Why is selecting and building a strong HR and benefits tech stack important? What benefits can a smart technology ecosystem provide?
Your HR and Benefits tech stack is a foundational technology for your function – your HR and benefits stack, typically bundled into either an HRIS or a PEO, is one of the most foundational technology platforms that any company has, alongside an accounting system and a sales or customer CRM.
It’s essential for compliance and payroll – your tech stack is essential for storing employment data and maintaining compliance with necessary reports and data that every company needs to keep track of. It’s crucial for compensating employees for their time and ensuring they receive proper paychecks, which is vital for maintaining happy employees.
It allows for automation and employee self-service – your tech stack provides valuable automation across compliance and payroll. It eliminates the need for manual processes like paper paychecks and allows for direct deposit. A smart technology ecosystem empowers employees to make changes to their profiles, update their statuses, and access core benefits, providing them with more control and autonomy.
What’s the difference between an HRIS, a PEO, and an EOR?
An HRIS (Human Resources Information System) is an HR technology platform – it can be used to manage payroll, compliance, timekeeping, and benefits enrollment. It focuses on managing employment data and talent-focused initiatives such as recruiting, performance reviews, learning, and compliance.
→ Cost: $8-25 per employee per month
A PEO (Professional Employer Organization) is a more comprehensive partnership for small businesses – it offers HRIS technology along with additional services. PEOs take on certain liabilities of employment for businesses, providing them with outsourced payroll support, compliance, and risk management, plus benefits administration. They also offer co-employment, which allows small companies to benefit from the PEO’s purchasing power when negotiating benefits with insurance carriers.
→ Cost: Variable, ~$100 per employee per month
An EOR (Employer of Record) is commonly defined as a PEO for international talent – EORs are used by companies to quickly hire and manage international employees, fully outsourcing the risk and responsibility to the EOR. EORs can also be used domestically for companies with a contingency-style workforce in multiple states.
→ Cost: $300-800 per employee per month
When should you use a PEO vs. HRIS?
Use a PEO if you have significant HR needs, but want to run a lean HR team:
- <100 employees but need solid HR services and benefits – a lot of smaller VC-backed companies don’t invest in many HR FTEs. But they typically do need a robust technology system and good benefits to attract their staff, so outsourcing it to a PEO is an easier decision. Particularly for small companies, the value of the benefits packages for the employees across medical and dental insurance is often better.
- Having employees spread across many states – if you have a widely distributed team, a PEO will help you deal with various state compliance and tax rules. A PEO is responsible for the employer’s state unemployment account administration and tax remittances. Companies that work from home often run into this problem and may want to use a PEO.
- If there’s more safety risk for workers – if a company is in manufacturing and employee-related risk is high, those companies often want to partner with a suitable professional benefits company with experience in that industry to help with compliance.
Use an HRIS when you’re larger and can more cost-effectively manage HR in-house:
- >100 employees – as companies grow, they may transition to an in-house managed HR model, using an HRIS platform and replacing the PEO’s benefits and outsourcing components with a benefits broker and internal hires. This allows for cost savings, scalability, and configurability, enabling companies to define their own processes and build a competitive advantage through their employment practices.
- If you want to offer more creative benefits – the options are typically narrower through a PEO; with an HRIS you have more benefits options.
Use an HRIS if your needs are simple, and you want to save money:
- You just need basic payroll and HR management – a PEO would not be necessary for smaller companies (1-15 employees) that have more basic HR & benefits, such as employees in just a few locations and limited employee benefits offerings.
- You have a robust in-house HR staff – when companies have qualified HR professionals on staff, the outsourcing and risk management benefits of a PEO can be redundant and expensive
What does an HRIS cover, and what vendor options are available?
