- Offer better employee benefits and a smoother HR experience. …
- Save money. …
- Maintain payroll compliance. …
- Save time. …
- Make sure they offer all the services you need. …
- Look at their pricing structure. …
- Watch out for any requirements on your end. …
- Make sure they’re easy to use.
Pros & Cons of PEOs
Who uses a PEO?
A PEO can be useful for a wide range of businesses and organizations, but it sometimes works best for small businesses. This occurs frequently because small businesses have limited personnel and resources, so they rely on specialized employer organizations to handle their HR needs. This frees them up to concentrate on business growth. A PEO frequently serves numerous employees concurrently, so they can frequently offer excellent employee benefits to small businesses that you would typically only find at larger corporations.
What is PEO?
A professional employer organization provides assistance in managing various aspects of the human resources division for businesses, including payroll, benefits, workers compensation, and more. This can free up businesses to concentrate on their main responsibilities and business goals by outsourcing their HR functions to a PEO. When a company uses a PEO’s services, the PEO frequently takes on the role of co-employer for the company’s employees. The PEO can frequently use the label of “employer” to help find competitive benefit options, but the company retains full control over hiring and firing.
Benefits of a PEO
The following is a list of advantages offered by professional employer organizations:
1. Beneficial support
Finding a professional employer organization that not only handles HR duties but also provides useful guidance that can help businesses succeed can be helpful. This may entail developing new onboarding and training programs as well as a strong customer service department. A PEO can also assist businesses in determining the effects of hiring part-time or full-time workers and how each one impacts productivity, payroll, and benefit options.
2. Employee benefits
A PEO’s main objective is to offer businesses and companies affordable employee benefits. They frequently pool the employees of the numerous businesses they represent to negotiate for lower coverage costs, including those for medical, dental, life insurance, and other benefits, which enables them to offer substantial benefits at low costs. The PEO frequently oversees employee enrollment, insurance provider negotiations, and any necessary legal obligations. They might also establish a benefits call center where workers can inquire about insurance and get crucial details on specific benefit packages.
3. Workers compensation
Professional employer organizations frequently handle workers’ compensation for businesses, which can help them save time and money on insurance premiums and claim administration. The majority of the time, PEOs provide workers’ compensation by handling paperwork, conducting audits, and responding to employee inquiries regarding workplace accidents. Many PEOs also employ a group of workers compensation experts who are familiar with the core operations of each business and collaborate with them to aid injured workers in getting back to work and develop beneficial safety programs to reduce accidents and claims in the future.
4. Legal support
Numerous PEOs can help businesses with a variety of employment-related issues, such as payroll problems and regulations pertaining to paid time off. PEOs may occasionally provide HR specialists or lawyers to help answer questions and reduce risks if you’re uncertain about the legality or regulations of a situation. When hiring remote workers, for instance, it’s possible that particular time-off regulations in one state may differ from those in the state where your company is currently based. You can more easily navigate those issues and questions with the aid of a PEO. They can also provide advice when making crucial choices and establishing objectives related to your career.
Professional employer organizations also manage a company’s payroll, including tax withholdings, sick leave accrual, and documentation. Most frequently, a PEO develops an automated payroll system that pays employees via direct deposit on particular days of the month. Additionally, they offer digital W-2 forms and pay stubs to both employees and employers, making it simple to perform calculations and maintain records. For their payroll assistance, most PEOs impose two different types of fees. Depending on the needs of the business, some prefer to charge separately for each service, while others charge a flat rate and demand a higher fee for access to all payroll services.
Companies can use a PEO to assist them in creating job descriptions that are effective in attracting candidates when looking for new, qualified candidates for open positions. They can also provide hiring managers and executives with training on how to find the best candidates for a position and occasionally make recommendations on the most alluring and reasonable pay for each position. Some PEOs can broaden the scope of potential candidates’ searches through powerful networking platforms and job boards, creating a larger pool of qualified candidates.
7. Company growth
Small businesses can frequently concentrate their time and resources on other tasks, such as their core missions, productivity, and revenue generation, by outsourcing their human resource management responsibilities to a PEO. It is possible for people to concentrate on the expansion and development of the company by being able to divert their attention from the recruiting and onboarding process. As a result, businesses can expand more quickly by quickly locating the ideal candidates they require and concentrating on more demanding issues like deliverables and client accumulating.
8. Retirement options
A PEO can give staff members practical retirement options, such as 401(k) plans. These plans can assist staff members in saving money for retirement and even let businesses design useful initiatives that might help retain staff for an extended period of time, lowering employee turnover rates. For instance, some PEOs might permit staff members to invest money from their payroll in their 401(k). Then, companies may decide to match the deferral, effectively doubling the employees’ 401(k) contribution with each pay period.
The responsibilities of HR professionals and the hiring process can occasionally involve a lot of rules and regulations. Employers in professional organizations frequently are aware of these rules and any changes that have been made. Due to this, businesses may be able to more easily adhere to important human resource regulations and grow their business more successfully.
10. Employee performance
A PEO can assist businesses in developing and implementing effective employee performance reviews. Offering resources to employees to help them set personal goals and advance within the company, coaching managers and supervisors on how to give evaluations, and assisting with employee evaluations are a few examples of how this can be done. In order to maximize employee productivity, businesses can set clear training objectives with the aid of a PEO, who can also assist with online learning system creation and maintenance.
What are the downsides of a PEO?
- Costs of benefits can fluctuate.
- Lower quality of HR services.
- Compliance is not guaranteed.
- Employees have limited access to HR.
- Company data is out-of-house, not immediately accessible.
- High expenses of PEO services outweigh value.
- Can negatively impact culture, morale and engagement.
Is PEO good for the employee?
A PEO can give staff members practical retirement options, such as 401(k) plans. These plans can assist staff members in saving money for retirement and even let businesses design useful initiatives that might help retain staff for an extended period of time, lowering employee turnover rates.
How can a PEO help my business?
One way a PEO can assist is by offering employee benefits. Due to the co-employment model, which PEOs frequently use to serve multiple businesses, the pool of members contributing to the benefits package is larger, giving small businesses access to the same quality employee benefits as larger corporations.
What is the advantage of using a professional employer organization PEO for recruiting?
Professional Employer Organizations (PEO) frequently employ seasoned hiring professionals who have the hiring expertise a growing company needs to strategically staff up. PEOs can also give businesses access to sophisticated web-based technology so they can handle every aspect of their hiring online.