Outsourced HR for a Startup Operating in the US and Israel: How We Cut Costs by $200K and Fixed Payroll in 90 Days

Ayelet Krom
Apr 20
5 min read

Updated: 1 day ago

Raftel provided outsourced HR services for a 15-person startup with employees in both the US and Israel. The company was dealing with repeated payroll errors, a PEO that cost $380 per employee per month, mishandled state tax filings, and no standardized HR processes across either entity. Within 90 days, Raftel migrated the company to a new PEO (reducing costs by over $200,000 annually), corrected state tax compliance, automated payroll, and built scalable HR infrastructure across both countries, without adding a single internal HR hire.

The Situation: Payroll Errors, Hidden Costs, and No HR Infrastructure

A growing startup with operations in the US and Israel had outgrown its ad hoc approach to HR. The company had 15 employees, an accountant handling payroll, and a PEO in place. On paper, the basics were covered.

In practice, payroll was consistently late or inaccurate. State taxes weren't being handled correctly, and the PEO they were using charged $190 per person per pay run.

At two pay runs a month, that's $380 per employee per month. At 15 people, $5,700 a month. As they scaled toward 45, that number would cross $17,000 a month,over $200,000 a year, for a platform so outdated you had to email their team just to process payroll.

No automation. No self-service. No visibility into people operations.

The company was paying premium prices for a system that created more problems than it solved.

What a Full HR Assessment Revealed

We started the engagement in summer 2025 with a full assessment of HR operations across both entities. The plan was a 30-60-90 framework: 30 days to evaluate, 60 days to implement, 90 days to test.

What we found in the first two weeks was worse than expected.

The PEO cost was hidden in the financials. The fees weren't broken out clearly. We found the real number buried in one version of their reports, a line item that had been sitting there, growing with every hire, delivering negative value. Nobody had flagged it because nobody was reviewing vendor costs with the right lens.

State tax compliance was structurally wrong. The way state taxes were calculated and remitted was fundamentally broken. This is the kind of problem that doesn't surface until an audit or an employee in the wrong state gets a tax notice they shouldn't have.

HR processes had no consistent framework. Onboarding varied by employee. Offboarding had no standard checklist. Benefits administration was inconsistent. Policies existed in some places and not others. Documentation across the US and Israeli entities didn't align.

None of this was because the team didn't care. It was because the infrastructure underneath them was broken, and nobody had the operational focus to fix it.

PEO Migration: From $17,100/Month to $320/Month

The old PEO platform was expensive, opaque, and required manual email coordination to run basic payroll. We evaluated alternatives against three criteria: automation capability, support responsiveness, and data portability if you need to leave.

The platform we selected costs $50/month base plus $6 per employee.

At 45 employees, that's $320 a month. Compared to $17,100 a month on the old system.

Annual savings at scale: over $200,000.

We completed the full PEO migration in three weeks and fully moved over the employee data, payroll structures, benefits enrollment, and compliance configurations. No missed pay cycles. No disruption to employee experience.

Automating Payroll and Fixing State Tax Compliance

Payroll went from something that required chasing and correcting to something that runs on schedule, automatically, with structured review checkpoints before every cycle.

We implemented automations within the new platform so payroll processing no longer depended on someone remembering to send an email. Built in compliance checks. Integrated payroll with finance so the numbers reconciled across both jurisdictions without manual work.

The state tax issue was corrected as part of this rebuild and properly structured from the ground up, not patched on top of broken logic.

Building Scalable HR Operations Across the US and Israel

We created unified onboarding and offboarding workflows that work for both US and Israeli employees that were aligned on process and adapted for local requirements.

Built out the HR policy framework. Centralized documentation. Established benefits administration that was consistent, competitive, and appropriate for a company at this stage.

The goal wasn't to build a Fortune 500 HR department. It was to build HR infrastructure that a 15-person company could run today and a 100-person company wouldn't need to rip out tomorrow.

Across PEO providers, payroll vendors, benefits brokers, and internal stakeholders, Raftel served as the single point of accountability, one team coordinating everything so the CEO didn't have to.

Results: Reliable Payroll, $200K+ Savings, and HR That Scales

Payroll runs on time. Every cycle. Employees in both countries get paid accurately, on schedule, without last-minute corrections.

Beyond that:

$200K+ in annualized cost savings from the PEO migration alone
State tax compliance corrected before it became an audit liability
Onboarding and offboarding standardized across US and Israel, with the same process, local compliance, zero guesswork
Leadership visibility restored clear documentation, aligned workflows, and a finance-integrated HR function
Scalable infrastructure as headcount grew from 15 toward 45, nothing needed to be rebuilt

The company went from repeated payroll failures to a structured, cross-border HR operation in 90 days.

Frequently Asked Questions

What is outsourced HR for startups? Outsourced HR is when a startup uses an external team to manage core people operations including payroll, benefits, onboarding, compliance, and HR policy, instead of hiring a full-time internal HR department. For early-stage and growth-stage companies, this provides structured HR support at a fraction of the cost of building an in-house team.

How much does a PEO cost per employee? PEO costs vary widely. In this case, the startup was paying $190 per employee per pay run ($380/month per employee) with their original provider. After migrating to a modern platform, the cost dropped to a $50 monthly base plus $6 per employee, a reduction of over 98%. Most startups should expect to pay between $50 and $200 per employee per month depending on the provider and services included.

Can a startup manage HR across the US and Israel without an internal HR team? Yes. With the right outsourced HR partner and PEO infrastructure, startups can run compliant, standardized HR operations across both countries. The key is building workflows that align on process while respecting local employment regulations, and having a single point of accountability coordinating across vendors and jurisdictions.

How long does a PEO migration take? A well-managed PEO migration can be completed in as little as three weeks. This includes transferring employee data, aligning payroll structures, coordinating benefits enrollment, and ensuring compliance configurations are correct. The goal is zero disruption to payroll cycles and employee experience during the transition.

Running HR across multiple countries and not sure what's falling through the cracks? Send us your current vendor stack and headcount breakdown, we'll tell you where you're overpaying and where you're exposed.