What Is PEO?
The Web’s Most Comprehensive Guide to PEO For Business Owners
Many business owners either have never heard of PEOs or have the wrong idea about how they work. So, please allow Staff One HR to clear up any misconceptions you may have about our industry. Along the way, we’ll also explain how your company could benefit from partnering with a PEO like Staff One HR.
“PEO” is an acronym that stands for “Professional Employer Organization.” Simply put, a PEO is an independent company that partners with small businesses to provide solutions for those business’s HR needs. All PEOs are slightly different, but duties typically handled by PEOs include managing human resources, taking care of payroll, overseeing workers’ compensation issues, and offering employee benefits.
To quote the National Association of Professional Employer Organizations, “ By taking care of paperwork and providing regulatory compliance assistance, PEOs help businesses improve productivity, increase profitability, and focus on their core mission.”
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Of course, the above definition barely scratches the surface of what a PEO is and, more importantly, what it can do for your company. For this reason, we’ve gone ahead and assembled an in-depth guide to our industry. Keep scrolling for the complete picture, or click on one of the “Read More” buttons below to jump to a specific section.
PEO & Your Business
PEOs aren’t just for businesses of a certain type of industry. Nearly every company can benefit from hiring a PEO.
WHAT IS A PEO?
A Professional Employer Organization allows businesses to outsource their administrative needs to a third party that specializes in these duties. This can include (but is not limited to) managing human resources, taking care of payroll, overseeing workers’ compensation issues, and offering employee benefits. The relationship is beneficial for both the owner and employees of a business: the boss is able to focus on the bottom line without being bogged down by details or red tape, and workers can rest assured that their needs (specifically job security and satisfaction) are taken care of.
PEOs are especially attractive to small businesses, as groups with few employees or a small number of locations may not have the resources or expertise that a dedicated HR department requires. They also allow employers to offer benefits and other perks (e.g., insurance options, training programs, retirement and savings plans) that would be inaccessible otherwise. Employees essentially get the best of both worlds: the casual, amicable culture of a small business environment paired with the draws and rewards of a large business environment!
HOW CAN A PEO HELP ME?
If you ask a PEO representative this question, they might just answer by saying, “Well, what do you need help with?” PEOs cover a wide range of HR duties, many of which we mentioned in the previous section. Overall, though, the idea is that the PEO will ease some of your burden as a business owner by sharing some of your responsibilities and pooling resources. With a PEO, you’re never quite alone when it comes to taking care of your employees!
HOW DO PEO’s WORK?
Employees of the client company enter a co-employment relationship with the PEO company, and the tasks involved with running the business are allocated between the business owner and the PEO. The business owner is still in charge of the day-to-day operations, including development and production, marketing, sales, and services, and meanwhile, the PEO handles employee-related issues. PEOs can even work alongside existing unions or HR departments. If the business owner decides that they don’t like this arrangement, they’re free to either re-negotiate their contract or hire a different PEO. Some business owners balk at the idea of hiring a PEO because they worry that the PEO will gain control of their company and employees. Fortunately, that’s not how PEOs do things!
PEOs are not temporary staffing companies. Although a PEO may oversee HR management duties that include employee orientation and management training, the PEO does not outsource their own employees to fill vacancies at their clients’ businesses. Instead, PEOs help their clients recruit and educate employees that are interested in long-term positions at the client company. Ideally, the perks and services that the PEO enables the client to offer will then encourage loyal, hard-working employees to stay put instead of moving on to “greener pastures.”
WHAT ARE PEO SERVICES?
If the idea of hiring a PEO sounds appealing to you, then chances are, there are some specific aspects of running your business that you’d like to outsource. Whether it’s payroll, employee training, compliance with the Affordable Care Act and other regulations, or something else entirely, a PEO can give you as much — or as little — help as you need.
HOW CAN A PEO SAVE MONEY?
Struggles with employee retention and federal regulation compliance are two major money drains for small businesses. Recruiting, hiring, and training new employees isn’t free, and if the new hire ends up not working out for one reason or another, then that investment essentially comes to nothing. Meanwhile, bureaucratic red tape in regards to taxation, safety codes, and insurance benefits can be difficult to understand, but failure to comply often means being slapped with heavy fines, and possibly even legal action.
So, instead of having to tangle with these issues on your own, why not outsource them to a specialist? PEOs know what to look for when trying to find new employees, and they also know the ins and outs of labor codes and regulations. While you focus on the “big picture” of running your business, the PEO makes sure that everything is functioning on the up-and-up.
