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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