Even small businesses can benefit from a professional employer organization (PEO). Small businesses tend to have HR done on a DIY and ad hoc basis by the owner and other personnel. This results in opportunity cost from people not engaging in revenue-generating activities and poor risk management (untrained people are more likely to make expensive mistakes).
A PEO can help your small business grow by providing scalable human resources solutions and access to the expertise you could not otherwise afford. Businesses that use PEOs grow 7 to 9 percent faster and are 50 percent less likely to go out of business.
Choosing the best PEO for your very small business, however, can be a daunting task. Here are some questions to ask:
Should your business be partnering with a PEO? Learn more!
Can They Provide All the Services You Need?
This can be challenging as you might not even know for sure what you need. Even the smallest business can benefit from someone handling payroll, benefits administration, workers’ compensation. A PEO also gives advice on employee relations and training.
For the smallest businesses, co-employment is particularly important as it allows you to put your employers on the PEO’s benefits plan and workers’ compensation insurance while ensuring your benefits are competitive.
What Are Their Communication Procedures?
Everyone has their preferred channels of communication. Make sure that the PEO you choose is comfortable with the ways you want to communicate and that communications channels remain open. Avoid a PEO that limits when and how you can contact them (within reason), especially if they are managing your benefits enrollment and thus may need to talk directly to your employees.
What is Their Company Culture?
If you don’t have an HR department yet, then it’s particularly important to get a feel for and understanding of the PEO’s company culture. Your employees may be having direct contact with the PEO, so you need to make sure their company culture meshes with yours, or that it resembles the kind of company culture you are seeking to develop.
One of the largest potential disadvantages of a PEO is its influence on your culture, which can lead to resistance from employees, so make sure that you choose the right PEO in the first place.
Have They Worked With Businesses in Your Industry Before?
Every industry is a bit different. There are minimal advantages to choosing a PEO that has worked within the same industry, and it shouldn’t leave a PEO out of the running. Most employee concerns are universally applicable. However, a PEO familiar with your industry can help you with employee development, return-to-work programs, and many things that work together to reduce your costs and speed your company’s growth.
Do They Have Customizable HRIS Technology That Will Integrate Seamlessly With Yours?
If you flinch at the very mention of human resource information systems, then you will need help with this. Make sure the PEO has HRIS technology that will integrate with any systems you are already using or works well with the way you operate.
They should be willing to customize their HRIS to meet your needs, rather than telling you what you are going to use and expecting you to do all the adapting. This doesn’t mean you shouldn’t listen to them on what options might be best for you, but if they expect the HRIS to be one size fits all, they may be a poor choice, especially as you grow.
Do They Have a Substantial Workforce in Terms of Staff and Expertise to Scale as Your Business Grows?
You don’t want to have to change PEOs down the line, so be sure to choose one that has the expertise to scale as your business grows. Think not just about the PEO you need now, but what you hope to need five or ten years down the road.
Will They Even Consider Working With You If You Have Fewer Than X Employees?
Many PEOs have set limits in terms of what they will look at. They may have an employee minimum. This might be as low as 5 or 10 employees, but you start needing help with your very first employee. Look for a PEO that is comfortable working with very small companies and willing to build a relationship with you as you grow.
Working with a PEO can and will help your small company grow. You need to make sure that you choose the right PEO partner for the long term.
For more help and to learn about how Execustaff HR can help, download our e-book “What Should You Expect From Your HR Outsourcing Service Company” and check out our blog for more advice on handling HR as a very small business.