PEO & Saving Money
The perks offered by PEOs can help save your company money in the long-run — and doing so is often the best way of staying one step ahead of your competition. According to the National Association of Professional Employer Organizations, “Small businesses that use PEOs grow 7-9 percent faster, have 10-14 percent lower employee turnover, and are 50 percent less likely to go out of business.” So, instead of asking, “Can I afford to partner with a PEO?”, the better question might be “Can I afford not to partner with a PEO?”
HUMAN RESOURCES BEST PRACTICES GUIDE
This guide features insights on the challenges faced by today’s business owners and leaders, and the tools a PEO can offer to help solve these problems.
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PEO & HR SUCCESS
First things first: if there are any specific duties that you want your PEO to cover, you’ll want to verify with a representative that the company does, in fact, offer these services. All PEOs are slightly different, and you can save yourself some trouble later on if your expectations are laid out in advance.
When dealing with a PEO, communication is key, and feedback is vital. You’ll need to decide exactly how “hands-on” you want the PEO to be with your company; understand that you might have to renegotiate things if your HR needs change. And, of course, if you find that a specific PEO isn’t meeting your needs, it might be time to consider switching to a different PEO.
SHOULD I HIRE A PEO?
Unfortunately, some PEOs are more reputable than others. Before you enter an arrangement with a specific firm, it’s a good idea to ask a representative about the company’s credentials and accolades.
There are several groups that certify or accredit PEOs; certifications from ESAC (Employer Services Assurance Corporation), CEFEX (Centre for Fiduciary Excellence), and/or CI (Certification Institute) are all good signs, as well as a membership in the NAPEO, National Association of Professional Employer Organizations. Don’t be afraid to ask for proof of these accreditations, or verify with a specific certification group that the PEO you’re considering really is a current member.
Attract the Best Talent
The best staff members are worth their weight in gold — and they expect to be compensated thusly. A PEO can help you offer the kinds of benefits that will turn heads and pique the interest of talented, loyal people seeking long-term work.
Build Your Culture!
What business values do you hold in high esteem? What is your vision for the future of your company? What is your idea of an “ideal” employee, and would that person be proud to say that they work for you? The PEO can also help you offer perks and employee benefits (e.g., retirement packages and health insurance policies) to your employees that you wouldn’t otherwise be able to facilitate.
Do I Need a PEO?
All companies are a little different, so it’s entirely possible that your business doesn’t really “need” a PEO. For example, if your firm is so tiny that you only have a dozen or so employees working underneath you, then you might be fine doing things on your own. But if you find yourself struggling to meet your HR needs (including recruiting and training new hires) or understanding government regulations on your business, then entering a relationship with a PEO can help you overcome these hurdles.
PEO IN 2018
The beginning of 2018 is an opportunity for a fresh start for business owners in nearly every industry. If 2017 was rough on your company, then it might be time for a change of pace—or organization. This can be the year that you give a PEO a chance and decide whether or not you’d like to make the arrangement permanent.
You may decide that you prefer to handle HR matters in-house; as we said before, PEOs aren’t right for every business or business owner. However, you may come to find that you like outsourcing some of these responsibilities to specialists. You may also come to find that your employees really love the benefits your PEO partnership has enabled you to offer them.
PEO IN THE
These days, paper paychecks, employee handbooks, and benefits booklets can seem pretty old-fashioned. Going paperless is much more convenient, (who doesn’t love direct deposit?) and eco-friendly. It can also help you to stay on top of paperwork and record-keeping much more easily. And younger employees — namely, millennials — often expect to be able to access certain information online instead of having to make phone calls or speak to an HR representative in-person.
That said, if you’re “not a computer person,” the idea of doing things online can seem a bit intimidating. And if you don’t have the technical know-how to pull it off, then doing so can be prohibitively difficult. Once again, though, PEOs can come to the rescue by facilitating digital record-keeping and information dissemination. If you’d like to go paperless, then chances are, your PEO will make it happen!
Outsourcing HR to a PEO
Running a business is tough, but you don’t have to do it alone. If you bring in a PEO, you’ll be able to focus on your most important duties instead of being tied up with the minutiae. You won’t “lose control” of your company. In fact, allowing a PEO to shoulder some of the burdens may just be the best thing you can do for yourself and your employees.
CONTACT STAFF ONE HR
Need help with PEO Services? Contact Staff One for help outsourcing your HR!