What Is a PEO and How Can They Benefit Your Business?

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What Is a PEO?

A PEO, or Professional Employer Organization, is a strategic HR partner that offers comprehensive HR solutions. PEOs provide payroll, benefits, and compliance services through an outsourced partnership — known as co-employment — so small business owners can focus on their core business while relying on the expertise and resources of the PEO.

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What Is Co-Employment?

One of the most commonly misunderstood things about PEOs is the nature of co-employment. Co-employment is a legal arrangement in which a business shares employment responsibilities with a PEO. In a typical arrangement, the PEO becomes the legal employer of a company’s employees for tax and payroll services while also handling issues such as workers’ compensation and benefits administration.

What Co-Employment Isn’t

Co-employment does not entail giving up any ownership of your business to a PEO. Business owners retain full control over business operations and decisions, including those related to employee management — such as compensation and who to hire or terminate. While you may consult your PEO on HR and employee-related business strategies, the PEO has no authority to make decisions — only to process payroll, withhold and pay taxes, maintain workers’ compensation, administer benefits, and anything else agreed upon and outlined in the legal arrangement.

The Cost Benefits of Partnering With a PEO

When you’re running a small business, cost efficiency is often a top priority. By leveraging economies of scale, reducing administrative costs, consolidating purchasing power, and mitigating compliance-related expenses, working with a PEO can prove to be a game-changer for your bottom line.

Access to Economies of Scale

When it comes to purchasing power, size matters. By partnering with a PEO, small businesses gain access to economies of scale typically reserved for larger organizations. PEOs can negotiate competitive rates and favorable terms for essential services such as healthcare plans, workers’ compensation insurance, retirement plans, and more. This collective leverage enables small businesses to enjoy cost savings and benefits that would be challenging to obtain on their own.

Reduced Administrative Costs

Handling HR tasks internally is a full-time job. Odds are, you’re not in a position to tackle two full-time jobs. However, with a PEO, these administrative burdens are lifted. PEOs take care of payroll processing, tax filings, employee benefits administration, and other HR functions. By outsourcing these responsibilities, businesses can reduce staffing needs and allocate resources more efficiently, which in turn unlocks substantial cost savings.

Consolidated Purchasing Power

PEOs can negotiate volume discounts and better pricing for various services and products that small businesses need, including HR software, employee training programs, and office supplies. By streamlining procurement through a PEO, businesses can bundle the services and solutions they need instead of purchasing them separately. And the more you’re able to bundle, the more you save.

Mitigation of Compliance-Related Expenses

Employment laws and regulations are constantly changing, which can make it hard to keep up with compliance. PEOs provide expertise and support in managing compliance, from maintaining up-to-date policies and procedures to ensuring accurate recordkeeping. By mitigating compliance-related risks and potential penalties, PEOs help small businesses avoid costly legal expenses and maintain compliance with confidence and control.

The HR Benefits of Partnering With a PEO

A PEO can bring unmatched experience and support to the table to help take the tedious HR tasks off your plate. From simplifying payroll and tax administration to supporting risk management initiatives, PEOs can take on the busywork of HR so you can focus on projects that drive success for your business.

HR Management and Compliance Assistance

Ever-changing employment laws and regulations are not easy to keep up with. Luckily, PEOs possess a wealth of knowledge and experience to help you navigate the complex world of HR management and compliance. From crafting effective HR policies and procedures to staying on top of recordkeeping and employee training, a PEO helps ensure that you’re well-equipped to handle the complexities of HR while avoiding compliance pitfalls.

Payroll and Tax Administration

PEOs can also handle the never-ending cycle of calculations, deductions, and paperwork (also known as payroll). By offloading the nitty-gritty of payroll processing and tax administration, you can save precious time and headaches. With the right PEO at your side, you can streamline payroll, ensure accurate tax filings, and keep up with those pesky tax regulations.

Employee Benefits Administration

Offering attractive employee benefits can be a game-changer when it comes to attracting top talent. But, while a PEO can help you secure a more desirable benefits package, managing all those benefits can be a hassle. Fortunately, a PEO can take care of all your employee benefits administration — from enrollment to ongoing management and support. With a wide array of benefits options and years of negotiation experience, PEOs help small businesses offer comprehensive benefits packages without the headache of handling them all on their own.

Risk Management and Workers’ Compensation Support

Nobody wants to deal with workplace mishaps or unexpected accidents — but it’s an important responsibility that needs to be taken seriously. That’s why PEOs provide valuable assistance in managing risks and navigating workers’ compensation requirements. They offer guidance on safety protocols, help assess potential risks, and support businesses in developing effective risk management strategies. And if the unfortunate happens, they’ll assist with workers’ compensation claims and be there to lend a helping hand throughout the entire process.