| HRIS | |||||
| What an HRIS does for you | It’s an HR tool that can handle: • Payroll • Compliance/taxes • Benefits Administration • Time tracking • Employee onboarding • Recruiting • Performance Management • Learning & Training | ||||
| What your HR team still needs to do | Running payroll – someone still has to make sure everyone submits their time, employee tax profiles are up-to-date, and run the payroll review to make sure everything processes. Employee onboarding – your team will still need to send out notifications to new hires, collect data from new hires, and remind people to fill out documents. Benefits enrollment process – once a year when companies have open enrollment, the HR team might need to go in and set the plans, the rules, and the policies that employees can select from. | ||||
| Vendor Options | Basic systems for small companies – off-the-shelf platforms that you can use without PEO engagements. In these simple tools, there’s typically limited custom reporting and two types of users (admin and employee). • Quickbooks • Intuit Payroll • Gusto • ADP Run Tools for companies with 15-200 employees – companies will step up to broader platforms that can take them up to a couple hundred employees. • Rippling • BambooHR • Paylocity • ADP Workforce • Paycom Robust systems for companies with 200+ employees – these tools have more modules and allow more configurability. They offer users different rules, permissions, workflows, views, and dashboards for more complex use cases. • UGK • ADP Workforce Now • Ceridian Enterprise tools for companies with 1,000+ employees these are tools built for use at large enterprises. • Workday • SAP | ||||
| What it costs | It’s typically priced on a per-employee, per-month basis – if you’re just looking at payroll and Core HR, you can find a platform for $8-$14/employee/month. If you’re looking for more functionality like recruiting and timekeeping, the cost is probably closer to $15-$25/employee/month. | ||||
How should you think about building a scorecard for evaluating which HRIS is right for you?
First, look at vendor size match and scalability – you need to consider the size of your company and what systems cater best to your current state, as well as your plans for growth over the next few years, then find a tool that can support you through those ranges.
Then look at:
- Functional capabilities – make sure the system can do what your organization needs it to. Go into evaluations with a knowledge of your more complex and unique processes and requirements, and select a system that can handle them. Consider what you need in terms of:
- Payroll
- Employee files
- Benefits administration
- Time and attendance
- Onboarding
- Performance
- Comp Management
- Learning & Training
- ATS / Recruiting
- Employee engagement
- System characteristics – every system has its strengths and weaknesses. Some systems are better at customer support, some have a better user interface, some have low cost, some are better at integration, and some are global. Tease out the key criteria that matter for your business and evaluate tools with those top of mind. Consider what you need in terms of:
- 3rd party integrations
- Customer service
- Reporting
- Employee self-service
- Support for an hourly workforce
- Support for a global workforce
What is a PEO and what vendor options are available?
| PEO | |||||
| What a PEO does for you | A PEO (Professional Employer Organization) offers a more comprehensive partnership – it offers HRIS technology along with additional services like payroll, risk management, strategic HR, and benefits administration. They also utilize co-employment, which allows small companies to benefit from the PEO’s purchasing power when negotiating benefits with insurance carriers. It’s not a full replacement for an HR department – smaller companies can use a controller-type person and leverage a PEO without feeling like they need to hire more labor. If a company is 75-100 employees, they usually can get away with 1-2 HR employees and a PEO. | ||||
| What your HR team still needs to do | Process payroll – there has to be an end-user pushing the payroll through. Contribution strategy decisions – you still have to make decisions around contribution strategy for benefits plan selection. Deal with employee relations – HR needs to handle the duties of working face-to-face with employees on day-to-day matters. The PEO is an administrative backbone rather than an employee-centric service. Employees can and will interact with the PEO directly, but you should have someone internally who owns the relationship with your PEO. They’ll be able to delegate certain projects and responsibilities to a PEO that they would otherwise require additional labor to deal with. | ||||
| Vendor Options | Smaller regional boutique PEOs are for 5-25 people organizations – smaller PEOs tend to have better relationships with smaller clients due to their personal touch. Complexity arises when the smaller company has a remote or hybrid workforce that’s multi-state; in which case, the company may want a larger PEO. Medium-sized PEOs serve 25-50 people organizations – they’ll have more breadth of technology, benefits, and HR capabilities than a boutique PEO and can usually handle a modest multi-state workforce. Larger PEOs serve 50+ people organizations – the largest PEOs (e.g. TriNet) are in the best position to serve larger small companies due to the breadth of resource capabilities for broad multi-state compliance, more complex HRIS needs, and national benefits capabilities. | ||||
| What it costs | The average cost for a PEO is ~$100/employee/month, but the spectrum is broad – some PEO sales teams have a lot of flexibility in determining prices as a company is larger and can scale down on the smaller end. | ||||
How should you think about building a scorecard for evaluating which PEO is right for you?
Consider suitability factors like:
- Industry experience
- Geographic location
- Certification through IRS
- ESAC Certification
- SOC compliance
- Is the HRIS technology proprietary or is it off the shelf
- Benefits carriers (national vs regional, number of carriers)
- Underwriting stringency (the more stringent it is, the better the long-term results)
A lot of companies begin evaluating a PEO, but realize it’s not a fit – oftentimes, companies figure out that a PEO is no longer really a fit for what they’re trying to accomplish as they proceed through the evaluation process. They may realize they’re too expensive or don’t meet their compliance needs or service expectations.
