Data shows that 33% of business decision-makers use a PEO, and it’s easy to understand why. Where else can you get the same payroll, compliance, HR management, and benefits services as Fortune 500 companies wrapped in a convenient co-employment model?
Unfortunately, the perks that make PEOs so appealing are the very features that present the biggest issue. As an organization matures, the rigid, standardized nature of PEO agreements starts to restrict growth and control, eventually becoming misaligned with the organization’s needs and goals.
As a result, businesses are starting to reject these cookie-cutter packages in favor of highly customizable human capital management (HCM) solutions. Here’s why PEO agreements are no longer favorable and how working with an HCM partner often yields better results.
The Appeal (and the Problem) With Modern-Day PEOs
Businesses turn to PEOs for several good reasons. Not only does the co-employment model allow SMBs on tight budgets to access a higher tier of employee benefits, but it also reduces administrative overhead while providing shared risk and legal compliance.
While this sounds like a dream on the surface, it can often stifle your business in the long run due to several factors:
- The Illusion of Choice: PEOs tend to offer pre-packaged, multi-choice benefit packages that don’t align with the unique needs and demographics of your workforce
- Lack of Data Ownership: PEOs often restrict your business from accessing critical employee data, requiring you to start from scratch if you ever want to leave
- Escalating Costs: PEOs promise affordability, but the per-employee/per-month or percentage of payroll fee models become unsustainably expensive as headcount grows
While you do get a comprehensive benefits and service package, you end up trading alignment, control, and, ultimately, cost-effectiveness.
The HCM Alternative: Offering the Perfect Mix of Autonomy and Expert Support
Today’s HR and business leaders have stopped asking how they can get the most bang for their buck and started looking for what best aligns with their business and workforce needs.
Unfortunately, PEOs typically group large swaths of their client base together in order to negotiate better rates with vendors, locking companies into their cookie-cutter offerings with little flexibility to meet the requirements of a unique demographic.
Partnering with an HCM provider usually provides a totally different experience. These firms combine comprehensive, industry-leading human resource technology with hands-on, expert HR consulting.
It offers an all-in-one system that allows you to offload the administrative burden while giving you the power to customize the system to your needs in ways that a PEO simply cannot.
3 Ways Your Business Can Unlock the Full Value of an HCM Partner
One of the best aspects of partnering with an HCM is its ability to empower your tailored workforce strategy. Here’s how these firms accomplish this goal.
1. Tailoring Benefits to Your Specific Workforce
With a PEO, everyone gets the same standard networks and vendors, regardless of age, location, or health needs. With an HCM, you can shop the open market for vendors you like and plans that fit your budget and workforce demographics.
Your HCM partner can also seamlessly integrate specific voluntary benefits (like pet insurance or lifestyle spending accounts) into the system for automatic deductions.
2. Designing a Custom Wealth and Retirement Architecture
PEOs usually offer standardized 401(k) plans with rigid fund lineups, limited configurations for employer matching, and administration that can be slow to respond.
With an HCM partner, you’ll get the ability to create the customizations your workforce would value, such as tiered vesting schedules, custom profit-sharing models, and financial wellness paths tailored to employee salaries.
3. Creating Custom Recruitment and Total Rewards Packages
PEOs are more likely to provide the same offer letter and onboarding workflow to every employee, regardless of role or location.
An HCM partner can help you build dynamic packages based on local labor market data and compliance requirements. You’ll finally be able to target your total rewards packages based on the expectations of your industry.
Exit the PEO Constraints and Reclaim Control of Your HR Strategy
Today’s businesses are much less focused on how much they can get and more concerned with whether their HR service providers align with their business needs and strategy. Instead of predetermined service bundles, organizations need a solution that offers flexibility while still maintaining a high level of support.
Fortunately, AssetHR’s HCM solution fits the bill. If you’re looking for cutting-edge HCM technology paired with deep HR consulting support, contact our team to see how we can help you properly manage your workforce today while preparing for future growth and expansion.