The Time-Saving Benefits of Partnering With a PEO

Life moves fast for a small business, and time is a precious resource. Partnering with a PEO can unlock significant time savings for business owners. Let’s explore how a PEO can streamline your HR processes, delegate non-core tasks, enhance efficiency through automation, and allow you to focus on the bigger picture.

Streamlined HR Processes

Say goodbye to juggling multiple HR responsibilities. PEO services cover a lot of the tedious HR processes, from recruitment and onboarding to employee management and compliance. By leveraging their expertise, advanced systems, and efficient workflows, PEOs help businesses optimize their HR operations and reduce the time spent on administrative tasks.

Delegation of Non-Core Tasks

As a business owner, your core focus should be on driving growth and innovation — not getting bogged down by burdensome HR tasks. PEOs take the weight off your shoulders by handling functions such as payroll, benefits administration, and regulatory compliance. By delegating these responsibilities to experts, you can reclaim your time and redirect your energy towards strategic initiatives that propel your business forward.

Enhanced Efficiency Through Automation

Automation is a hot topic across every industry, and PEOs can help you harness it to increase efficiency and reduce manual labor. With advanced HR technology platforms, PEOs automate time-consuming tasks like payroll processing, benefits enrollment, and reporting. By streamlining these processes through automation, PEOs eliminate tedious manual work and minimize the risk of human error, freeing up your time and ensuring accuracy.

Focus on Strategic Business Initiatives

When you partner with the right PEO, you’re able to focus on what matters most to your business. By offloading time-consuming administrative tasks, you can spend more time developing innovative strategies, building valuable relationships, and growing your business. A PEO gives you the breathing room to think big and keep your company on a growth trajectory.

In today’s competitive job market, attracting and retaining top talent is crucial for the success of any business. With the help of a PEO, small businesses can access a wide array of benefits and perks that can give them a competitive edge over similar companies. Learn how PEOs open the door to a range of enticing benefits and perks that will help you build a thriving, motivated team.

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Comprehensive Employee Benefits Packages

PEOs understand the importance of offering attractive benefits to employees. They provide access to comprehensive employee benefits packages that encompass healthcare, dental and vision coverage, life insurance, disability insurance, and more. By partnering with a PEO, small businesses can offer benefits packages that rival those of larger corporations, making them an attractive employer and helping them bring in perfect-fit talent.

Improved Employee Retention and Recruitment

When you’re able to offer robust benefits through a PEO, you’re more likely to retain your employees for years to come. People are more likely to stay with a company that provides competitive benefits and perks. So, small businesses with enticing benefits that demonstrate their commitment to doing right by their employees often have an easier time attracting more and better talent. More applicants means more opportunities to find the perfect people for your business.

Affordable Health Insurance Options

Rising healthcare costs are likely a thorn in your company’s side. However, partnering with a PEO provides access to affordable health insurance options that cover your employees and protect your bottom line. PEOs leverage their collective purchasing power to negotiate competitive rates with insurance providers, allowing small businesses to offer comprehensive health insurance coverage at more affordable rates. This not only benefits employees, but also helps businesses control their healthcare-related expenses.

Retirement Plans and Other Financial Benefits

We don’t have to tell you that planning for the future is essential. PEOs recognize the importance of retirement savings for employees and offer comprehensive retirement plans to ensure employers can help their staff secure their financial future. In addition to 401(k) plans, PEOs may offer other financial benefits such as flexible spending accounts (FSAs), commuter benefits, and employee assistance programs (EAPs), further enhancing the overall package of benefits and perks available to employees.

The Compliance & Risk Mitigation Benefits of Partnering With a PEO

Compliance and risk management are two areas of your business that can keep you up at night. Alone, managing these two responsibilities can quickly become overwhelming. But with the right PEO, ensuring compliance and minimizing legal risks is a whole lot easier. Let’s explore the compliance- and risk-related benefits that come with teaming up with a PEO — including assistance with regulatory compliance, staying updated with employment laws and regulations, handling unemployment claims and audits, and minimizing legal and compliance risks.

Download the HR Compliance Checklist for Small Businesses

Assistance With Regulatory Compliance

Rules and regulations in your particular industry are likely changing on a regular basis, which makes it hard to keep your compliance standards up to date. PEOs bring their deep understanding of compliance requirements in order to assist businesses in navigating this tricky terrain. Whether it’s ensuring proper recordkeeping, implementing effective policies and procedures, or handling regulatory reporting, partnering with a PEO provides small businesses with the guidance and support needed to meet today’s compliance obligations.

Staying Updated With Employment Laws and Regulations

Just like regulatory rules and standards, employment laws are also always changing. PEOs dedicate their resources to monitoring and understanding these changes, keeping their clients informed and up to date every step of the way. By partnering with a proven PEO, small businesses can access the latest information and ensure that their practices align with current employment laws and regulations, which reduces the risk of penalties and legal issues down the road.

