What is a PEO?
Professional Employer Organizations
Having management done effectively can be a difficult task in the competitive business world. Professional Employer Organizations, or PEOs, help companies of clients. They do so by developing strategies in outsourcing the management of certain business factors such as payroll, workers’ compensation, employee benefits, and human resources. In fact, PEOs keep the clients’ focus in mind to optimize the competitive edge of the business as the client company can now focus on more lucrative endeavors.
When it comes to managing complex related matters, businesses need as much help as possible. It may be tedious to allow other fields to progress as businesses may need to keep records consistent and error-free for matters such as health benefits, payroll, workers’ compensation claims, unemployment insurance claims, and payroll tax compliance. With the bulk work needed for the employees to be fully satisfied, a company may sacrifice productivity for compensation. A PEO prevents this from happening and opens up the gateway to other possible management systems. A business will then benefit from the advantage of rerouting their focus on more profitable means in their business.
The PEO Advantage
You need the benefits a Professional Employer Organization (PEO) can bring to your business to make it soar. We independently work with 50+ leading PEOs in the marketplace. Our PEO Partnerships will act as more than just an addition to your Human Resources department they provide a Client Relations Partners and SHRM certified Human Capital Consultants that provides expert guidance on a host of topics relating to human resources and employee concerns. With our Client Relation Partners, you are assured of a prompt and knowledgeable response to all your human resource questions.
Business owners who use PEO services also have full and free access to additional services such as employment verification and background screening, drug testing, recruiting, professional development and continuing education instruction and seminars. With a PEO at your side, you are able to attract and keep the absolute best employees to further the growth of your business.
So what do they DO?
There are several “core” features that are offered by nearly every PEO company. They are:
HR Outsourcing – Human Resources tasks are often very detailed and technical, and it can be easy to make a mistake or miss a crucial step when filing paperwork. For a business owner, HR duties can become very time-consuming, tedious, and stressful. PEOs act as a dedicated human resources department for their clients, and will monitor employment regulations and reporting requirements. In addition, hiring, firing and interviewing assistance can typically be given by the professional employer organization. They can also provide access to HR experts that will give you advice on compliance and recruiting, and even put together employee handbooks and employment procedure manuals.
While there may be differences in the offerings and organization of different employee leasing companies, it is important to note that while the HR tasks are managed by an outside service, the business owner is still responsible for day to day management of their employees.
Payroll – PEOs process payroll, deliver checks, perform direct deposits and file payroll taxes. They ensure your workers are categorized correctly, and that you are compliant with the most up to date government rules and regulations. This service is especially useful for companies with employees in multiple states. They ensure that payroll is filed properly for each state, saving business owners time and money.
Benefit Outsourcing -To maintain a competitive edge and retain key employees, small businesses must compete with large companies that can offer extensive employee benefit programs. PEOs provide access to a broad range of medical, dental, retirement and other insurance offerings thus allowing their clients to offer a competitive, well organized package to attract talent, boost employee morale and retain their best employees. A PEO will also help insure compliance with government regulations related to benefits such as COBRA and the PPACA.
Though these core services are very important, there are still many other benefits to co-employment. Not all PEOs offer these same additional services, and these differences often determine which PEO is the best fit for your company. Some of these additional services are:
- Worker’s Comp -This benefit is so popular that many PEOs are now offering worker’s comp as a core service. It’s worth noting that if a business is satisfied with its existing coverage, it is usually possible to find a PEO that will allow the company to keep its individual policy. However, companies can benefit from obtaining worker’s comp insurance through a PEO. PEO services are usually subject to lower rates, and these savings can offset the PEO’s cost of services. Typically, a PEO will also review and process worker’s compensation claims, saving small businesses a great deal of time.
- Safety – Because the PEO’s service may be responsible for worker’s compensation, they may also provide risk and safety consultants. These consultants will review facilities, give advice, and even develop safety programs tailored exclusively to their client’s needs.
- Recruiting – In addition to traditional HR services, some PEOs provide access to a recruiter or a job posting service. They may also screen applicant resumes or perform initial interviews. This helps save business owners time, and ensures that final interviews are conducted only with serious, qualified candidates. However, not all PEOs are involved in the hiring process, and employers do not have to use this service if they would rather recruit on their own.
- Training Services – If offered, training may be local or web based, and is often provided at a discounted fee. Training areas can range from employee development and computer skills to sexual harassment and ethics programs.
- Performance Management – Outsourced human resources departments provide guidance concerning performance reviews and methods of identifying and retaining key employees. This service helps a business owner understand which employees are doing the most for their company, and how to reward their efforts. Additional services available may include on-boarding programs, evaluation & performance tracking, goal development, compensation management, market salary data, workforce planning, and even writing tools for performance reviews.
- Outplacement Services – This service helps to limit risk when performing a reduction in the workplace. With this service, downsized employees will have some assistance while searching for a new employer.
- Background screening – Some PEOs offer background screening to assist in the hiring process. With sufficient background screening, employers can avoid hiring high-risk individuals who may cause concern for a small business. This service is usually discounted due to volume-based pricing.
- Drug Screening – As in background screening, this step insures employers do not hire high-risk individuals. Again, this service may be discounted due to volume-based pricing.
But What Does it Cost?
Most PEOs charge a flat fee per employee per year based on a percentage of payroll. This percentage will vary depending on the number of services utilized by their client. For example, a contract to manage employee recruitment, the payroll process, medical insurance administration and employee retirement planning will pay a larger fee than one who only contracts to oversee payroll.
PEOs can also offer bundling packages to reduce overall cost – for example, Human Resources, background checks, and drug screening may be offered together for a reduced rate. Of course, businesses should take care not to pay for services they will not use, as this will increase the price of co-employment.
More Stats, Please
The nation’s largest trade association for PEOs is the The National Association of Professional Employer Organizations (NAPEO). With well over 400 PEO members, NAPEO operates in all 50 states. Member companies range in size from brand new companies to large, publicly held organizations with many years of experience. NAPEO describes itself as The Source for PEO Education®, bringing its members with the very best educational options and business resources, including conferences, seminars, magazines, online services, marketing resources, public relations support and more. The Voice of the PEO Industry®, NAPEO also protects the interests of its PEO members by proactive lobbying efforts and ongoing, timely communications on legislative/regulatory issues of interest. For more information on growth in the PEO industry, you may review some of NAPEO’s statistics here, www.NAPEO.org.
Is a PEO Right For My Group?
If you’re a small business owner who has concerns about payroll, filing paperwork, and complying with government regulations, co-employment may be the service you’ve been looking for. You may already have a PEO but confused as to unbundling the administration fees form the benefits component you are actually paying. In some cases, a PEO may NOT be right for you. With Health Care Reform your company may qualify for a small business tax credit or a large percent of employees may qualify for an income tax credit on the individual exchange.
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