What Is A PEO?
PEO or Professional Employer Organizations are B2B enterprises that provide their clients with employee management solutions and administrative assistance. PEO gives small and medium-sized businesses access to a professional HR team and comprehensive HR solutions ranging from employee benefits, payroll administration, employment taxes, and worker’s compensation.
Professional Employer Organizations (PEOs) usually partner with an employer through a joint employment relationship, allowing them to act as a legal “employer” of the workforce. This contractual legal arrangement, commonly referred to as co-employment, enables the PEO to take up all HR functions so the client can focus on their core competencies. Through this HR outsourcing partnership, clients can increase their productivity and efficiencies without worrying about their administrative needs.
As a small-medium business owner, a PEO can increase your business processes through better employee benefits. It can also save you tons of money while still taking critical HR responsibilities, risks, and compliance off your plate.
PEO History & Highlights
While the PEO industry is still in its nascent stages, PEO is not a new business concept. The predecessors to PEOs first appeared in the 1980s in response to a growing need for streamlined staffing and a human resource administration model. As we know them today, PEO started in the US as small organizations providing payroll solutions to client companies in the 80s.
In later years, state governments started enforcing labor and compliance laws meant to create better working conditions and protect employees’ interests. These changes made HR administration tasks very exhausting and resource-consuming. Many businesses started experiencing difficulties as their workforce expanded, which as a result, slowed down their productivity and efficiency.
This created a perfect environment for PEO to come in and provide these struggling businesses with crucial support for growth and sustainability.
Today, PEOs provide their HR outsourcing services to an estimated 175,000 small and mid-sized businesses and employ over 4 million worksite employees. Those businesses that have outsourced their HR and administration duties to PEO have 9% more growth, 10-14% more employee retention rate, and a 50% survival rate than their counterparts.
Is a PEO Right for Your Organization?
Are you struggling with a stack of benefits paperwork? Drowning in legal notices and expense reports? As a business owner, you must wear many hats and keep a lot of balls in the air. With so much to do, some things are easy to slip between your fingers.
If you feel like offering comprehensive HR solutions and an impressive benefits package to your employees is beyond your grasp, especially when dealing with limited resources, a professional employer organization (PEO) may be right for you. A PEO can help you deliver a range of benefits to your team without overstretching your resources. By outsourcing mundane HR functions, you can free up your time to focus on your core business.
Typically, PEOs have a wide range of expertise ranging from payroll taxes, HR to insurance coverage. These businesses provide a host of services and solutions included in the contractual arrangement between the company and the client. Some of these services include:
Compensation and Payroll administration
Regulatory compliance assistance
Unemployment insurance claims
Human resources policies and practices
Recruiting and hiring
Family and Medical Leave Act administration.
By leveraging technology and economies of scale, a PEO can effectively manage your everyday HR and administrative operations at a fraction of the cost of doing it in-house. This can allow your business to grow faster and access better HR benefits typically available to large companies.
If you are wondering if a PEO is a good option for your business, there are several things you should consider to test if this co-employment model will work for you:
How many employees do you have?
The PEO model is commonly ideal for small and medium businesses with up to 250 employees. Today, some PEOs narrow their services to focus on specific industries and capping the onsite employees to no more than 100.
Why are you considering a PEO?
A business should identify its HR and administrative pain points before hiring a PEO. This way, you can get into a contractual co-employment agreement with a PEO that will deliver what you initially seek.
Can your business afford a PEO?
Before hiring a PEO, you should take time to understand their administrative fees and measure them up with your internal HR costs. Are the potential cost savings sufficient? If a PEO is saving you hundreds of dollars and taking immeasurable stress off your HR team, then outsourcing their functions could be worth it.
What are the PEO’s benefit partners?
Typically, PEOs work with other select partners to offer specific benefits to your employees. Evaluate if these partners resonate with your company’s goals and culture.
How much control are you willing to relinquish?
By signing up a PEO, you’re essentially adding a business partner to handle some of your HR and administrative responsibilities, such as signing your employee’s check and handling taxes. Consider the level of control you’d be comfortable giving up.
Will a PEO help you achieve more regulatory compliance?