Handling of Unemployment Claims and Audits

Dealing with unemployment claims and audits can be time-consuming and complex. PEOs take on the responsibility of managing unemployment claims and represent their clients during audits. With their expertise in handling these processes, PEOs can alleviate the burden for small businesses by navigating the intricacies, providing documentation and support, and ensuring compliance throughout the entire process.

Minimization of Legal and Compliance Risks

Small businesses face unique legal and compliance risks that can have significant consequences if not addressed properly. By partnering with a PEO, you get peace of mind knowing you’re in full compliance with the latest legal and compliance standards. PEOs work closely with you to identify potential risks, implement preventive measures, and develop comprehensive strategies to minimize legal and compliance risks.

As your compliance needs evolve, so too does the way your PEO provides support and services. With a proactive approach in place that’s always being analyzed and optimized, PEOs are able to help small businesses safeguard their operations and protect themselves from costly legal challenges.

The Tech & Employee Experience Benefits of Partnering With a PEO

Whether you’re looking to drive efficiency or an improved overall experience for employees — you need technology. PEOs often provide access to tech that can help you deliver the kind of employee experience that candidates typically find at larger organizations. This is a critical aspect of staying competitive in the labor marketplace. Let’s dive into a few of the tech and employee-experience benefits that businesses get when partnering with a PEO.

Accurate and Timely Payroll

Payroll processing software ensures employees get paid the right amount on time, without adding any extra stress to your life. Automating and streamlining this process helps save time and mitigate the risk of any errors or inconsistencies related to compensation.

Employee Self-Service Portals & Mobile Apps

A fast, convenient, and even delightful experience with HR? For many small- to mid-sized companies — and even enterprise organizations (though for different reasons) — this feels like an unattainable ideal. However, many PEOs offer software solutions that give your employees self-service options through web portals and mobile apps.

Dedicated Employee Support & Customer Service

When an employee has a question about their health insurance or about something related to HR that extends beyond the capability of self-serve options, who do they talk to? Without a dedicated HR team, that burden is likely falling entirely on the business owner or a single HR person. That responsibility alone can quickly exceed one person’s capacity.

PEOs offer a dedicated point of contact who can answer these questions with a high level of expertise and customer service. This provides your employees a reliable resource while relieving you of many of the disruptions that pull you away from the core needs of your business.

Additional Advantages of Partnering With a PEO

Some other advantages of partnering with a PEO include:

  • Employee training programs and resources
  • Professional development opportunities
  • Employee assistance programs
  • Performance management support
  • Business expansion or downsizing support
  • Employee onboarding and offboarding guidance

It’s important to remember that not every PEO offers the same services. If you’re thinking about partnering with a PEO, be sure to identify the primary needs of your business so you can choose the best partner for you.

Certified PEOs & Guidelines for Choosing the Right Partner

If you’re considering taking the next step and partnering with a PEO, you want to make sure you choose an organization that has financial stability and is capable of meeting the needs of your business. A good thing to check for is whether the PEO is certified by ESAC or by the IRS. These certifications ensure its financial and ethical practices have been independently accredited.

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Here are some other good guidelines to follow when choosing a PEO:

  • Assess your workplace to determine your human resource and risk management needs.
  • Ask for client and professional references.
  • Investigate the company’s administrative and management expertise and competence. What experience and depth does their internal staff have? Does the PEO corporate staffing allocation follow the priorities of the PEO’s marketed services? Does their senior staff have professional training or designations?
  • Understand how the employee benefits are funded. Is the PEO fully insured or partially self-funded? Who is the third-party administrator (TPA) or carrier? Is their TPA or carrier authorized to do business in your state?
  • Review the service agreement carefully. Are the respective parties’ responsibilities and liabilities clearly laid out? What guarantees are provided? What provisions permit you or the PEO to cancel the terms of the contract?
  • Make sure that the company you are considering meets all state requirements.

Should You Partner With a PEO?

The correct response to this question is everyone’s favorite answer: It depends. Here are some good indications that it may be time to begin conversing with a PEO:

  • You’re spending too much time on HR-related issues such as payroll, compliance, and employee support and not enough time on activities that directly impact revenue.
  • You’re having trouble attracting the talent necessary to either sustain your current level of growth or achieve your growth goals.
  • You have compliance challenges that are beyond your current capabilities.
  • You’re getting requests from employees for benefits that you currently don’t have access to or are unsure you’re able to afford.

If you’re experiencing any of these, you can schedule a consultation with one of our experts here at Emplova to discover how a PEO can help you save time, reduce costs, attract and retain talent, and, ultimately, grow your business.