Professional employer organizations are a popular option for small businesses looking to save time and money on human resources, payroll and compliance services. They also provide access to premium benefits like health insurance, life and disability coverage, retirement plans, and commuter programs.
Most PEOs charge a flat fee per employee or a percentage of the total payroll. It is important to understand these fees before you make a decision.
PEOs are a Co-Employer
PEOs are co-employers with clients under a legal contract called a client services agreement. Under this arrangement, the PEO assumes employer responsibilities and obligations for payroll administration, workers’ compensation insurance and state unemployment insurance. This also means that a PEO is the employer of record for employees covered by their policies. In addition, the PEO typically groups a client’s workforce with its workforce to gain buying power for health coverage, which is often more affordable than small businesses can find on their own.
This arrangement can free up time for in-house HR and payroll teams to focus on other tasks, such as attracting and retaining talent, refining products, expanding markets and overseeing day-to-day operations. This can significantly affect a business’s ability to grow and compete.
Similarly, the PEO’s expertise in employment-related laws can help ensure that your organization always complies with federal and state regulations. A PEO’s support can help companies avoid costly mistakes and penalties from mishandled payroll or tax filings. Additionally, many PEOs are insured against any accounting errors they may make on behalf of their clients. This is a major benefit for remote businesses, as it can prevent costly reimbursements or fines from the IRS and other government agencies.
PEOs are a Service Provider
Running a business requires more than just your daily tasks; it can often feel like there needs to be more time to get everything done. To navigate the complexities of human resources management, businesses often seek comprehensive solutions; understanding what is a professional employer organization, for instance, is key for companies looking to outsource HR tasks and streamline their operations. A PEO can help with many of the employment-related administrative tasks you need to manage, freeing up valuable time to focus on your company’s core mission.
A PEO contracts with your business to share employer responsibilities and costs through a co-employment relationship. They act as employer of record, handle payroll administration and tax filing, and provide HR support and access to benefits. As a result, you can save time and money while improving your employee’s overall experience at work.
PEOs can also be a valuable resource for businesses seeking to manage risk and compliance. They are well-versed in various state and federal laws impacting your business and stay up-to-date on changing regulations. This helps your business avoid fines and other costly consequences for violations.
In addition to providing access to high-quality, modern health insurance and retirement options, a PEO can help with various other services, including workers’ compensation coverage, claims management, onsite safety inspections, and loss prevention programs. Knowing you can help cover their medical bills and related expenses if injured gives your employees peace of mind. Additionally, a PEO’s buying power can often result in lower costs for your team than available to small business owners alone.
PEOs are a Business Partner
A PEO can take the burden of compliance and administrative tasks off your hands. This allows you to focus on your business’s growth and expansion. It also protects you from costly mistakes that could jeopardize your business’s financial stability and viability.
PEOs can also offer big-business benefits to help recruit and retain top talent. Typically, these benefits are more competitive than those small businesses provide. Moreover, since PEOs have a collective buying power that leverages their pool of clients, they can negotiate better rates on medical insurance and other employee-related benefits.
The best way to find a qualified PEO is to research the company and assess its client reviews and testimonials. You should also check for accreditations and performance to ensure that the PEO you choose is a well-established, reliable, and financially viable company.
Consider a PEO with an in-house team of legal and HR professionals to ensure they can handle all employee-related issues. Finally, you should evaluate the PEO’s pricing structure and ensure it offers value for money. For instance, you should compare prices against the number of employees you have to determine whether it’s cost-effective. Also, ensure that the PEO’s technology offerings align with your business’s needs. For example, you should look for a PEO with a robust human resource information system (HRIS). This can streamline and automate some of your administrative functions.
PEOs are a Cost-Effective Solution
PEOs save businesses money by leveraging economies of scale to provide a wide range of services. For example, they can secure lower rates for benefits like medical insurance by pooling the buying power of multiple clients. They also save time by eliminating the need for companies to file and track payroll taxes, labor laws and other regulatory issues.
Whether your business wants to streamline its HR and administrative processes or boost employee engagement and productivity, a PEO may be the answer. When choosing a PEO, ensure the company offers the needed services and has experience working with similar organizations in your industry. It’s also important to compare the pricing structure (e.g., flat fee, per-employee rate) and to understand what you’re getting for your money.
In addition to saving businesses time and money, PEOs can also help protect them from liability. Keeping up with federal and state regulations, from workers’ compensation to healthcare mandates, can overwhelm many small business owners. But when a PEO manages these tasks, it can free up the owner’s time to focus on the core business and prevent expensive penalties and legal issues. PEOs can also reduce customer risks by staying updated on changing employment laws and ensuring compliance. This can be especially valuable for businesses that operate in multiple states, as they often must comply with varying employment laws.
