Many small to medium sized companies try to increase productivity by either hiring more people or asking people to work longer hours. While this often increases overall efficiency, it is rarely cost effective because it also increases direct employee costs and overloads the Human Resource administration.
However, today American businesses are going through a fundamental paradigm shift when it comes to areas like human resource management. One example of this shift is in the emergence of the Professional Employer Organization (PEO), an industry that has risen in response to a large market demand.
In essence, PEO services offer client companies, as well as their worksite employees, all the expertise of a robust corporate personnel department, while still allowing the client to function as an independent business.
What Is A PEO?
If you’re unfamiliar with the term, it can be difficult to understand what a PEO actually does. The confusion arises because you are not clear about their role in relationship to your organization.
Essentially, a PEO will work as a co-employer.
What does this mean?
You still remain the primary employer, still controlling your employees work and still managing your organization’s structure. Meanwhile, the PEO will handle many of employer-related obligations. Consequently, it will manage payroll and tax remittance, as well as any government filings. Unlike a payroll company, it can assume a greater share of the company’s responsibilities.
How a PEO Can Help Your Business
A PEO offers relief to HR departments that are overwhelmed by employee paperwork, struggle to get payroll straight, or can’t hire talent or retain employees because of substandard benefits.
Essentially, a PEO will manage all HR work that your company would typically have to outsource to a wide selection of service providers like marketing, accounting, payroll, and IT support.
What a PEO will Do
Instead of struggling to find the time to manage a variety of vendor relationships, a PEO can serve as a supplier for managing employee benefits, payroll processing, worker’s compensation, performance management support, training and development, recruiting support, and strategic human resource support and planning.
Two major issues many companies struggle with are mitigating employer liability risks and ensuring compliance with state and federal employer-related laws. A PEO will take care of managing these two highly complex aspects of managing a business.
What a PEO will Not Do
A PEO can provide so many essential services that it might seem that they have taken over your business. This is actually not the case at all.
A PEO will not control your business; it will not replace your current human resources staff; and it will not cause any disruptions to your workplace or its culture.
Costs of a PEO
The cost of working with a PEO will depend on many factors. What services do you need? How many employees do you have? What type of business do you run? The cost structure will also depend on the PEO provider you pick. Some will determine pricing based on a percentage of your gross payroll. Others will charge a fixed amount for each employee.
Summary of Benefits
Let face it, it’s difficult, if not impossible, for a start up, and sometimes even a slightly more mature company, to afford an army of professional people to help it with its core human resource functions.
Since it takes years of education and experience to become an accountant, a lawyer, a human resource professional, a benefits manager, or a manager of information services, these professionals charge top rates for their services. However through the PEO industry, small to medium companies can now get all the professional help they need to operate their business. They can now use outside resources to increase productivity while reducing direct employee cost.
In conclusion, then, a PEO will help your company get access to comprehensive and affordable benefits services, assist with the complexities of the Affordable Care Act provide your HR administration with relief from payroll and other forms of overload, give ongoing government compliance assistance, offer workers’ compensation coverage and claim resolution, and serve as a go-to resource when you need the help and advice of seasoned Human Resource professionals.