In the US alone, more than 3.7 million employees are employed through a professional employer organization (PEO). It is estimated that the number of smaller businesses using this service may reach up to 40% within the next few years.
Like many business owners, you may be unsure of what a professional employer organization (PEO) does. They take on the responsibility of managing employee benefits. They also focus on onboarding new employees, tracking payroll, and more.
In this article, we will break down the roles and responsibilities of a PEO company so that you can understand how they can help your business grow. A PEO is essentially an outsourced HR department. By partnering with a PEO company, you can free up time and resources to focus on other business areas.
Let’s take a closer look at what exactly PEOs do, so keep reading.
Professional Employer Organization: Role, Value & Impact
Professional employer organizations (PEOs) are third-party companies that provide HR services to businesses. They offer a range of services, from payroll and benefits management to employee onboarding and termination.
PEOs assume the role of employer for their clients. Thus, allowing business owners to outsource HR tasks while retaining full control over decisions.
This allows them to focus on other aspects of their business. They can do so without sacrificing employee satisfaction or compliance with labor laws.
Furthermore, partnering with a PEO company can help businesses save money. This is done by reducing costs and providing access to cost-effective benefits packages.
PEOs also help businesses stay compliant with labor laws, as they are well-versed in the regulations that govern the workplace.
It is important to note that partnering with a PEO does not mean giving up control of your business. Your organization still retains its identity and ownership rights over employees. You maintain the right to make all the important decisions related to hiring and firing.
PEO Services: What Can They Do For You?
As mentioned above, partnering with a PEO can provide numerous advantages for small and mid-size companies. Let’s take a look at some of the ways a PEO can help your business:
A PEO company can provide access to benefits packages that may otherwise be too expensive or difficult for businesses to obtain. They will also handle the paperwork and administrative tasks with employee benefit plans. For instance, enrollment forms and processing claims.
As part of their services, a PEO will manage payroll operations on your behalf. This includes preparing paychecks, filing taxes, and calculating wages. They also manage employer tax payments, ensuring that these are made in a timely manner.
A PEO is well-versed in labor laws and provides HR support so businesses can stay compliant with all applicable regulations. They will also handle employee onboarding, termination, and performance management.
A PEO company is experienced in handling employee-related risks. For example, workplace injuries and disputes.
In the event of a lawsuit, they will provide legal representation. They will help you protect your business from any potential liability issues.
Partnering with a PEO will save you time and money by eliminating the need to hire an in-house HR team. This frees up resources for other areas of your business. Thus, allowing it to run more smoothly and efficiently.
Who Should Consider Using PEO Company Services?
The decision to partner with a PEO company should not be taken lightly. After all, it involves entrusting an outside organization with managing your HR operations.
That said, if you are running a small or mid-size business and are looking for ways to reduce administrative costs, this might be it. It helps free up time and resources for other areas of your business, then partnering with a PEO could be the right choice for you.
Additionally, businesses that need access to cost-effective benefits packages or require professional assistance in managing employee relations issues should consider working with a PEO company.
Moreover, if you are looking for streamlined payroll, and improved employee compliance, it can help. Also, if you need greater risk management, then a
PEO can provide the tools and resources to help you achieve these objectives.
How to Choose the Right PEO Company for You?
Choosing the right PEO company can be a daunting task. You want to ensure that you partner with an organization that is experienced, reputable, and has the resources to meet your business needs.
Before making a decision, it is essential to do your research and consider the following factors.
An experienced PEO will have a thorough understanding of labor laws and regulations. They will have experience in handling various types of employee-related issues.
Ask potential partners about their background and record of success when considering them for the job.
2. Reputation & Reliability
It is always best to work with a reputable PEO company that has proven itself capable of meeting the needs of its clients.
Do your due diligence and explore the company’s reputation in the industry. Do this through reviews, testimonials and referrals.
A good PEO will have a team of experts that can provide assistance in areas such as payroll processing, risk management, and HR compliance.
Ask potential partners about the size of their team and inquire as to whether they have any additional resources. They might have services that may be beneficial to your business.
Partnering with a PEO should save you money in the long run. This is done by eliminating the need to hire an in-house HR staff and handling employee benefits on your own.
Inquire about pricing models upfront to ensure you are getting the best deal for your money.
The right PEO company should be able to adapt to your businesss specific needs. They should provide flexible solutions that can help you achieve your goals.
