When talking to potential clients about XMI’s various offerings, one of the most frequently asked questions is, “What’s the difference between a professional employer organization and human resources outsourcing?” Even the businesses that have done their research and come prepared to the meeting with a baseline knowledge consider this one a head-scratcher. And for good reason. Just take a look at these two definitions:
“A professional employer organization (PEO) provides comprehensive HR solutions for small and mid-size businesses.”
“Human resources outsourcing (HRO) refers to the practice of contracting a third-party organization to handle some or all of a business’s HR tasks and functions.”
No wonder it’s confusing—they sound like the exact same thing. In many cases, they are. Whether you hire XMI as your professional employer organization or administrative services organization (ASO), the services you receive will be largely the same. Under each model, we’ll manage your payroll process, make sure your state and federal employment taxes are paid on time, design and administer a benefits package that can attract top talent, and so much more.
But there’s a major difference that sets PEO apart. When you hire XMI as your professional employer organization, we do all of the HR tasks listed above, but we do them as a co-employer of your workforce.
The National Association of Professional Employer Organizations defines co-employment as a “contractual allocation and sharing of certain employer responsibilities between a PEO and its client, as delineated in a contract.” In co-employment, employees have two employers—the business owner for whom they work and the PEO that contracts with that business.
Daniela Lewis, XMI director of strategic partnerships, says most business owners new to the concept of co-employment raise one of two issues.
“When they hear ‘co-employment’ they might think it’s employee leasing, which it’s not,” she says. “Or they’ll hear ‘shared responsibility’ and think their liability is gone and the risk is going to fall solely on the PEO. That’s not it either.”
In co-employment, the business owner retains control over daily operations, corporate strategy, revenue generation and company culture, while the PEO assumes responsibility for the administration of time-consuming employee-related tasks that have nothing to do with producing revenue.
“Most business owners or C-level leaders are not experts in the employee lifecycle,” Lewis says. “They know about their product, their clients, their business model, but not the latest regulations affecting employers. The problem is, if HR isn’t their core competency, they’re probably going to do something wrong, and the consequences could be devastating.”
This is where a PEO really shines. As co-employer, the PEO has “skin in the game,” Lewis says. “As a PEO, we are truly a partner, providing you every possible way to reduce liability and proactively keeping you out of sticky HR situations.”
The XMI Difference
Unlike most vendors out there, XMI doesn’t offer either PEO or human resources outsourcing—we actually have both. And we also don’t have different sales reps for these different offerings. When you talk to XMI, you’ll talk to one person who wants to help you choose the model that’s best for your business.
“We want our clients to do what makes the most sense to them,” Lewis says. “Our services aren’t one-size-fits-all. They are based completely on client needs.”
If you’re looking into PEO services or human resources outsourcing for your growing business, XMI can help you make the choice that’s best for you and your employees. Email firstname.lastname@example.org to get started today.