What is a PEO (Professional Employer Organization)?

Do you struggle with human resources tasks? Does it feel overwhelming to handle your business and its growth along with the administration required? A PEO or Professional Employer Organization may help.

Each PEO provides different services, but we’ll give you an overview of what you can expect and how to find the right service.

What is a Professional Employer Organization?

As a business owner, you can hire a PEO to handle your HR duties. Each PEO offers different services, but in general, they can handle payroll, hiring, benefits administration, workmen’s comp, drug testing, FMLA, and more.

A Professional Employer Organization has a professional staff experienced and knowledgeable in all things HR-related. A PEO takes the stress off your company to have an HR department in-house while removing the burden of the HR tasks from the owner’s shoulders too.

How Does it Work?

A PEO is like your business partner. You own the business and run it how you want, producing sales, handling marketing, and growing your business. You make all business decisions regarding how your business operates.

A PEO is your HR department except they don’t work for you. Instead, you hire them to handle your HR work as a service. What they do for you depends on what they offer and what you need.

You work out a plan with the PEO based on what they offer and what you need – no two PEOs work the same.

Reasons to Use a PEO

Every business has different reasons for using a PEO, but here are the most common reasons:

Process Payroll

Payroll can take up a lot of time and it requires a lot of compliance. Outsourcing your payroll and tax filings can free up your time and ensure you’re handling them right.

Administer Benefits

If you offer health, dental, life, or any other insurance options to your employees, it takes a lot of paperwork and administration to handle. You can outsource these tasks to your PEO knowing your employees are well taken care of and you don’t have the headache of the tasks on your shoulders.

Handle Legal Work

PEOs are on top of the latest regulations employers must follow. Whether you offer health insurance, retirement benefits, or any other benefits, there are certain compliance issues you must meet and if not could face serious consequences. A PEO can ensure you are always within compliance.

Handles Workmen’s Comp Issues

If an employee gets hurt on the job, it’s a paperwork and legal nightmare for employers. A Professional Employer Organization can oversee the details, manage cases, handle the legal aspects, and ensure you are always within compliance. If the case gets to court or has other issues, your PEO can assist with that as well. 

What can a PEO NOT Do?

PEOs are a great resource for employers, but there are certain things they don’t do, which you should be aware of:

  • Make business decisions for you
  • Fire employees
  • Make hiring decisions (they can do the screening, but you make the decisions)
  • Make labor or supply decisions

Who Should Use a PEO?

Any business owner who needs HR support can benefit from a PEO, but some businesses benefit more than others.

Real estate companies, technology companies, and healthcare companies are great candidates for a PEO as are insurance companies, accounting firms, manufacturing companies, and even wholesale companies.

Any company with employees and whose owner doesn’t have time to handle the compliance, paperwork, benefits, workmen’s comp, and legal aspects of having employees should consider using a PEO.

What is the Cost of PEO?

Each PEO charges different fees. Some work on a flat fee structure and others work on a percentage of the total payroll. 

To get the right estimate, you’ll need to provide a PEO with the details of your business and what you want from their services. This may include:

  • The number of employees
  • Your existing benefits
  • What services do you want the PEO to provide

The more services you need, the more it will cost. For example, you can hire a PEO to do just your payroll or you can use them to do everything HR-related in your company including running your benefits and handling your workmen’s comp benefits.

How to Find the Right PEO

Like any service, you should shop around for the best PEO service. It’s important to focus not only on the cost but on other factors too including:

  • Experience

How much experience does the organization have? Do they work in your industry? Do they work with businesses the same size as yours? Find a company with the experience closest to what you need.

  • Time

Make sure the PEO can dedicate the time you need for their services. The more services you need, the more time they’ll need free to help your business. Make sure you don’t choose an organization that’s already overwhelmed.

  • References

Ask a PEO for references of companies that currently use them or used them in the past. If they are hesitant to provide references, they may not be a good fit. You should be able to talk to others and see what they think.

Final Thoughts – Do you Need a PEO?

A PEO is the best way to ensure your company runs smoothly without overwhelming you as the owner. HR tasks take up a large part of your time, especially if you have a lot of employees. It can help you stay within compliance, provide your employees with what they need, and ensure you get the best help when screening new hires, dealing with benefits, or handling other legal issues that pertain to your business.

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