Ask potential partners about their approach to problem-solving. Find out how they plan to make sure your business stays compliant with all applicable regulations.
By taking the time to find a professional employer organization (PEO) that meets your needs, you can rest assured that you are in good hands.
Whether you are looking for cost-savings, streamlined payroll processing or improved employee compliance, partnering with the right PEO will help ensure the success of your business.
How to Train Your Staff On Working With A PEO Company?
Once you have chosen the right PEO company for your business, it is important to ensure that all of your staff members understand how to work with them.
First, ensure that everyone has a clear understanding of what services their new partner provides. Find out why they are necessary for the success of the business.
Then, arrange for HR training sessions with each department. This should include an overview of labor regulations and information about employee-related issues.
Additionally, explain the importance of compliance. Provide examples on how to avoid costly mistakes that could put your business at risk.
Finally, make sure personnel know whom to contact in case they need assistance or have any questions regarding working with a PEO company.
What Is A PEO Insurance Policy?
Along with all the benefits, a PEO can also give your business access to insurance policies.
These policies are designed to help businesses protect themselves against potential risk. Risks that are associated with providing their employees with health coverage.
The specific terms of the policy will vary depending on the type and amount of coverage you choose. They typically cover areas such as medical expenses, disability benefits and death benefits.
By offering a comprehensive insurance package through a PEO company, employers can save money.
Also, a PEO can generally provide access to more competitive rates than an individual business could find on its own.
Taking advantage of a group insurance policy through a PEO is a great thing to do. It ensures that you are providing your employees with the best possible coverage. It also shows that you are protecting your business from costly risks.
What Are the Differences Between A PEO & ASO?
Concerning employer services, there is often confusion surrounding the differences. This is true between a PEO and an administrative services organization (ASO).
A PEO provides all the same services as an ASO but operates on a co-employment model. They assume all liability associated with their client’s HR management and payroll processing.
On the other hand, an ASO does not assume any of these liabilities instead.
They are responsible for providing administrative support only. The client is liable for employee relations issues and for ensuring compliance with regulations.
It is essential to understand these distinctions when selecting the right partner for your business needs. A PEO company may be the better option if you are looking for a comprehensive solution that can help reduce your risks and streamline HR duties.
What Are the Differences Between A PEO & HRO?
Along with PEOs and ASOs, another option for employers is a human resources outsourcing (HRO) organization. An HRO provides similar services to a PEO. It does not assume any liability associated with its client’s human resources management duties.
An HRO typically specializes in payroll processing and employee benefits administration. By partnering with an HRO, companies can reduce their administrative costs. They can do so while ensuring compliance with applicable regulations.
However, there may be certain tasks outside of payroll and benefits that need to be handled by the employer. For example, hiring and firing decisions or dealing with performance issues.
In short, a PEO company provides a comprehensive solution that covers nearly all aspects of employee relations. Whereas an HRO only provides payroll and benefits support.
The right option for your business will depend on the specific needs of your organization. If you are looking for a comprehensive solution that can help keep your costs down, in that case, partnering with a PEO is likely the best choice.
What Won’t A PEO Company Do for You
PEO companies can provide a comprehensive solution for employee relations and human resources. However, there are specific tasks that you will need help with.
For example, PEOs cannot hire or fire employees on your behalf. This is the exclusive responsibility of the employer. Similarly, understanding and addressing performance-related issues remain under the purview of your team.
Furthermore, PEO companies may assist with specific compliance requirements. For instance, payroll tax filings and workers’ compensation insurance, but they do not provide legal advice. Employers should consult an attorney if they have questions about applicable laws.
Finally, a PEO company needs to handle the recruitment of new employees. This is of utmost priority and can help so much in the long run.
Employers are responsible for sourcing and onboarding new staff. They must focus on providing training and development opportunities for existing personnel.
The Right PEO for You
As you can see, there are several different options available when it comes to employer services. By taking the time to find a professional employer organization (PEO) that meets your needs, you can rest assured that you are in good hands.
Whether you are looking for cost savings, streamlined payroll processing, or improved employee compliance, partnering with the right PEO can make all the difference.
From providing access to group insurance policies and managing employee benefits and compliance issues, a PEO can give you the comprehensive solution you need for a successful business.
If you are looking for help in managing your human resources needs, consider contacting a PEO company today. If you’d like worker’s comp insurance for you business, get in touch now.