Every year, about 6.7 million people are hired by companies across the US, with only 1.4 million layoffs to pave the way for the new hires.
Employees are the lifeblood of any business or organization and also its biggest asset. Unfortunately, some companies may lack the resources to accommodate a comprehensive human resource department for employee oversight, but that’s where PEO companies come in.
A professional employer organization, or PEO, is a company that provides HR services to businesses on behalf of the business. With so many benefits of a PEO, it’s no surprise that 173,000 companies in the US hire PEOs for their HR management.
If you’re still on the fence about hiring a PEO, we’re here to show you why doing so works for the best. In today’s post, we’ll be highlighting some of the many benefits of hiring a PEO for your business.
What Does a PEO Do?
A PEO, or professional employer organization, is a company that provides HR services, payroll, and employee benefits to small businesses. By outsourcing these functions to a PEO, business owners can save time and money while reducing their risk of compliance issues.
PEOs are especially beneficial for companies with limited HR resources or those who are looking to outsource all of their HR functions. Some common responsibilities of a PEO include:
- Payroll and tax administration
- Employee benefits management
- Risk management and safety compliance
- Recruiting and hiring support
- Employee training and development programs
By taking over these key HR responsibilities, business owners can take a huge load off and focus on the profit-making aspects of their businesses.
What Are the Benefits of a PEO?
With that out of the way, let’s now look at how a PEO can be beneficial to your business. Here are a couple of benefits of hiring a PEO to manage your HR functions.
1. Reduce HR Costs
The first and most obvious benefit of hiring a PEO is that it can help reduce your HR costs. By outsourcing your HR functions to a PEO, you can avoid the high cost of maintaining an in-house HR department.
A PEO can also help you save money on employee benefits by negotiating group rates for health insurance, retirement plans, and other benefits. What’s more, a PEO can help you save money on payroll processing by using their economies of scale to get better rates from banks and other vendors.
Lastly, a PEO can help you avoid the cost of compliance violations by staying up-to-date on the latest employment laws and ensuring your business is fully compliant.
Although PEOs charge for their services, the overall savings make hiring one totally worth it. If you’re looking to cut HR costs, then a PEO is just what the doctor ordered.
2. Boost Employee Morale
A listless and unmotivated workforce spells bad news for your business or organization. Hiring a PEO can help improve employee morale by providing them with access to better benefits and more comprehensive HR support.
When employees feel supported and valued, they are more likely to be engaged in their work and motivated to do their best. This boost in morale can lead to improved productivity, which is great for your bottom line.
It also boosts employee retention rates, so you can retain high-value employees.
3. Reduced Liability
By outsourcing your HR functions to a PEO, you can transfer some of the risks associated with employment law compliance to the PEO. This can protect you from costly fines and penalties in the event of a compliance violation.
It’s worth noting that employees who violate employment laws wilfully can get fined $1000 for each violation. The problem is that most employers are oblivious to certain employment laws, especially the new ones.
A PEO can help you sidestep hefty fines that come with violating employment laws you had no idea existed.
4. Administer Employee Benefits
Employee benefits are a huge part of the employee experience. However, they can also be a huge hassle for employers to administer. Without an HR team or department, it can be downright impossible to keep up with employee benefit changes.
A PEO can take over the administration of your employee benefits, so you don’t have to lift a finger. This includes negotiating group rates for health insurance, managing retirement plans, workers’ comp, and administering other employee benefits.
Not only does this take a load off your plate, but it also ensures that your employees have access to great benefits that help improve their quality of life.
5. Handles Employee Onboarding and Training
Onboarding allows new hires to acclimatize to their new work environments and roles, and understand the company culture. A good onboarding program can help improve employee engagement, reduce turnover rates, and boost productivity.
Training employees on company policies, procedures, and systems is also crucial to ensuring a smooth transition into the workplace. A PEO can handle both onboarding and training to facilitate a smooth transition of new hires into your company. That way, they can fit right into their new roles and hit the ground running.
Proper employee onboarding is necessary whenever you have new hires. Without this, your workforce will suffer from decreased productivity and a host of other problems.
6. Payroll Management
A PEO company can help take the hassle out of payroll management. It can manage all aspects of your payroll, from processing employee timesheets to issuing paychecks.
What’s more, a PEO can also help you save money on your payroll costs by using their economies of scale to get better rates from banks and other vendors. This translates to massive savings every pay period.
If you’re looking for a way to streamline your payroll management, then a PEO is definitely worth considering.
7. They Help Create and Maintain Employee Handbooks
An employee handbook is a crucial document that outlines your company’s policies and procedures. It provides employees with a clear understanding of your company’s expectations of them and sets forth the consequences for not adhering to company policy.
Creating and maintaining an employee handbook is a lot harder than it seems. That’s because this handbook must capture everything from roles and responsibilities to company philosophies.
A PEO can help you create and maintain a comprehensive employee handbook to guide your employees throughout their tenure.
