Professional Employer Organizations, better known as PEOs, are an unsung hero of the small business world. Yet their services have the power to transform businesses, particularly those on the smaller side of the spectrum.
What are PEO Services?
PEO is a type of firm that provides comprehensive human resources (HR) outsourcing services to other businesses, particularly small- and mid-sized businesses. The goal of a PEO is to help these businesses manage their HR responsibilities more efficiently, so they can focus on their core operations and strategic growth.
The primary services provided by PEOs are as follows:
- Payroll Processing: PEOs handle all aspects of payroll for their client companies. This includes managing employee timesheets, calculating wages, withholding taxes, distributing paychecks, and providing electronic access to pay stubs.
- Benefits Administration: PEOs often offer a variety of employee benefits programs, such as health, dental, and vision insurance, retirement plans, life, and disability insurance, and more.
- HR Management: This includes a wide range of tasks, such as recruiting, hiring, and onboarding new employees, managing employee performance reviews, developing and enforcing company policies, handling employee grievances, and managing terminations.
- Compliance Assistance: PEOs help businesses comply with various labor laws and regulations, including those related to employment discrimination, workplace safety, wage and hour laws, and employee benefits.
- Workers’ Compensation Insurance: PEOs very often provide and manage workers’ compensation insurance for their client companies.
- Risk Management: PEOs help businesses identify and manage risks that could lead to legal liability or financial loss.
The Co-Employment Model
A unique aspect of PEOs is the co-employment model they use. In this model, the PEO becomes the employer of record for tax purposes and for providing benefits. However, the client company retains control over business operations and management of employees. This arrangement allows small businesses to access benefits and services often reserved for much larger organizations.
Benefits of Using PEO Services
One of the primary advantages of using PEO services is the cost savings. The people at Vertisource HR say that by pooling employees from various client companies, PEOs can achieve economies of scale in purchasing insurance, benefits, and other HR-related services. This often results in lower costs for the small business.
Compliance with labor laws can be a complex and daunting task for small businesses. PEOs have expertise in this area and can assist with compliance issues, helping to avoid potential fines or legal problems.
Outsourcing HR tasks to a PEO can help businesses save significant time and resources that can be better spent on strategic initiatives and growth.
Choosing a PEO
When choosing a PEO, there are several factors to consider:
- Accreditation and Certification: Look for PEOs that are accredited by the Employer Services Assurance Corporation (ESAC) and certified by the IRS. This will provide assurance that the PEO meets high standards of professional and ethical conduct.
- Services Provided: Not all PEOs offer the same services. Be sure to consider your business’s needs carefully and compare the services offered by different PEOs.
- Cost: The cost of PEO services can vary. Be sure to understand all the fees involved and how they are calculated.
- References and Reviews: Check references and read reviews to get an idea of the PEO’s reputation and the quality of its services.
PEOs provide an invaluable service to small businesses, offering HR outsourcing that can save time, reduce costs, and provide access to better benefits. Choosing the right PEO means small businesses can focus more on their core operations and less on administrative tasks, leading to greater potential for growth and success.