“[PEOs] now provide…services to about 180,000 companies that collectively employ more than 3 million workers and generate $156 billion in annual revenues.” (NAPEO.org)
Does your business manage all HR and benefits administration responsibilities in-house? It might be time to look into partnering with a Professional Employer Organization (PEO). A PEO provides an outsourced solution to manage your human resources, administer employee benefits, regulatory compliance, and payroll. PEOs work through a co-employment arrangement, contractually sharing certain employer responsibilities with your company.
Determining if a PEO is right for your business will require doing some homework—researching providers, determining the right questions to ask them and doing some cost-benefit analysis to determine the total cost of ownership of your PEO relationship. You are likely to find that this investment now will pay off in more time, money and peace-of-mind later.
What’s in it for me? The advantages of using a PEO
Perhaps you’re not familiar with PEOs or you question if they’re right for your business. Why should you enter a partnership with another company when you’ve been doing your own HR administration for years? Maybe the thought of partnering with an outside firm seems like an extravagance, or you fear that you would lose control of your operation. Both are far from the truth.
Let’s start by looking at the benefits of partnering with a PEO. They include:
- Business growth is increased for companies using a PEO. According to a survey from the National Association of Professional Employer Organizations (NAPEO), companies that used a PEO enjoyed a growth rate of 7 to 9 percent over businesses that did not.
- More time to focus on strategy, cultivating leads and nurturing your business relationships. One clear reason for the impressive growth rate described above is the time you save. Using a PEO means you don’t waste in-house resources on the mundane administration, but rather invest them in the essential tasks inherent to your HR strategy. This leaves you with more bandwidth to focus on your core business.
- The employee turnover rate for PEO clients is 10 to 14 percentage points lower per year than that of comparable companies, according to NAPEO. Partnering with a PEO allows you to take better care of your employees, giving them more reason to stay loyal to your company.
- Your likelihood of staying in business increases. Companies that contract with a PEO are 50% less likely to go out of business than businesses that do not use a PEO, according to NAPEO.
What services can I expect from a PEO?
What can a typical PEO do for your business? The menu of offerings vary among providers, but the core services to look for include the following:
- Payroll Processing and Tax Filing. This includes calculation, preparation and distribution of payroll checks; reporting, withholding and remitting payment of payroll taxes; employee deductions, including garnishments; and preparation of payroll reports.
- Benefits Administration. The PEO typically handles the administration, reconciliation and payment of employee Health, Dental and Vision plans, as well as COBRA and State Continuation Administration; long and short term disability; 401(k), IRA, and other retirement plans; flex spending, HSA, and HRA; among other benefits.
- HR Management and Consulting. This includes core services like Employee Handbook development and review; wage and hour assistance; HR policy development and review; FMLA and leave issues; HR regulatory compliance consultation; Federal and State required postings; assistance with day-to-day issues, and more.
- Workers’ Compensation Insurance on all Employees.
- Unemployment Insurance Liability and Claim Processing.
What else should I look for when considering a PEO?
When comparing vendors, there are several factors to keep in mind, including:
- What core services do they offer? Be sure to consult the list of PEO services above and compare it with what that particular vendor provides.
- Do they offer trained and experienced specialists to answer your questions? Some PEOs use call centers to handle client questions, meaning you might get a different representative every time you call with a question. True business partners offer dedicated specialists who are there for you when you need them. They understand your business inside and out and have the expertise to take problems off of your hands so you can concentrate on your core business.
- Will the PEO allow me to retain my current employee benefit broker? Confirm that you are not forced into a master plan, but rather have the flexibility to determine which benefit options are best for your employees and are cost efficient for your company.
- Is the PEO willing and able to customize your offerings? The best PEOs are scalable and flexible enough to work with you to provide the right fit for your business.
The bottom line: For many businesses, it pays to partner with a PEO
Unless your specialty is HR and benefits, you’re not in business to spend time and internal resources on these areas. You have better things to do—like grow your business. Seek a reliable partner, one who is accountable, reliable and accurate, and let them manage your day-to-day HR benefits and compliance responsibilities.
Your employees will thank you for it.
To learn more about how a PEO or other administrative models may benefit your company, please contact us.