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Is It Time to Outsource Human Resources?

Professional employer organizations help free up business owners' time to focus on generating revenue.
January 14, 2011
URL: http://www.entrepreneur.com/article/217866

Most small-business owners know the frustration of spending more time than they want or should on non-revenue-generating activities. From payroll and human resource management to benefits and compensation, entrepreneurs can spend up to 40 percent of their precious day engaged in these necessary but time-sucking tasks.

The answer for many growing companies may be to hire one of the 700 professional employer organizations (PEOs) in the U.S. These companies become the legal employer of your staff and handle all the payroll, benefits and HR functions.

"Most small businesses are under 25 employees, and that means the owner is the most productive, is critical to the success of the business, and has to get out there and generate sales and products," says Milan Yager, president and CEO of the National Association of Professional Employer Organizations. When small businesses outsource non-core activities, "they can focus on the business of their business," says Yager.

But when does it make sense to hire a PEO? While PEOs aren't for every company, those that do use them can often offer better benefit packages and thus hire better talent, says Ed Vargas, senior vice president of health and benefits at Aon Consulting. "We help them set up a Fortune 500 package of benefits," he says.

In assessing whether or not you should hire a PEO, there are several questions to consider before you make a decision:

Remember -- each PEO is different, and business owners would do well to read the fine print.