What does an EOR cover, and what vendor options are available?
| EOR | |||||
| What an EOR does for you | They are an employer of record, often used to hire, pay and give benefits to international employees – the alternative is to hire a contractor which is high risk and low effort because you don’t have to set up an entity but you could get fined for not following employment laws. Or you could create an entity that is high effort and low risk—you have to find an accountant, a bookkeeper, etc. The EOR is lower risk, lower effort, and higher priced because they outsource it for you. | ||||
| What your HR team still needs to do | Your HR team needs to: • Interface with EOR company • Onboarding • Pull reports for employment data | ||||
| Vendor Options | Most companies use the large global EORs: • Deel • Remote • Velocity Global • Globalization Partners • Atlas There are a few regional-specific vendors – they’ll cover smaller areas like Europe or North America, but most companies go with the large global EORs | ||||
| What it costs | EORs cost anywhere from $300-$800/month/employee – it varies a lot from country to country depending on employment laws, fees, etc. | ||||
How should you think about building a scorecard for evaluating which EOR is right for you?
Understand the support model for your vendor’s setup – in order to support 150 countries, a lot of large EOR vendors take an aggregator approach. They work with partners who are already operating in every country and serve as the layer above them. This approach can cause delays when you’re asking the EOR for reports or support, or trying to onboard someone. Make sure you know your vendor’s model and your support needs, and balance those factors against cost considerations.
What are other HR tech point solutions to consider? When would you need each?
Fewer systems are always better than more – you don’t want too many systems in your tech stack. More bundling is far easier for companies to manage, so you need a compelling business reason for a point solution to make sense.
Consider the level of disruption any point solution will cause in your tooling ecosystem – different tools incur different levels of disruption in your existing tech stack. For example, a timekeeping tool is fairly disruptive because it captures time every day and needs to be put into a payroll system. That’s really fragile and you don’t want to have errors there. However, Applicant Tracking is a relatively siloed process with low disruption from a point solution.
| ATS & Onboarding | |||||
| What it is | ATS tools help companies manage recruitment – companies will post their jobs, create job descriptions and launch them onto their career pages through the tool—then it will track the applicants, move them to different stages, disqualify them, loop in hiring managers, and get the applicants through the process. It will take you all the way to the point where an applicant is transitioning to the new hire onboarding experience. Onboarding tools digitize the documentation that needs to be done for new hires – it will digitize your W-9s, I-9s, etc. Then, companies can include a learning component that can help you train new hires on the company’s vision, their job, their manager, and a 30-60-90 plan. | ||||
| Vendor Options | Greenhouse, Workable Almost any PEO has onboarding – every PEO today has an ATS and electronic onboarding component. It’s very common for all the new hire paperwork to be filled out electronically on the PEO. Generally, most PEO vendors all leverage the same underlying technology platform (Prism) Prism is considered a middle-of-the-road product that’s straightforward and navigable but not the sleekest or most modern solution. | ||||
| When would you want a specialist tool for this? | If you’re a high-growth company – you might need a system that’s better for bulk actions, better at getting new candidates in the door, or leveraging hiring managers. Applicant tracking isn’t disruptive and lends itself to a point system – it doesn’t interact with payroll and you can navigate to new systems easily. It’s one of the less disruptive tools to implement. | ||||
| Performance | |||||
| What it is | A performance management tool streamlines the process of evaluating and enhancing employee performance – it serves as a centralized platform that enables HR professionals to set clear performance goals, track progress, provide feedback, and identify areas for development and recognition. By leveraging comprehensive data analytics and performance metrics, this tool empowers organizations to align individual and team objectives with overarching business goals, foster a culture of continuous improvement, and drive employee engagement and productivity. | ||||
| Vendor Options | Lattice, 15Five, Cornerstone | ||||
| When would you want a specialist tool for this? | If you have a desire for a more continuous model for performance management – if all you’re doing is annual performance reviews, your HRIS or payroll vendor will likely suffice. Most companies use their HRIS module as a starting point. If you want regular manager/employee check-ins with OKRs and goals throughout the organization, a point solution makes sense. | ||||
| Compensation | |||||
| What it is | Most companies use spreadsheet work to figure out their budgets for next year – and what they can afford to pay everyone, what raises they’ll give out, etc. At a certain point, they want a specific tool to help track and manage compensation. | ||||
| Vendor Options | Pave, Carta | ||||
| When would you want a specialist tool for this? | Generally, companies over 150 employees want to automate compensation – oftentimes, companies around 150 employees will switch off the tool in their HRIs and onto a dedicated compensation tool. | ||||
