When choosing the right PEO, especially when it comes to human resource management, you should ensure that they offer basic HR services like benefits, payroll, and compliance.
Pros of PEO
1. Flexible, scalable:
Bundled HR solution covers you as you grow. i.e. Compliance changes based on # of employees. The HR Platform can handle 10 as well as 200 employees. The benefits scale up as you do. You are able to include value-added services as you grow.
2. Access to “Big-Company” infrastructure and benefits
- More health care benefit options for employees and their families mean:
- Attract high caliber talent in your industry
- Retain your best employees
- 401(k) and retirement planning
- Top-rated voluntary benefits and discount programs
- HR technology platform for administering benefit plans
3. Access to HR expertise
- Support for payroll and employee needs.
- HR and Human Capital consultants.
- Benefits administration
- Employee issues
- Strategic HR planning: Interview Traning and Permanence Management Reviews, etc.
- Ensure HR compliance with local, state and federal laws.
4. Shifting and sharing of liability
- Workplace safety
- Sexual Harassment
- Employer Practices Liability Insurance
- Affordable Care Act compliance
- COVID and New regulations
- Time Saver: You get back valuable time from doing redundancies. The average PEO client saves 10 hrs/month.
- Benefits Savings: The average client saves 15-40% on medical benefits alone. The national networks and robust benefits are also value-added.
- Savings on Workmans Comp.
- PEO’s are pay as you go WC. This means if you downsized in light of COVID you receive an adjusted lower rate the following month and not end of the year.
- PEO’s may be able to place hard to write Workmans Comp. Ex: Construction Industry
- State Unemployment: Since you are sharing in a larger company’s SUTA rate the rates are generally lower with lower fluctuations. If during COVID a company had high turnover their SUTA rate can jump much higher than a PEO.
1. Wrong PEO Selecting a PEO for the wrong reason(s): should be considered a long-term strategy, not a short-term fix. Some PEOs may charge a percentage of salary instead of a clear per employee per month cost.
2. Employers fear the loss of control Even though you will still be running your small business and making day to day decisions, the PEO will become the co-employer of your staff. PEOs do NOT have control over your salary. You control who you hire/fire. You decide on benefits eligibility waiting periods, plan selections, and employer contributions. The PEOs deal with HR responsibilities and risks, saving you countless hours and many headaches, but do not take away your independence.
3 System limitations Because the PEO is a business as well, and has to meet it’s own deadlines, they may request certain payments upfront. This may mean a fundamental shift in your cash flow because there will be consequences for being a week late with your payroll taxes.
4. It is NOT for every small business depending on your industry and demographics you may or may not be the right for a PEO. While the vast majority of clients are indeed enjoying benefits savings for some groups the costs may be even higher than small group health insurance. Addiotnaly, some companies can develop above-average very high risk and become too much of a liability burden for the PEO and the client can be moved to a higher risk category. The very advantage of a PEO can make it a disadvantage – they can underwrite.
Before you consider hiring a Professional Employment Organization, you should first find out what is a PEO so that you can know exactly what to expect from it. With the right PEO, you will be able to manage your businesses’ demand for growth and your employees as well.
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