What is a PEO?
A professional employer organization (PEO) enables companies to outsource the management of human resources (HR), employee benefits, payroll and workers’ compensation. Because PEOs can manage the majority of a company’s HR responsibilities, business owners have more time to focus on the operation and growth of their business.
PEOs consist of a team of experts able to take on the most challenging HR responsibilities and the most complicated federal and state regulations. When you hire a PEO, you enter into a “co-employment” relationship. In other words, the PEO becomes the legal employer of your personnel and assumes employment responsibility and risks. PEOs can even handle hiring and management responsibilities.
Benefits of Hiring a PEO
More and more businesses are beginning to see the value of PEOs. According to the National Association of Professional Employer Organizations (NAPEO), approximately 250,000 small-to-medium sized businesses (SMBs) and 2.5 million people take advantage of PEO arrangements.
Hiring a PEO offers many benefits:
More Efficient Use of Time. HR tasks can be labor intensive and time-consuming, especially if you’re not well-versed in HR policies and procedures. Though they are outsourced, PEOs are experts and know the ins and outs of day-to-day and long term HR responsibilities. When you let a PEO handle your HR tasks, you can focus on what’s important – running and growing your business.
Cost Savings. PEOs allow you to have an entire HR department without having to hire a single HR employee. They tackle the full range of HR responsibilities efficiently and effectively.
Benefit Plans. PEOs can offer your employees high-quality, affordable benefit plans. Because PEOs are the legal employer of all of their clients’ employees, they are eligible for insurance and benefit plans that most SMBs couldn’t otherwise afford. This allows you to offer premium benefits, which will help you attract top talent and increase employee retention.
- PEOs are HR experts. They have experience with all aspects of HR across industries, including education, hospitality, professional services, healthcare and nonprofits. PEOs provide the capabilities of a veteran HR department that can effectively handle any issue.
- PEOs help your company comply with complex and constantly changing laws and regulations. Instead of spending your valuable time and energy trying to understand and keep up, leave it to your PEO to ensure your company is in compliance.
Reduced Liability. PEOs help you reduce risk and liabilities by taking a proactive approach to preventing lawsuits and claims. If your company does face a claim, your PEO can effectively manage the situation on your behalf.
If you’re overwhelmed and distracted by HR responsibilities, you should consider hiring a PEO. PEOs offer business owners an expert HR solution that not only saves time and money, but also adds value by providing payroll, benefit plans, HR expertise, employee management and solutions to tax compliance issues (NAPEO).