Running a successful business is filled with growth challenges. You have to navigate the market landscape, secure clients in a competitive business ecosystem, and pull off successful and cost-effective marketing campaigns. However, running a business is also filled with HR challenges.
Over 170,000 small and mid-market business owners turn to Professional Employer Organizations (PEOs) to alleviate HR challenges. HR and PEOs work together on payroll, compliance, and benefits administration – tasks that when done alone can often distract you from your primary goal of growing your business. Yet, there are still plenty of misconceptions that float around the term PEO. Some business owners believe that PEOs take away control of their business and employees. In reality, PEOs provide an average ROI of 27% while positively impacting how you run your company.
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What HR Responsibilities Does A PEO Handle?
PEOs provide end-to-end support across a variety of HR buckets. PEOs offer more substantial benefits than traditional HR outsourcing solutions, often focused on niche needs. The vast majority of companies that leverage PEOs use them across their entire HR infrastructure.
Some of the responsibilities PEOs can handle include:
- Compliance and risk reduction
- HR administration
- Payroll management
- Payroll taxes
- Benefits procurement and administration
- Workers’ compensation procurement and administration
- FMLA assistance
- OSHA advice
- Employee handbooks
- Issuing W-2 forms
- HRIS Technology provision
A PEO does not touch anything related to products, services, or customers. They work in concert with you to implement HR best practices and reduce risk so you can focus on your mission.
What Responsibilities Does Your Business Handle If You Hire a PEO?
If your PEO is handling your HR responsibilities, where does that leave you? One of the most common myths associated with PEOs is that they force you to “lose control” of some of your business. However, you’re still one-hundred-percent responsible for controlling your employees, running day-to-day operations, and delivering products and services to your clients/customers. PEOs only take over HR duties.
Your PEO helps with risk and compliance, delivering cost-effective and world-class benefits to your employees, navigating the complexities of payroll taxes, and spending time and energy managing claims and creating top-tier employee handbooks. You still run your business.
How Does a PEO Partnership Cut Costs?
PEOs provide tangible, measurable value across your entire HR ecosystem. They’re incredibly effective at cutting costs, and companies that use PEOs grow 7 to 9 percent faster. Let’s break down how PEOs cut costs within the following HR functions:
Benefits Administration
Small and mid-market businesses lack the employee density to secure cost-effective benefits. Smaller companies will pay around 18 percent more for health insurance, and they’re locked out of some of the upper-tier retirement and wellness benefits packages. PEOs can help SMBs acquire enterprise-grade benefits at lower costs. Additionally, your PEO will help you administer those benefits and leverage self-service technology to provide employees with quick and efficient means of navigating their benefits.
Risk Management
Fifty-seven percent of senior executives say that “risk reduction” is their number one priority. These are enterprise leaders that have fully-staffed law, HR, and compliance departments. As a small business, reducing risk requires the expertise of a knowledgeable team. Penalties for a single mistake on a simple form like an I-9 can cost you thousands of dollars, and OSHA fines can reach $134,937 per violation.
In California, mistakes on HR tasks like payroll can quickly turn into expensive affairs. Each year, thousands of employees file PAGA lawsuits against their employers, leading to massive, multi-million-dollar judgments. To put it simply, the average business owner doesn’t have the time, experience, or people to navigate the stream of compliance requirements. Between local, state, and federal laws, there’s an enormous number of new bills and law changes each year. Your PEO has all of the resources and industry knowledge to help you stay compliant across your entire HR ecosystem.
Hint: Even if you have a dedicated HR department, risk and compliance are the two largest time saps. HR teams spend 36 hours a week dealing with payroll alone. That’s time they could be spending growing your company culture and hiring the best possible people.
Payroll Management & Taxes
Payroll is a notoriously tricky part of small business operations. You need to make sure your employees get paid accurately and timely. PEOs completely handle your payroll, eliminating errors and creating happy employees in the process.
PEOs Help Business Cut Costs, Not Control
It would be challenging to break down every way that a PEO helps your company. They’re growth-driven, HR outsourcing solutions that exist to help you find tangible value in your HR ecosystem. But, all of those benefits are nothing compared to the peace of mind you get with having an expert partner by your side so you can focus on engaging your employees, pleasing your customers, and growing your business.
