Why a Professional Employer Organization is Good for Your Business

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Why a Professional Employer Organization is Good for Your Business

As a company, the focus is always on providing services or products to the client. However, as an employer, you have to focus on providing a quality work experience for your employees. While there are many ways to foster a positive work environment, one critical tool that too many businesses overlook is a PEO.

Understanding PEOs

A PEO is a short way of referring to a professional employer organization. These companies specialize in human resources. In fact, they serve as a third-party option. If a company wants to outsource its human resources department, a PEO can be hired to provide such services as needed. In this manner, a PEO is not dedicated to a single client. Instead, a PEO will work with a range of companies for human resources, healthcare and even retirement savings.

While companies of all sizes can work with a PEO, such outsourcing is particularly popular with businesses of small or medium sizes. These companies often have employees that need human resources support, but these companies typically lack the resources, skills or personnel to provide the quality needed.

Obviously, this kind of outsourcing comes with a cost. Because PEOs must be paid, some companies are reluctant to make the investment. In order to determine the right choice, it is necessary to look at the benefits. Only by assessing the gains associated with a PEO can any company determine if the investment is worthwhile.

PEOs Take on the Tax Headache

There are a lot of great things about running a business. Dealing with taxes is not one of them. The tax code is complicated, and the process is even messier for businesses. With a payroll to manage, navigating the tax code is stressful. While some businesses have an accountant on staff, others have to outsource the task.

Fortunately, a PEO can handle tax questions along with everything else. PEOs are there to deal with all tax issues including yearly returns and payroll deductions. It is the job of the PEO to know all applicable state and federal tax laws. The PEO will even make sure employees have a W2 form on time.

PEOs Minimize Administrative Details

A PEO will cover a range of tasks for businesses. This means that businesses are not bogged down by frustrating administrative tasks. These little jobs are necessary to the functionality of the business, but they are tedious and distracting. Instead of wasting time and manpower on these boring office tasks, it is preferable to let the PEO deal with them.

PEOs Reduce Your Liability

Operating a business requires some vulnerability. With employees on the payroll and paying customers on hand, it is likely that not everything will be smooth sailing. It only takes one disgruntled employee or a single dissatisfied customer to open a can of legal worms. Instead of leaving the company vulnerable to litigation, a PEO will provide critical civil defense and liability insurance. Plus, if a situation should arise, the PEO will be in charge of dealing with the case. This means the company will have better coverage and fewer hassles.

PEOs Open the Door to Retirement Accounts

Most companies offer employees access to retirement accounts. Planning for retirement is essential, and for most employees, a retirement savings plan is simply an expected part of the benefits package. Choosing and maintaining the right plan for employees can be difficult for those who are unfamiliar with the system.

The good news is that a PEO will have all that figured out. The PEO will provide a comprehensive overview of the available plans so company leaders can make the best choices for their employees. This way, companies have more options and better options for retirement savings.

PEOs May Recruit New Employees

Hiring the right employees is important. It is also a time-consuming and expensive process. A PEO can significantly streamline the process. Most PEOs are active on recruiting networks, which makes it easy to gather a group of qualified candidates for any open position. Better still, PEOs are adept at screening potential candidates. This means you only have to see the best of the best.

PEOs Track Employee Performance Better

PEOs are expert managers, and their ability to oversee employee performance is a perk worth noting. Many owners struggle to evaluate employees and provide critical feedback, but a PEO will have the experience and skills to systematically look at performance issues. In many cases, this is done with advanced performance tracking software that includes step-by-step forms to guide the process.

PEOs Can Actually Reduce Costs

Cost is often the main reason companies avoid PEOs. However, the evidence suggests that working with a good PEO will actually save companies money. This happens on a number of fronts.

First, PEOs handle your human resources. This means you do not need staff or software. This can be a significant source of savings.

Second, the savings will manifest in the benefits package. Paying for employee benefits is extremely expensive. However, PEOs often have access to discounted rates and superior coverage. Offering cheaper rates is a key tool PEOs use to recruit new clients. Companies that work with PEOs enjoy lower insurance costs across the board. The savings will be most dramatic for smaller companies with 100 employees or fewer.

PEOs Improve Company Benefits

The benefits will not only be more affordable. In most cases, they will also provide superior coverage. Many small businesses cannot afford the best benefits packages. These packages are typically reserved for larger companies that can buy benefits on a large scale. PEOs work with many clients, which means their scale is always large. Therefore, the packages offered by PEOs tend to include elite coverage perks. In short, companies get better benefits and cheaper benefits.

PEOs Allow Companies to Focus

The advantages of working with PEOs will impact the company on a holistic level. With fewer administrative tasks and better performance tracking, companies can get back to business. In other words, companies can eliminate distractions. Business can be conducted more efficiently, and owners can use their talents in more effective ways.

PEOs handle human resources, taxes, payroll, insurance, legal compliance and more. These are all necessary parts of your business, but they are not the reason you went into business. With a PEO, owners can focus on the real reasons they started the business in the first place.

PEOs Make Companies Competitive

All of these factors combined mean that a company with a PEO is better situated for success. By offering better benefits, companies attract better employees. With better recruitment strategies, the best people are placed in the right jobs. As the company streamlines its operations, production can be boosted. It is a chain reaction that has a clear impact on the company. For the competitive edge, a PEO is a great tool.

The Bottom Line

Companies should always strive to be the best. In some cases, that means seeking out other professionals who can do specialized work on the company's behalf. Hiring a PEO is not a small decision, but it can certainly have a big impact on the way your company moves forward. Consider the benefits, and you may discover that a PEO is the right choice for your company.