15 Advantages Of Using A PEO for your Business

The term PEO is short for Professional Employer Organization. PEOs usually work with small to mid-sized businesses by relieving them of time-consuming Human Resources related tasks.

PEOs work with businesses by entering into contractual arrangements with them. These arrangements are called co-employment partnerships or relationships. The PEO handles all employee-related administrative tasks. The company handles all other aspects of running the business. A PEO is an entity that a business both outsources to and partners with.

The Pillars Of A PEO

Efficient PEOs provide value to businesses by:

Reducing the Cost of Doing Business
Customizing HR Services
Providing Depth and Spectrum of Expertise
Sharing Liability
Complying with Hiring/Labor Laws

These pillars broadly encapsulate the many advantages of using a PEO for your business. Some advantages can reflect the traits of a combination of several pillars.

When To Use A PEO For Your Business

The services of a PEO become handy when your business has to deal with an increasing volume of HR-related administrative tasks. Your business might be growing or is big enough that its HR-related needs are becoming cumbersome. Yet your business might not be big enough to justify having a dedicated HR department.

Sometimes a business owner might have the time to handle the growing volume of HR-related tasks. However, it would be a poor use of their time to do so. For example, a surgeon or lawyer will make more money billing for their professional expertise than processing timesheets or completing new hire paperwork. A partnership with a PEO is a perfect fit in the above-mentioned scenarios. Even non-profit businesses can benefit from using PEOs to focus on serving the communities that they operate in.

The Advantages Of Using A PEO

Reducing the Cost of Doing Business

1) Reduce Cost of Administrative Tasks - Instead of hiring a dedicated payroll employee or having an HR department on-site, most businesses can pass tasks associated with HR onto a PEO. All a PEO needs is access to raw payroll data. This data can be accessed directly from a business by linking to their internal payroll/accounting software. Or someone at the business site can forward the correct payroll hours to the PEO.

The PEO can easily compute taxes, deductions, overtime, sick, and vacation pay concerning the company and labor laws. They can process the payroll and pay the employees. Imagine if the dedicated payroll employee at your business was on vacation or a leave of absence themselves. It would be costly for the business to find a temporary employee to complete the tasks of the absent payroll employee. A PEO can save a business time and money from these situations.

2) Reduce Cost of Healthcare & Other Group Benefits - The cost of health insurance and other group benefits are more costly per employee for small businesses than they are for more extensive employers. Larger employers can negotiate better group insurance rates because of the volume of business they give to their insurance providers. A PEO can access better insurance rates by grouping all the small businesses that they serve as one big group. Their clients will not be able to access these competitive group rates by themselves.

Customized HR Services

3) Customized Setup - A PEO recognizes that every business has its own unique needs. Therefore, a PEO can customize the entire service for your business. Some businesses need basic services such as payroll administration. Other businesses may need a few additional services. Yet others will need full-service assistance from recruitment to employee separation. Not only can a PEO provide full-service HR solutions to their clients, but they can also partner up with businesses that have some HR personnel on staff. Here they can provide complementary services to businesses. A PEO can usually sync with other accounting/payroll/HR programs to provide a well-rounded service. So if your HR needs are growing or becoming more complex, consult a PEO for advice and solutions.

4) Review of Services - A PEO does not just stop at just designing customized solutions for their clients. A good PEO will review the impact of their service periodically. Quarterly checkups with your business can help them to fine-tune the service that they provide. Any feedback before timed reviews can also be used to troubleshoot or refine services. As you become comfortable with using a PEO for some services, you may weigh the benefits of getting all HR-related services through a PEO. Contracting with one efficient PEO for all HR-related services can be cost-effective and convenient.

5) Payroll Administration - The major advantage of using a PEO for your business is the timeliness and accuracy with which the PEO processes payroll. A PEO keeps up to date with labor and payroll tax requirements. They also stay current with such laws and requirements across all the geographical locations that your business employs. This is a lot of administrative work. A PEO can ensure accurate computation of pay, taxes, and deductions. They also pay employees and tax authorities on time. Employees get upset when their employers do not compute their paychecks accurately and on time. When such errors happen multiple times, then you can be on the road to losing employees.

6) Benefits Administration - Enrolling in health, vision, dental, and other group benefits. Annual enrollment, and keeping track of payment and deductions for multiple employees can become a mountain of administrative work for most business owners. In addition, the opportunity of making costly errors rises with increasing paperwork. A PEO not only enrolls employees into benefits programs accurately, it also ensures that employees are educated about their benefits. Communications about changes and updates to benefit plans are communicated to all employees uniformly and on time. This service helps employees feel confident about what they are signing up for and how their benefits will be administered. It creates clarity and transparency for the benefit of employees.

7) Retirement Plan Administration - Retirement plan benefits or 401ks are complex to design. A PEO usually has access to several retirement plan solutions that they can extend to your employees. You will be spared a lot of time and possibly costly mistakes by adding on retirement or 401k plans from a PEO. A PEO can also administer retirement plan benefits on behalf of your business. If employees are already getting their paychecks and other benefits through a PEO, then it will be easier for them to trust and sign up for retirement plans through said PEO.

