Decoding HR Support: Consultants vs. PEOs
In the realm of human resources, businesses have various options when it comes to obtaining HR support. Two popular choices are HR Consultants, often referred to as "Fractional HR Leaders," and Professional Employer Organizations (PEO’s). While both serve to address HR needs, there are significant differences between the two. In this blog post, we'll explore these differences and shed light on why hiring an HR Consultant can offer unique advantages for your company.
Before delving into the distinctions, let's establish a shared understanding of what HR Consultants and PEO’s entail. I also want to start by saying most of my experience with PEO’s is when I have been hired by businesses to end their services. In the last six months alone, I have supported numerous companies that experienced many of the struggles explored in this article and ultimately chose to move away from their PEO and begin HR support from Rising Tide HR.
What This Article Will Address:
The difference between an HR Consultant and PEO
Advantages and disadvantages of both
Where will your business get the most bang for your buck (we won’t keep you hanging - by hiring an HR Consultant….Even better, hiring Rising Tide HR!)
HR Consultant aka “Fractional HR Leader”
An HR Consultant, also known as a fractional HR Leader, is a professional who provides HR expertise and guidance on a part-time or project basis. These consultants typically have extensive HR experience and are well-versed in various HR functions, such as recruitment, employee relations, performance management, compliance, and policy development. They work closely with businesses to understand their needs and offer highly customized solutions.
Professional Employer Organization (PEO)
A PEO is an outsourced HR solution that essentially becomes the employer of record for a company's employees. By entering into a co-employment relationship, the PEO takes on HR responsibilities such as payroll processing, benefits administration, compliance management, and workers' compensation. The PEO model allows small and mid-sized companies to pool resources with other organizations to access more affordable employee benefits and HR support.
Now let's explore the fundamental distinctions between HR Consultants and PEO’s, highlighting why hiring an HR Consultant can be more advantageous for a company.
Tailored Expertise
One of the primary advantages of hiring an HR Consultant is the ability to tap into their specialized knowledge and experience. Unlike a PEO, which typically offers a more standardized approach, an HR Consultant provides tailored solutions aligned with your organization's unique needs and goals. Consultants can develop customized HR strategies, policies, and programs aligning with your company's culture, industry, and growth trajectory.
Recently, I worked with a business that found their PEO benefit solutions did not match the values and experience they wished to provide their employees. When working with this company, we found that by moving to a private benefit broker, they could have a customized solution for their benefit packages, far more control over what was offered, a clearly defined strategy for a multi-year growth plan, and it was cheaper. The difference in the PEO was their plan design was stagnant based on company size, with little flexibility and ultimately little affordability for this company.
Utilizing Rising Tide HR’s services, we analyzed the company's needs, reviewed numerous brokers until we found one that best aligned with the values of this company, negotiated their rates, and collaborated on a tailored rollout plan.
This simple change seemed impossible for the leadership team, but it was done seamlessly behind the scenes in less than 45 days using Rising Tide’s HR services!
Flexibility & Cost-Effectiveness
Hiring an HR consultant offers greater flexibility compared to partnering with a PEO. As fractional HR leaders, consultants work on a part-time or project basis, allowing you to scale HR support up or down as required. This flexibility can be especially valuable for companies experiencing rapid growth, undergoing restructuring, or tackling specific HR challenges. As an example, I was recently hired by a business to replace their PEO function that they didn't even realize what they had entered into. They hired a service to support their payroll, and the next thing they know, they are utilizing that service for various offerings. While this seemed cost-effective and streamlined at the time, they started to feel the limitations of being required to operate their systems, administrators, and policies.
This CEO explained, “We were following their playbooks without the PEO knowing if the playbooks would even work for our industry, company size, and most importantly, our culture and values. When we called in for support, we got a new person every time who we had to explain who we were, and often were not asked any detailed questions about our business - we were a number without a name or a face”.
HR consultants often offer more cost-effective solutions than PEOs, as their services can be tailored to fit your budget and specific HR needs. I often find that clients who have worked with a PEO found that additional services were added and the cost became more significant than expected. Ultimately larger than they could afford at their size. While I have never worked for a PEO, I would guess this is their strategic model - get into an organization to show benefit, then greatly expand, so it's hard to pull out.
Retain Control & In-House HR Experience
While a PEO handles many HR functions, it also means relinquishing a degree of control over these critical processes. On the other hand, by working with an HR Consultant, your organization retains full control over HR decision-making and implementation. This control fosters in-house HR development, allowing your internal team to gain valuable insights and skills from the consultant, thus strengthening your HR capabilities over time.
Strategic HR Partner
HR Consultants act as strategic partners who bring fresh perspectives, best practices, and innovative solutions to the table. They offer guidance on a wide range of HR matters, including talent acquisition, performance management, organizational development, and employee engagement. This strategic collaboration can help align your HR practices with your overall business strategy, enhancing operational efficiency, productivity, and employee satisfaction. HR Consultants have often worked with a variety of tools and systems, so when the time comes to implement an Human Resources Information System (HRIS) or Payroll system, they can help you find the tool that is best for you, sometimes even with cheaper rates since they may have established relationships with these vendors. When you purchase services from a PEO you are often purchasing a tool to coincide - giving little flexibility.
While both HR Consultants and PEO’s serve a purpose in addressing HR needs, hiring an HR Consultant as a fractional HR Leader can offer distinct advantages for your organization. From tailored expertise and flexible support to retaining control and strategic partnership, an HR Consultant can help unlock your company's full potential by aligning HR practices with business objectives. Investing in an HR Consultant gives you access to a dedicated HR professional who understands your unique needs and can provide customized solutions to drive your organization's success.
Remember, when choosing between an HR consultant and a PEO, consider your company's specific requirements, growth stage, and long-term HR goals. A well-aligned HR partner can make a significant difference in shaping your company's culture, employee experience, and overall success.
