Unraveling the Mystery: What Exactly Is a PEO Company and How Can It Benefit Your Business?
In an ever-changing regulatory environment, staying on top of federal, state, and local laws and rules can be challenging for small business owners. PEOs make it easier for clients to manage complex HR issues, including compliance support and payroll services.
Through an arrangement known as co-employment, a PEO assumes some employer duties for a client company and becomes a co-employer under a client service agreement. This includes handling employee benefits, such as health insurance and workers’ compensation.
What is a PEO?
For those unfamiliar with human resources outsourcing, a common question is, what is a PEO company? A Professional Employer Organization (PEO) company provides comprehensive HR services, assisting businesses with payroll, benefits administration, and regulatory compliance tasks.
A PEO is an HR services company that takes on various employer responsibilities, such as payroll processing, tax withholding, and reporting, workers’ compensation insurance, employee benefits administration for health insurance and retirement plans, compliance issues, etc. They do this via co-employment, where the PEO becomes a true partner of your business, and shares risk with you.
For example, suppose your employees work in multiple locations (like at home or abroad). In that case, the PEO will ensure you comply with local laws and regulations (like paid sick leave policies) across your workforce. And they’ll help you keep up with compliance changes, like the recent “ban the box” laws that prevent employers from asking about criminal histories on job applications.
PEOs also provide additional perks for your employees, like access to wellness services and 401(k) plans. These can be a great way to attract and retain top talent while boosting morale. And since they’re leveraging the buying power of many companies, they’re usually more affordable than you would expect from an HR service provider.
Handling all these responsibilities yourself is a full-time job and could cost your business more than you realize. A PEO can streamline these tasks for you so that you can focus on what matters most: growing your business.
How can a PEO benefit my business?
Regarding human resources, hiring the right people and providing competitive benefits are crucial to your business. However, it can be difficult for small businesses to take on all these tasks, especially when trying to grow their companies. That’s where PEOs can come in. By taking on payroll processing, tax filings, workers’ compensation, and employee benefit administration, a PEO can help you free up your time to focus on growing your business.
Another way that a PEO can help is by giving your employees a single point of contact when they have questions about their health insurance or other HR-related issues. This can save you and your team many headaches and provide your employees with better service.
Finally, a PEO can help your business cut costs by offering discounted rates on workers’ comp and other insurance policies. This is because PEOs often have large groups of employers that they can group into one big pool to negotiate rates with insurers. This can significantly benefit your company if you need help to afford premium insurance policies for your staff. A writer who covers small business funding, digital payroll solutions, and other valuable topics for entrepreneurs and small business owners. He has hands-on experience helping run his own business and performs in-depth reviews of small businesses’ products.
How can I find a PEO?
When selecting a PEO, look for one that meets the specific needs of your business. For example, if you need help managing payroll and workers’ compensation, find a PEO that offers those services. Likewise, if you want to provide better health insurance or other benefits to attract and retain talent, search for a PEO that can pair your company with insurers that offer those options.
Also, consider whether the PEO offers HR compliance support to minimize fines and other risks. Some PEOs even provide legal defense costs to protect you if an employee sues you.
The best way to find a reputable PEO is to evaluate client and professional references. Ask for a list of references with contact information and ask each for their experience working with the PEO. Then, call each reference and ask questions about the PEO’s services, cost savings, and overall experience.
The right PEO can offer significant business advantages, from happier employees to lower costs to peace of mind. But with so many options available, choosing the right PEO for your organization is essential. By selecting a reputable PEO with an excellent track record, you can focus on running your business while confident that your human resources and legal matters are in good hands.
What are the costs of a PEO?
The cost of working with a PEO varies by provider. Some PEOs offer a flat fee per employee, while others charge for services on an a la carte basis. In any case, a good PEO should be transparent and communicate clearly what each service costs so that you can compare apples to apples.
With the right partner, a PEO can help you save money and get back to running your business by managing the time-consuming HR administrative tasks that can easily overwhelm a small or medium-sized company. Moreover, you can access expert guidance and resources for regulatory compliance and risk management that would be difficult or costly to hire in-house.
Additionally, a PEO can provide valuable ancillary benefits like ID theft protection, financial counseling, and wellness programs that will make your employees feel valued and improve retention. And finally, a PEO can manage state-specific payroll taxes and worker’s compensation issues. Plus, they can help your business find affordable group health insurance through their relationships with top-tier insurers. By partnering with the right PEO, you can focus on growing your business and achieving revenue goals. That’s what makes a PEO so valuable for small businesses! A recent study showed that companies with a PEO have higher employee satisfaction and lower turnover rates.