealed that the top barrier hindering HR's ability Aberdeen's Research Briefs to be strategic to business objectives is 'too much time spent on day to day provide a detailed exploration tactical activities.' This was cited by 52% of the HR and business executives of a key finding from a primary surveyed. Previously in Aberdeen's annual Core HR report (August 2010), research study, including key the third highest ranked pressure driving investment in core HR is performance indicators, Best-'regulation forcing tighter compliance'. Aberdeen also found that more than in-Class insight, and vendor half the companies in that study outsource some HR processes (such as insight. payroll, benefits, etc.) without sacrificing employee service or business outcomes. Definition of PEO This Research Brief will examine data from nearly 170 companies in the small and mid-size segment (up to 250 in headcount) to determine whether For the purposes of this study, Professional Employer working with a professional employer organization (PEO) is a valid Organization (PEO) is defined alternative to managing HR processes in-house. as a provider of integrated human resources Business Context administration and employer risk management of its clients, Effective HR management is founded on three key pillars, each equally by contractually assuming integral to the competitiveness of the company. First organizations must be substantial employer able to provide services that address employee needs - a necessity to responsibilities and risk, attract and retain quality talent. Secondly, the cost of providing this service through the establishment and and its offerings must be reasonable enough to sustain a company's maintenance of a co-employer existence. Lastly, the burden on HR to deliver this service must be relationship with the client's manageable because in many cases, especially in smaller organizations, there employees. PEO models are is less than one dedicated resource to HR. In fact, 56% of the companies in also known as co-employment our sample have less than one resource dedicated to HR functions. This models. resource usually wears another functional hat like accounting, finance, account receivables, account payable, or even owner / general manager of the business. While effective HR service must take into consideration the employees, HR staff and business shareholders, it must be built within a compliant framework. Aberdeen's 2010 study, Future of Core HR: Building the Business Case for Automation and Integration, showed that 35% of all organizations are investing in this function primarily to adhere to a changing regulatory environment. Labor laws, tax laws, and healthcare reform are increasingly moving to the forefront of business leaders regardless of company size. Nonetheless, smaller businesses, that often don't have the luxury an in-house legal team and may therefore struggle to keep up with changing laws and regulations, are at a greater compliance risk than larger peers. Therefore, co-employment should be an option to consider. This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. PEO: Taking Outsourcing a Step Beyond Pays Off for Small and Mid-Sized Companies Page 2
Healthcare Costs Continue to Drive PEO In addition to the 23% of organizations in this study currently working with Sample a PEO, another 33% have used PEO in the past or are currently considering In June and July, Aberdeen adopting a co-employment model. The primary driver cited by these 86 surveyed 168 US-based companies - 38 are curren... [download for more]