| Benefits Admin | |||||
| What it is | The tool where administrators input the plans and all the rules for the benefits for the year – then the employees will go into the tool and use that to make selections and enroll in their medical, dental, and vision insurance plans. | ||||
| Vendor Options | It’s best served in payroll and HRIS systems – because of how close it is to the payroll calculation. | ||||
| When would you want a specialist tool for this? | If you have really complex plans or benefits needs – if you have special groups in need of benefits like unions or retirees (e.g. if you were a school district) that you need to pay out for, there are specialty systems to support that. If you’re under 100 employees and have a broker – building automations with insurance carriers is often difficult for smaller companies, so your benefits broker might offer a free, fully-managed point solution, such as Ease or Employee Navigator | ||||
| Learning | |||||
| What it is | A tool for administering trainings – these can train employees in mandated compliance-related trainings like ethics or sexual harassment—or help them with skill-based trainings. | ||||
| Vendor Options | These are often built into your HRIS platform | ||||
| When would you want a specialist tool for this? | If you’re really focused on developing talent – if your company is very focused on upskilling your workforce, you can find a specialty point system to handle learning. | ||||
Other point solutions may make sense if you have custom needs:
- Leave Management Outsourcing
- 401k & Retirement Savings
- HR Consulting & Outsourcing
- State Registration & Tax Filing
- Compliance & Training
How might the tools in your HR ecosystem be integrated?
Be skeptical about the integration possibilities that vendors sell you – software companies know that buyers care about integration and that buyers often don’t know enough to evaluate those integration possibilities incisively. Understand that your integrations will likely have to be built, they can break, and data flow won’t always be precise. Dig into the details of what you want done, how you want data to push and pull and when. Ask questions during evaluations and get clear answers. Understand that it’s probably going to require custom work to figure out what you need from your IT department. You need to know whether your team can handle it or if you need to hire someone. Integration is not just flipping a switch.
Consider alternative approaches to integrations – integration platforms as a service (iPaas) like Zapier, MuleSoft or Dell Boomi can help you build and maintain integrations for a fee; Browser plug-ins through Verified First, or a human-tech hybrid that will monitor integration status can help you handle integrations.
See more about HR tooling integration from OutSail here.
How might your tooling ecosystem change depending on the goals of your organization?
The overarching business goals of your organization should shape your tooling choices – for example, if you have a timeline for exit, that might affect the tools you choose—the same goes for having a complex or global workforce. See an example of how business goals contour HR tooling below:
What HR tools can you implement yourself? When is an implementation or services partner useful?
The majority of companies can handle their implementation themselves – more than 80% of companies today don’t leverage HRIS implementation partners. However, more companies are leaning towards leveraging partners because implementation sets the stage for system success over the long term. Getting your tools set up right is going to save a lot of headaches down the road. If you do hire a third party, make sure the vendor is knowledgeable about the solution you’re implementing. Familiarity with the platform is the biggest factor in seeing increased value from the companies.
Even when considering internal resources, recognize most HR Managers aren’t technology specialists – most HR Managers don’t know how to set the tool ecosystem up or how to run the implementations. Finding someone very familiar with the platform, who knows how to project manage, and can do a lot of the heavy lifting provides big benefits in the immediate term, and saves time in the long run by cutting down on mistakes you’ll have to correct for.
Even with a PEO, you’ll have some work during implementation – the larger and more complex your environment is, the more helpful it is to have some dedicated implementation resources internally. PEOs do have implementation departments, but the value of these depends on how you leverage them.
What are the most important pieces to get right?
Prioritize your top needs during selection – these systems all have a lot of functionality and there are a lot of vendors out there. So make sure you understand what the business needs are, where you are today, and where you’re going to be in 18-24 months. Try to optimize for meeting those top needs. There are a lot of good vendors out there, but every one of them is flawed so you have to be clear about what your goals are.
What are common pitfalls?
Buying a system based on flash – don’t get away from key selection factors and get caught up in name brands or flashy features. You need to have a keen eye for what will provide the most value to your organization—not what looks or sounds the best.
Being unwilling to work through difficulty – these are complex tools and sometimes it can take work to get them right. The grass isn’t always greener, and sometimes a change isn’t going to make anything much better.
To learn more about building your HR technology suite, visit the OutSail website here.
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