If your company has been fined or penalized for compliance violations before, then a PEO can help you navigate these complex issues.
Are you willing to put in the work and resources to fully integrate a PEO model into your business? This may require you to run parallel systems until everything gels in.
Benefits That A PEO Can Provide
Outsourcing your HR to a professional PEO with a proven track record can provide many benefits to your business. Let’s dig in and see how a PEO may help your business:
Time and Cost Saving
One of the biggest benefits of signing up a PEO is the ability to outsource mundane, non-revenue generating activities such as payroll, benefits administration, and other administrative tasks that can be time-consuming. This enables you to focus your time and resources on more important tasks that can increase your revenue and growth.
Because PEOs operate with best practices and the latest technologies, they can help you achieve more HR efficiencies at a fraction of the cost of hiring an in-house HR team.
Payroll management and tax filings can be tedious tasks that can lock up tremendous resources in small and medium businesses. A PEO can help you create more time by scratching these off your list.
PEOs have the human resource capacity and expertise to handle complex state and federal payroll, tax and benefits regulations, allowing you to focus on what you do best.
Another outstanding benefit of working with a PEO is their effectiveness in operating across state lines. Ambitious businesses looking to expand outside their states or even internationally can rely on PEOs to offer the much-needed HR solutions to help them remain competitive and compliant with various domestic and international employment laws.
The primary goal of a PEO relationship is to provide your employees with a range of benefits while still taking away costly and overwhelming regulatory and administrative burdens.
Some of these benefits may include medical, dental, and vision coverage, 401 (K) retirement plans, life and disability benefits, and a robust healthcare spending account. A comprehensive PEO-sponsored benefits package can help you attract and retain top talent.
Streamlined employee onboarding
These days, recruiting moves at light speed. You should be able to source, recruit and hire top talents without losing the bandwidth to focus on your core competencies.
A reputable PEO has huge investments in comprehensive, integrated HR technology that you can tap into to introduce new hires into your business processes seamlessly.
Scalable HR solutions
A professional employer organization can help you develop customized HR solutions that you can use as you grow. PEOs have extensive skills and expertise to develop proven processes and sophisticated systems that can support your expansion.
Actionable workforce analytics
A PEO can help you gain more insights into your workforce, such as employee attrition and retention rates, allowing you to streamline your HR operations. Having access to these analytics can help develop more precise job descriptions and more streamlined screening so you can create and retain a talented workforce.
What to Look for in a PEO
There are many PEOs out there – some great, some not so great. Signing up a PEO is a huge investment that requires great consideration. A good starting point is to establish your needs, so you know exactly what services and solutions you’ll be needing from your co-employment partner.
If you’ve already determined that a PEO will bring value and efficiency to your business, there are some guidelines that you can follow to get a top-of-the-game PEO. These include:
Is the PEO certified by the IRS?
This certification means they have sufficient experience with the latest industry standards.
What type of employee benefits do they provide?
Look for a PEO with competitive 401(k) and insurance plans. Added benefits such as Social security and Medicare assistance, telehealth services, home and auto insurance can help you attract and retain top talent.
What is the cost structure?
Does the PEO charge per employee or a percentage of your payroll total?
Is the PEO scalable?
Look for a PEO with extensive capacity and solutions that you can tap into as you grow.
Look for a PEO with a strong financial, compliance, and client retention record.
Looking for a Certified PEO?
Are you looking for ways to provide your employees with better benefits and a more satisfying work experience? Or want to free up some time so you can focus on your growth? Or perhaps you’re looking for a partner to help you navigate complex regulatory compliance issues? A PEO can help you achieve all this. By hiring a PEO, you can comfortably outsource all the tasks and processes that you don’t have the time or expertise to handle.
If you are ready to take the next step toward hiring PEO services, we can assist you. At TurnKey Office Solutions, we can take care of your payroll administration, employee benefits, regulatory compliance, and risk management so you can focus on what matters most to you and your business.
All our PEO solutions are designed to fit in with your corporate culture seamlessly and can be customized to meet your companies’ unique needs. Contact us today to learn how our PEO solutions can help you expand your operations and grow your bottom line.