4 Myths About HR Outsourcing

HR outsourcing can be a strange concept to business executives who are unaware of the intricacies of this type of partnership.

However, when done correctly, HR outsourcing can lead to faster business growth and lower employee turnover. Businesses that partner with a Professional Employer Organization or PEO to outsource HR are 50% less likely to go out of business and generally find a 27.2% return on their investment annually. Interestingly enough, 69% of PEO users reported growth during the pandemic in 2020 versus 28% of non-PEO users. So, clearly there are some great advantages for small businesses to outsource HR. Why, then, do business owners hesitate to do so?

Following are several common myths that we encounter when talking to business executives about HR outsourcing to a PEO. The information below will dispel those myths and clear up any ambiguity about this type of partnership.

Myth #1: I will lose control of my business.

Rest assured your business and operational decisions will always remain yours. You are where you are today because of your specific expertise. The job of the PEO is to ensure you are mindful of any employment laws that will impact your business. They will help create policies and procedures to keep you compliant while putting your organization in the best possible position.


Myth #2: A PEO will come in and hire and fire whomever they want.

When you outsource HR to a PEO, you are partnering with a group of human resource experts that will offer advice and guidance allowing you to make the best decisions when it comes to your employees. They can go so far as to do the actual hiring or firing on your behalf if you’d like, but the final decision on either action is always yours to make.


Myth #3: A PEO relationship results in negative tax implications for my business.

PEO clients keep any tax benefits they would otherwise have outside of the relationship. In fact, the industry has come a long way in showing the government the benefits of a PEO relationship in business. Lawmakers are now considering this relationship when it comes to various employment and tax laws. The IRS has gone so far as to create a ‘Certified Professional Employer Organization’ or CPEO status for those PEOs that go through a rigorous audit process, proving the highest financial and ethical standards.


Myth #4: I’ll never know what I’m paying for.

Some PEOs, like Tandem HR, will itemize your monthly billing statement so you know what you are paying for each month. Items on this statement will include the employer’s portion of insurance premiums for elected benefits, FICA, FUTA, SUTA, EPLI, and Workers’ Compensation. It will also include administrative fees that cover the administrative work the PEO provides in the areas of payroll, benefits, employment law compliance, safety and risk programs, and much more.

When a PEO is the right solution for your business–it can make a significant impact! We’d love to talk to you further about your HR outsourcing concerns and the benefits it can offer your business specifically. Fill out the form on this page or give us a call at (630) 468-9286.