PEO vs. HRO: Which is right for your business?

Explore the differences between these popular human resources outsourcing options


If a business owner is looking to outsource their human resources department, they will likely come across two options to do so: a PEO and a HRO company. 


Continue reading to learn more about what each of these types of companies offer.


What is a PEO? 

A professional employer organization, or a PEO, is an outsourced and off-site human resources department. PEOs provide cost-effective HR, payroll services, workers’ compensation and benefit administration services to small and medium-sized businesses through a co-employment partnership.  


The co-employment aspect creates a three-way relationship among the PEO, the client company, and the client company’s employees. In doing so, the PEO provides small and medium-size businesses access to an integrated HR department that delivers a vast array of services and benefits while mitigating employer-related liabilities.  


Read more: 

The benefits of partnering with a PEO for human resources


What is an HRO? 

Human Resources Outsourcing, or HRO, is a company that provides a business with human resources services. A HRO company can provide a variety of services from basic HR functions to more complex and detailed HR management. 


Some HRO companies will allow businesses to combine or choose select services and add or take away as needed, offering scalability options. This means that your business remains responsible for any HR functions that are not in your contract with the HRO company. 


What is the difference between a PEO and an HRO?

PEOs and HROs are both popular options for businesses looking to outsource human resources services. Both of these choices operate in different ways and do not provide the exact same services, so it’s important to examine which is the right choice for you and your business. 


If you are looking for an outsourced HR company that will allow you to provide your employees with comprehensive benefits, a PEO is likely the better choice. Due to the co-employment nature of a PEO partnership, many PEOs are able to provide your business with access to high-quality insurance for your employees and their families that include HMO, POS, and PPO plan options. Typically, PEO client businesses will work with licensed brokers to discuss benefit packages that are best suited for your business.


On the other hand, if you are a smaller business with less than five employees, you may benefit from a HRO company due to their greater level of flexibility. HRO companies allow their client businesses to select certain services and not others if they are not needed. However, if you are a small to mid-sized business, you may wish to have an outsourced HR company that can handle more HR functions as a PEO can. 


Looking for a PEO in the Orlando area?

PER has provided outsourced HR services to small and mid-sized businesses across Central Florida for over 25 years. Our comprehensive services include human resources, benefits administration, and more.


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