A professional employer organization (PEO) is often considered a cost-effective alternative to hiring a large HR department.
According to Wikipedia, a PEO is defined as:
“A professional employer organisation (PEO) is an outsourcing firm that provides services to small and medium-sized businesses (SMBs). Typically, the PEO offering may include human resource consulting, safety and risk mitigation services, payroll processing, employer payroll tax filing, workers’ compensation insurance, health benefits, employers’ practice and liability insurance (EPLI), retirement vehicles (401(k)), regulatory compliance assistance, workforce management technology, and training and development.”
The model is simple: The PEO is legally considered the co-employer of all your workers, and it takes care of services including benefit and payroll administration, workers’ compensation, and employment taxes.
WHAT BUSINESSES WORK BEST WITH A PEO?
Many different kinds of companies work with PEOs. The ones that benefit most are businesses with 10-125 full-time employees.
WHAT SERVICES DOES A PEO PROVIDE?
Depending on the business’s needs and what it chooses, it may find that PEOs can:
- Allow them to offer higher-quality employee benefits, including medical coverage, retirement matching and 401(k) plans.
- Manage payroll records and documentation, issue pay stubs and tax forms, and provide paid time off.
- Design job descriptions, conduct salary and wage surveys, and assist with the interview processes.
- Provide workers’ compensation coverage by managing and resolving claims, conducting loss prevention reviews, and helping with the design of return-to-work plans.
- Support them in performance reviews and in conducting appraisals via advancement and reward program designs and leadership coaching.
WHAT ARE COMMON CONCERNS RELATED TO WORKING WITH PEOS?
Although PEOs can solve a lot of problems, you may have some concerns.
- Will you face a loss of control over your people?
- Is the PEO’s security up to your standards?
- Will your employees resist the change?
In this article, I’m looking to address these concerns and answer other questions about the advantages of using a Professional Employee Organization.
ADVANTAGES OF PROFESSIONAL EMPLOYER ORGANIZATIONS
First, I would like to explain how a Professional Employer Organization known as a PEO is established.
A PEO is an organization that combines its company client’s employees under the PEO’s Federal Identification Number. Creating a co-employment relationship and an economy of scale for services and benefits provided that equal to a Fortune 500 company.
PEOs enable client to cost-effectively outsource the management of human resources, employee benefits, payroll, and workers compensation. PEO client focusses on their core competencies to maintain and grow their bottom line.
Businesses today need help managing increasingly complex employee related matters such as health benefits, workers compensations claims, payroll, payroll tax compliance, and unemployment insurance claims.
They contract with a PEO to assume these responsibilities and provide expertise in human resources management. This allows the PEO client to concentrate on the preoperational and revenue producing side of its operation.
HOW DOES A PEO DELIVER SERVICES?
A PEO provides integrated services to effectively manage critical human resource responsibilities and employer risks for clients.
A PEO delivers these services by establishing and maintaining and employer relationship with the employees at the client’s worksite and by contractually assuming certain employer rights, responsibilities, and risk.
WHAT BENEFITS DOES A PEO PROVIDE?
Businesses across America have discovered the incredible value of PEOs because they provide:
- Access to large employer benefits; healthcare, dental, vision, life insurance.
- Increased participation in a PEO 401k retirement plan.
- Assistance from Human Resource professionals.
- Helping the business comply with state and federal law.
- Employee turnover is 10% to 14% less.
- Business Growth is 7% to 9% faster.
If you are a small to medium size business and have your controller, bookkeeper or yourself handling the issues of the above-mentioned topics. You should consider a PEO option for your business.