When you’re running a mid-sized company, the burden of human resources issues and complying with employment regulations isn’t small. While larger companies can afford to hire HR professionals at a cost of around $80,000 a year plus benefits, mid-sized companies may find themselves scrambling to split up human resources duties among several employees. Managers can spend up to 40 percent of their time doing administrative tasks that do not help the company’s bottom line.
Professional employer organizations, or PEOs, allow companies to outsource their human resources duties so that managers have more time to spend on profit-generating tasks. If your mid-sized company is struggling to keep up with human resources tasks and regulations compliance, a PEO could be the answer.
What Is a PEO and How Do They Work?
A PEO is a business-to-business service provider that offers companies the opportunity to outsource essential human resources responsibilities like payroll, workers compensation, employee benefits and health care. A PEO can handle every aspect of your company’s HR issues, from recruiting and training employees to creating employee handbooks to pursuing disciplinary action.
Because they specialize in helping companies comply with employment law, contracting with a PEO can remove the burden of liability from your company’s shoulders. The PEO you choose will share the risks of business management with your company.
Your PEO will be your company’s joint employer or co-employer. It will become your employees’ employer of record for tax purposes. The PEO’s name will appear on your employee’s checks and tax documents, but your company will still have control over your employees’ day-to-day tasks and activities.
PEOs Let You Offer Better Employee Benefits
Many smaller and seasonal companies struggle to offer their employees competitive benefits packages, like health insurance and 401(k) retirement plans. Your company may not be able to afford the best health insurance coverage on its own, for example. With help from a PEO, your company can enter a larger risk pool, and get lower rates on better health plans — that should make your employees happy.
The same goes for 401(k) plans. As a mid-sized company you may not have the clout to offer your employees a solid retirement package. Working with a PEO can give you access to the kind of benefits that will keep your employees loyal – and make future job candidates more eager to work with your company. Your company will be able to attract the most desirable candidates when it can offer the sort of benefits package a PEO can give you access to.
PEOs Offer Comprehensive Assistance with HR and Liability Issues
There are now more employment laws and regulations than ever, and many companies are struggling to keep up. One of the most valuable services PEOs offer is professional assistance with regulation adherence and liability issues. When you work with a PEO, you’ll have access to a host of professionals who can help your company navigate the confusing world of employment law. You’ll have the peace of mind that comes from knowing that your company is in full compliance with the law, and that you have access to the PEO’s legal department should you ever need to the advice or assistance of an attorney.
You’ll have help with all of the more mundane aspects of running a business, like creating company policy and handling employees’ issues. If there’s a problem with an employee, your representative from the PEO can speak with them. If you need to let an employee go, your PEO representative can handle that, too.
PEOs typically charge a percentage of your payroll or a flat fee per employee; the exact rate can vary widely depending on your company’s location, your number of employees, and whether your business operates year-round or seasonally. For mid-sized companies, the cost of a PEO is usually reasonable when compared with the cost of a full-time HR professional.
Most PEOs offer their services as a complete bundle that includes outsourcing of all aspects of human resources management. However, many PEOs will offer an a la carte selection of services that allows companies to pick and choose the PEO options that work best for their company. This way, you can pay for only the services you need.
If your company needs help with human resources management, but you can’t afford full-time human resources staff, a PEO could be the answer. PEOs allow mid-sized companies to outsource their human resources service for a nominal fee.
About the Author: Contributing blogger Sam Henderson is a B2B CFO with 20 years of experience in the field. He recommends National PEO for all your administrative needs.