Receive our blogs in your inbox

HR tips from industry experts.

Human Resources

PEO vs. In-House HR for Manufacturing Companies: What's Best for Your Company?

by FrankCrum on December 18, 2023

In the fast-paced and intricate world of manufacturing, the strategic management of human resources can be a deciding factor in a company's success. As manufacturing companies strive for operational excellence, the choice between partnering with a Professional Employer Organization (PEO) and maintaining an In-House HR department becomes a pivotal decision.

In this article, we explore the benefits and factors to consider when using either PEOs or in-house HR. Understanding HR models is crucial for manufacturing leaders, as it helps them navigate industry complexities and position their companies for success.

Benefits of Using a PEO in Manufacturing

In the dynamic landscape of the manufacturing industry, businesses are constantly seeking strategies to optimize operations and drive growth. Using PEOs is a popular solution for manufacturing companies, with significant advantages.

1. Expert HR Management: PEOs provide specialized HR expertise for manufacturing companies to comply with employment laws and regulations. From payroll processing to benefits administration, PEOs handle the details, allowing manufacturing leaders to concentrate on production and innovation.

2. Cost Savings and Predictability: By pooling the resources of multiple businesses, PEOs can negotiate better rates for employee benefits, insurance, and other HR-related costs. This not only results in potential cost savings but also provides manufacturing companies with a more predictable and manageable budget.

3. Comprehensive Employee Benefits: Manufacturing employees are the backbone of operations, and offering competitive benefits is crucial for attracting and retaining top talent. PEOs offer a range of benefits like healthcare, retirement plans, and wellness programs, boosting employee happiness and loyalty.

4. Risk Mitigation and Compliance: Navigating the complex landscape of labor laws and compliance requirements is a constant challenge for manufacturing companies. PEOs reduce the risk of legal issues and penalties by helping you with compliance and risk management and keeping your informed of the latest regulations.

5. Keeping Employees Safe: PEOs can help manufacturing companies keep employees safe by working together to create comprehensive safety programs and help ensure that employees receive targeted training on equipment operation and hazard recognition. Continuous safety monitoring helps identify potential risks, allowing proactive measures to mitigate hazards and prevent accidents. Additionally, PEOs can assist in developing robust emergency response plans, ensuring manufacturing companies are well-prepared to handle critical incidents and provide swift and effective responses to keep employees safe.

6. Focus on Core Operations: Manufacturing companies partnering with a PEO can redirect their focus and resources toward core competencies. By alleviating the administrative burden of HR tasks, businesses can channel their energy into refining production processes, driving innovation, and staying ahead in the competitive manufacturing landscape.

7. Agility in Workforce Management: Manufacturing operations often experience fluctuations in demand and workforce requirements. PEOs offer flexibility in workforce management, enabling businesses to scale up or down seamlessly without the challenges associated with recruitment, onboarding, and downsizing.

The benefits of using a PEO in manufacturing extend far beyond simple HR outsourcing. It's a strategic partnership that empowers companies to optimize costs, navigate compliance complexities, and elevate their focus on innovation and production. As the manufacturing landscape continues to evolve, those embracing the advantages of PEO solutions for manufacturing companies are well-positioned for sustained success in a competitive market.

Challenges and Advantages of In-House HR in Manufacturing

In the bustling world of manufacturing, where precision and efficiency are paramount, the choice between in-house human resources management and outsourcing to a PEO is a critical decision. Here, we explore the unique challenges and advantages that come with maintaining an in-house HR department in the manufacturing industry.

Challenges of In-House HR in Manufacturing:

1. Compliance Complexity: The manufacturing sector is subject to a myriad of labor laws and regulations. Staying abreast of these legal complexities can be challenging for an in-house HR team, leading to potential compliance issues and legal ramifications.

2. Resource Intensiveness: Managing HR functions internally requires dedicated resources, both in terms of personnel and technology. The demands of payroll processing, benefits administration, and employee relations can be resource-intensive, diverting attention and resources away from core manufacturing activities.

3. Recruitment Struggles: Attracting and retaining skilled talent in the competitive manufacturing job market poses a perpetual challenge. In-house HR teams may face difficulties in implementing effective recruitment strategies, resulting in potential talent gaps.

4. Limited Expertise: HR functions span a broad spectrum, from payroll and benefits to compliance and employee relations. An in-house HR team may lack the specialized expertise found in a PEO, potentially hindering the efficiency and effectiveness of HR operations.

Advantages of In-House HR in Manufacturing:

1. Direct Employee Relations: In-house HR fosters direct relationships between HR professionals and manufacturing employees. This direct connection can enhance communication, resolve issues promptly, and contribute to a positive workplace culture.

2. Focused Company Alignment: An internal HR team can be integrated deeper into the company's overall strategy and operations. This alignment enables HR professionals to better understand the specific needs and goals of the manufacturing business, contributing to strategic decision-making.

3. Real-time Responsiveness: With HR professionals on-site, manufacturing companies can address employee concerns and emerging HR issues in real time. This immediate responsiveness can contribute to a more agile and adaptive work environment.

PEOs vs. In-House HR: Making an Informed Decision for Your Manufacturing Company

Making the right decision between working with a PEO and maintaining an in-house HR department is a critical step for manufacturing companies seeking operational excellence.

A PEO brings a wealth of specialized HR expertise, offering standardized solutions and leveraging collective buying power for cost-effective services. This can be particularly advantageous for companies navigating complex compliance issues and looking to streamline HR functions.

On the other hand, in-house HR can help foster direct relationships with employees and align more closely with the company's unique culture and objectives.

To make an informed decision, manufacturing businesses must carefully assess their priorities. If flexibility, scalability, and external expertise are paramount, a PEO may be the optimal choice. If real-time responsiveness and deep integration with company strategy are critical, an in-house HR team may better suit the organization's needs.

When deciding between using a PEO or keeping your HR in-house, it’s important to consider that each approach comes with its unique set of advantages and considerations. While a PEO offers specialized expertise, cost efficiencies, scalability, and partnership, in-house HR can provide real-time responsiveness and a deeper integration into company strategy.

As a manufacturing leader navigating this choice, it's essential to align the decision with the specific needs, priorities, and goals of your company.

Whether prioritizing streamlined processes, compliance assurance, and cost-effectiveness with a PEO, or valuing customization, direct employee relations, and strategic alignment with in-house HR, an informed decision sets the stage for optimized HR practices and operational excellence in the competitive manufacturing landscape.

At FrankCrum, our mission is to help businesses become the best they can be. To learn more about our comprehensive services, contact us today.


FrankCrum is a professional employer organization (PEO), founded in 1981 dedicated to helping business owners boost HR capabilities and broaden convenient services and benefits to employees. The origin of FrankCrum dates back to 1981, when Frank W. Crum, Jr. and his father, Frank Crum, Sr., founded the Great American Temporary Service. With a passion for helping small business owners succeed, the company has evolved and grown over several decades.