8. Provides Legal Support
Employment law is a murky legal field, and it’s not uncommon for employers to find themselves on the wrong side of the law. This can cost your company a lot of money in terms of legal fees and damages.
A PEO can help you navigate the often-complex world of employment law. They can provide you with legal support and guidance on issues such as compliance, hiring, firing, and more. This way, you can avoid costly legal mishaps that could put your business at risk.
9. Handle Workers’ Compensation
Workers’ compensation is a mandatory insurance program that provides benefits to employees who are injured on the job.
However, managing workers’ compensation claims can be a time-consuming and complicated process. A PEO can take over the management of your workers’ compensation claims, from start to finish.
This includes filing claims, handling paperwork, and dealing with insurance companies. By outsourcing the management of your workers’ compensation claims, you can free up valuable time and resources that you can use for other important things.
Some PEOs even have workers’ compensation boards, specifically for workers’ comp.
10. Helps Track Employee Performance
Employee performance tracking is a crucial part of any HR strategy.
By tracking employee performance, you can identify areas where employees need improvement and take steps to address them. You can also pick out employees that add little or no value to your business.
PEOs use various ways to keep track of your employees’ performance. They can administer regular performance reviews, conduct skills assessments, and do a lot more.
In doing so, you can ensure peak performance and productivity from your employees.
11. Provide Retirement Options
Offering a retirement plan is a great way to attract and retain top talent. However, setting up and managing a retirement plan can be a daunting task, especially for small businesses.
PEOs can help you set up and manage your retirement plan. They can also provide employees with access to various retirement options that they might not otherwise have.
As such, you can provide your employees with the best possible retirement benefits and keep their motivation high.
12. Spur Company Growth
PEOs can help spur company growth in so many ways. For starters, they can help you develop and implement an effective HR strategy. This includes things like talent acquisition, employee development, and performance management.
In addition, PEOs can also provide you with the resources and support that you need to expand your business. This includes things like access to capital, business development assistance, and more. By partnering with a PEO, you can take your business to the next level and achieve sustainable growth.
There are many benefits to hiring a PEO for your business. These are just some of the most notable ones. If you’re looking for ways to improve your business, you should definitely consider hiring one.
How to Choose the Best PEO for Your Business
The country has no shortage of PEOs eager to serve your business. A simple Google search will put dozens of them at your disposal. However, with so many PEO companies, how do you pick the best one for your business?
Well, here’s how you do just that.
Understand the Types of PEOs
Not all PEOs are cut from the same cloth. There are full-service PEOs that offer a comprehensive suite of HR services. There are also PEOs that focus on specific HR needs such as payroll, benefits administration, or workers’ compensation.
As such, it’s important to understand the different types of PEOs to find one that meets your exact needs.
Check for Accreditation
When looking for a PEO, you should always check for accreditation. This is an important indicator of a PEO’s quality and reliability.
The two main accrediting bodies for PEOs are the National Association of Professional Employer Organizations (NAPEO) and the Internal Revenue Service. Ensure that the PEO you settle on is accredited by either one or both of these organizations.
Get Referrals From Business Colleagues
Talk to other business owners and ask them for referrals. Your business colleagues will point you in the right direction. Find about three to five referrals, then choose the best one from them based on your business needs.
Check Their Compliance Expertise
Compliance is a crucial part of any HR function. This is because businesses have to comply with a myriad of employment laws and regulations.
A good PEO will have a team of compliance experts that stay up-to-date with the latest changes in employment law. That way, they can ensure your business is always in compliance.
Check the Companies They’ve Worked With Before
The PEO’s portfolio will give you a clear picture of what to expect from the PEO. Have they worked with companies like yours before? If they have, how have the said companies benefited from the PEO?
Find a PEO that’s familiar with companies in your field and with your workforce size. In doing so, you can be sure that the PEO will be up to the task at hand.
Consider Your Benefits Package
One of the main reasons businesses partner with PEOs is for their employee benefits packages. As such, you should consider the types of benefits offered by PEO.
Ideally, you should go for a PEO that offers a comprehensive benefits package. This includes things like health insurance, retirement plans, and paid time off.
By partnering with a PEO, you can offer your employees a benefits package on par with that of bigger businesses.
Check Their Financial Strength
The last thing you want to do is partner with a PEO that can’t meet its financial obligations. This could lead to disruptions in service delivery or even the collapse of the PEO.
As such, you should always check a PEO’s financial strength before partnering with them. A good way to do this is by checking their credit rating and financial statements.
Hire a PEO Company Today
With so many benefits of a PEO, there’s no reason why your business shouldn’t hire one. Use the above tips to find the perfect PEO for your specific business. Talk to other business owners, and they’ll point you to a credible PEO for your business.
While you’re at it, take the time to explore our mind-boggling worker’s comp insurance option. Get an instant quote and give your workers the coverage they deserve.