Any modern business owner can tell you that managing a team and building a successful company is, more often than not, a juggling act. With growth comes a substantial increase in employee needs, as well as the managerial responsibility to look ahead to the future in determining assets that will attract more talent and provide stability within the company. Sensible business owners often ask themselves, “Is a PEO good for my business?” A PEO works with the business owner to handle the overwhelming or extraneous tasks that can distract the owner’s attention from future growth opportunities.
What Is a PEO?
PEO is an acronym for Professional Employer Organization. It’s synonymous with the concept of employee leasing. This type of organization is set up to work with company leaders to streamline certain elements of important business tasks. For example, a PEO can manage payroll efficiency, handle certain types of Human Resources responsibilities, and even use its network to obtain a much wider spectrum of employee benefits that might be out of reach to a small-business owner. These perks make PEOs very attractive to business owners who question whether hiring a PEO would be good for business.
The agreement between a PEO and a business owner constitutes co-employment of the business. This can be an intimidating phrase for owners; however, co-employment allows the PEO the authority to execute tasks in the agreement contract, freeing up the business owner to focus on his or her management work.
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What Type of Work Will a PEO Handle?
When you first meet with the PEO’s representatives, you will agree to a particular distribution of work. Some companies need quite a lot of assistance, while others only need one or two tasks to be managed. It will depend on your self-evaluation of your business’s unique needs and the various services offered by the PEO. Specific roles and operations include, but are not limited to:
- Payroll management to ensure efficient and correct employee payment
- Workers’ compensation direction, including insurance coverage and claims management with the assistance of loss-prevention experts
- Employee benefits opportunities found through the PEO’s extensive network, such as coverage for medical, dental, and vision, as well as retirement, personal accident, and life insurance, short- or long-term disability insurance, educational opportunities, healthcare flexible spending accounts, and even adoption assistance
- Human Resources authority to maintain up-to-date employee handbooks, legal compliance in drug or alcohol testing, or hiring and firing needs (including employee orientation or termination support)
- Recruitment expertise to find the right employees to suit your company
- Training sessions on a wide selection of topics, including workplace safety, professional leadership networking, and diversity awareness
- Risk minimization and compliance assurance regarding tax filing, Employee Practice Liability Insurance (EPLI), or Equal Employment Opportunity responsibilities
What Does This Mean for a Business Owner?
Essentially, vast savings give a PEO meaning – savings of time, energy, and money for business owners. Upon agreements with the PEO, no longer would you need to spend valuable time researching tax laws, reading complex healthcare and insurance requirements, or paying exorbitant sums of cash in the hiring process. This is how you can determine if a PEO is good for business. It frees you up to steer your company ship, develop new business, and create your product in a calmer mind frame, secure in the knowledge that the PEO is handling its work.
What Kinds of PEOs Are There?
There are two types of PEOs available: PEOs and CPEOs. A CPEO is a PEO that has applied with the Internal Revenue Service for designation as a Certified Professional Employer Organization, which allows the CPEO to manage payment and reports of federal employment taxes for a company’s employees. CPEOs must submit to a financial audit, allow background checks of their employees, and provide proof of positive capital and timely payment of employment taxes. A CPEO assumes liability for all tax payments (rather than dividing liability with its client company) and ensures maintenance of particular tax credits for its clients.
What Should I Look for in Choosing a PEO for My Company?
NAPEO, the National Association of Professional Employment Organizations, states that the USA has upwards of 900 PEOs available, providing service to 175,000 businesses. With that many PEOs to choose from, how do you select the best one for your company? Here are three elements to keep in mind:
- The best PEO is one that crosses every T and dots every I. As a business manager, you want to work with an organization that is focused on the details in order for you to relax knowing the PEO is upholding its side of the agreement.
- Make sure the PEO’s employees have a strong work ethic, are results-oriented, and are on top of their assignments. Availability in case you have questions or concerns is certainly necessary as well.
- A good fit and supportive energy are important. A PEO that steamrolls your company vision or talks down to your employees in business matters will not work in the long run, even if its benefits are superb. Think of hiring a PEO as finding a helping hand in the complex arena of company management.
The Bottom Line: Peace of Mind
Entering into an agreement with a PEO should hopefully solve the question of whether a PEO is good for your business. A good PEO will work with you to achieve goals, save money, smooth out employee concerns, and minimize stress across the board. From HR to payroll, taxes to training, the right PEO will provide specialized assistance to your company. For any small- to medium-sized business, these benefits are worth it.