Expertise

8) Spectrum and Depth of Expertise - A PEO can help your business to navigate through complex HR issues by providing expert HR advice. A PEO has many HR experts on staff. These experts have experience dealing with a wide range of HR topics. These experts also understand these HR topics in depth. There are many experts to consult with over any complex topic. This is a distinct advantage over hiring a few HR employees who are not as experienced with dealing with a spectrum of HR issues in depth.

9) Recruitment/Talent Acquisition - A PEO can help your business in recruiting talent in several ways. They can source, interview, and hire candidates for you. Or they can design a system or process that will make the sourcing and selection of candidates much easier. For example, a PEO can perform background checks on candidates that have been selected for hire. Or they can help with onboarding hired candidates.

10) Employee Retention - Hiring suitable candidates and paying them on time is not the end-all or be-all of having a productive workforce. A business owner has to reduce employee turnover by keeping their employees engaged and motivated. A PEO can help you to design good performance review checklists and processes. They can also help your business to track all employee events. For example, tracking milestones, training, discipline, and attendance. Being able to track employee information quickly and easily can help employers to remember and be current with what their employers are doing and achieving. Employees, in turn, have respect for employers who are aware of their milestones and achievements.

11) Data Analytics - A PEO can track and analyze HR-related workforce data to help you drive better hiring decisions. Questions like what benefits and services your benefits are using the most and which jobs have higher retention or higher turnover can be answered. Are disciplinary issues related to a particular shift start time/ job description/department etc. Analyzing this data can help you to make necessary changes at the workplace. For example, changing the time a shift starts, examining leadership issues in a department.

Data analytics provided by a PEO can also help you to understand the forecasted trends for your business and industry. This type of information can help you to plan for future expansion or downsizing.

12) Benchmarking - How do the benefits and compensation you provide measure up to industry standards? A PEO can help you as a business owner to decide whether you provide pay and benefits that are competitive in the job market. Sometimes benchmarking can help you to recognize if employee retention can be improved with changes in the compensation package. Benchmarking can also be used to reorganize compensation packages. For example, providing more of what is close to the industry standard and less of what is not. Comparing average employee productivity, absenteeism, and disciplinary action across the industry with your own business can help you with making changes in the current workforce, hiring practices, workplace processes, and workplace culture.

Shared Liability & Compliance:

13) Lawsuits - A PEO can help you to prevent lawsuits before they happen. For example, a PEO will keep up with local labor and tax laws as related to your business. By planning for these changes ahead of time, the PEO can help you to accommodate these laws right on time.

HR experts can give businesses advice on how to handle potential legal issues that can come up with employees. Of course, businesses must always consult with the appropriate lawyers to get legal advice. However, PEO HR services can help you with being proactive about potential legal problems.

A PEO also has shared liability with you on employee-related lawsuits, fines, and penalties. For example, if the business follows all employment laws properly, but a lawsuit cannot be prevented, then the PEO will also bear its proportion of the cost of the lawsuit. Shared liability with a PEO is a cost-sharing benefit for the businesses that use them.

14) Hiring/Labor/Tax Laws - Changes in work-related laws can be difficult to understand and keep up with. This difficulty is compounded when businesses operate out of multiple jurisdictions. Employing remote workers from even more locations adds to the layer of complexity.

A PEO can take the stress and guesswork out of these challenges. PEOs are good about complying with labor laws to prevent lawsuits and fines. They are also good about paying tax authorities the payroll taxes on time. When the PEO takes the responsibility to pay these taxes, it is one less administrative task for the business owner to take care of.

It is interesting to note that businesses can attract lawsuits during the recruitment process. Asking applicants inappropriate questions or angling for information that applicants are not required to provide will lead to lawsuits. You can easily make these mistakes if you do not have the guidance of a PEO. A PEO is mindful of legal hiring practices. They can either recruit for you or provide the appropriate guideline to follow when recruiting.

15) Workers Compensation - Sooner or later, all employers have to deal with employee injuries at the workplace. Injuries can be related to slips and falls for employees who work on-site. Repetitive strain injuries occur over time and can happen to on-site or remote employees. Reporting these injuries, providing timely medical treatment, and compensating injured employees are complex and time confusing tasks.

A lot of emotions about loyalty can affect the employer/employee relationship after such injuries occur. Using a PEO that is experienced with managing claims, accommodating injured workers, providing access to medical treatment, and compensating injured employees correctly, will help a business to not run afoul of any workers compensation laws.

Learn How A PEO Can Help Your Business

There are multiple advantages to using a PEO to handle HR-related tasks for your business. Outsourcing HR tasks to a PEO can help you to focus on generating revenue instead of being lost in a mountain of paperwork. A PEO can help your business to improve the bottom line.

Learn how a PEO can help you to streamline your HR practices and improve the bottom line by clicking on the link below: