PEO: What you need to know

A Professional Employer Organization, or PEO, is a firm that allows small- and medium-sized businesses to outsource most of their HR management responsibilities.

PEOs deliver cost-effective, outsourced services for HR, payroll, benefits, and risk management, giving business leaders, entrepreneurs, and managers more time to focus on growing their business and their bottom lines.

Many PEOs also offer expanded HR services like time and attendance reporting, recruiting, employee training, and performance management.

Professional employer organizations provide services to almost 180,000 businesses in the United States – that’s almost four million people trusting their HR and compliance needs to professionals just like us.

In fact, did you know companies who partner with a PEO…

Grow up to 9% faster?

CEOs and business leaders can outsource their day-to-day HR needs to redirect internal focus to high-value activities that build a company, like strategy and employee management.

Save 35% on HR administration costs?

HR administration is one of the biggest expenses. Working with a PEO enables an organization to access competitive benefits at a lower cost.

Lower employee turnover by 10% to 14%?

Working with a PEO allows smaller businesses to offer their employees the same benefits as their much larger competitors. In doing so, improving company culture, employee happiness and engagement, and ultimately, reducing turnover.

Become 50% less likely to go out of business?

Working with a PEO can help solve some of the challenges SMBs face. With faster growth, lower employee turnover, and reduced HR administration costs, small businesses are much more likely to succeed.

While services can vary, the typical PEO serves three core business functions: HR, benefits, and risk and compliance – all supported by next-gen technology.

Within each, we offer various solutions tailored to your needs:

HR Services: HR is more than just benefits, covering a range of tasks from running payroll and taxes, to employee relations and shaping the culture your business needs to thrive. HR services can include:

• HR management
• Payroll and tax solutions
• Performance management
• Recruiting services
• Training and development
• Scheduling
• Time and attendance

Employee Benefit Services: Why should enterprise employers have all the fun? A PEO can open the door to cost-effective and flexible benefit plans that help recruit and retain top talent. Partnering with a PEO enables clients to offer the same quality benefits as their larger, national competitors, including:

• Healthcare benefits
• Life, disability, dental, and vision plans
• 401(k) and other savings plans
• Voluntary benefits (commuter benefit plans, supplemental insurance, legal benefits, etc.)
• Complimentary benefits (employee assistance programs, entertainment, and shopping discounts, etc.)

Risk and Compliance Services: You can never eliminate the risks of running a business, but you can always take steps to reduce your risk exposure. PEOs can help identify potential risks and mitigate exposure. Services include:

• Employee lawsuits
• Workers’ Compensation management
• Workplace safety improvements
• Affordable Care Act (ACA) compliance
• Leave of Absence (LOA) management
• I-9 verification
• Occupational Safety and Health Administration (OSHA) support
• Employee policies and notifications

Each PEO may offer unique solutions that set it apart from others. For SMBs, these services can be extremely valuable for growing their business, keeping employees happy and engaged, and recruiting industry superstars.

You’ll want to look for a Certified PEO who can:

Demonstrate a strong track record, including fiscal stability and accreditation from ESAC or the IRS.

Tailor their services to meet the unique needs of your business and employees.

Offer references from other clients in your industry with a high average Net Promoter Score (NPS) and customer retention rates (not to brag, but our NPS is 68 over a trailing 12-month period, and our NPS for our client’s worksite employees is 69 for the trailing 12-month period).

Provide comprehensive support, including legislative, risk and compliance expertise

Certified PEOs (CPEOs) – like us! – have met the IRS’s rigorous financial, legal, and reporting requirements. Working with one may afford you certain financial protections and tax benefits.

A CPEO certification provides:

• Tax restart elimination removes the wage-base “restart” for certain federal payroll tax purposes if you join or leave a CPEO relationship midyear.
• Financial assurance is a certification program that requires a CPEO to post a bond each year, guaranteeing payment of its federal employment tax liabilities.
• A trusted partnership as PEOs must renew their certification periodically, proving that they consistently meet fiduciary standards and other requirements.

When you have a trusted PEO partner handling HR administration, benefits management, and regulatory requirements, you can devote more time to high-value business activities and focus on the mission of your business.

An attentive, responsive partner can:

• Make you an employer of choice for top talent
• Improve the efficiency and cost-effectiveness of your HR workflow
• Allow you to focus on your business and revenue generating activities
• Give you one central contact to resolve all your HR problems
• Offer better choice and better plan designs at better prices
• Provide access to world class, personalized services from experts who know, and care about your needs

A PEO offers you a team of experienced, HR professionals who love what they do. They know exactly how to solve your problems because they’ve been in the trenches. From benefits to tax, labor law, Workers’ Compensation, and everything in between – our experts can help improve your company’s productivity and profitability.

Partnering with a PEO opens the door to Fortune 500-level benefits at a reasonable cost, allowing you to stay competitive in your market and offer plans that rival your largest national competitors. It also gives you one central point of contact to eliminate the challenges and expenses of managing multiple benefits providers.

Though you can never eliminate employment risks, a PEO can be your front line of defense and help you identify, manage, and mitigate the risks that come with running a business.

PEO was born in the 1980s after an influx of new laws and regulations surrounding employee and labor issues caused major disruption for business owners and how they approached human resources. For small and midsize business owners, what was once rather simple, suddenly became complex.

As SMBs began to seek alternatives to address their HR needs, there was an increase in outsourcing of HR services, which led to the birth of PEO. PEOs offered their clients much-needed HR expertise, along with the compliance knowledge required to effectively manage the ever-changing human resources environment.

Today, there are almost 500 PEOs operating in the United States. What’s more, the number of WSEs employed by a PEO has grown almost 8% over the last decade!

We sure hope so! But there are certain qualifications a company should have to maximize the benefit of a PEO partnership, including:

• Number of employees: Usually, white-collar SMBs with between 10 and 150 full-time employees are an excellent fit for a PEO.
• Growth-oriented mindset: PEOs enable business owners and HR leaders to focus on growing their business instead of HR administration tasks. Small and mid-sized companies that want to grow are a perfect PEO client.
• Want to provide great benefits: PEOs offer organizations access to Fortune 500-level benefits, including healthcare, vision, dental, and 401(k) plans.
• Operates within specific industries: The services offered by PEOs are well suited to a range of industries, including financial services, healthcare, technology, professional services and marketing.

A PEO is a partnership, and any good partnership should have a healthy balance of give and take. Although a PEO can handle your daily HR tasks, it will not:

• Take over your day-to-day business operations
• Replace your HR Manager
• Communicate with your customers
• Control hiring and firing decisions
• Set pay rates or schedules
• Interfere with corporate culture
• Help with sales, marketing, or customer acquisition

There are many HR solutions available today, so it’s common to mistake similar services for PEOs. However, a PEO is not a/an:

• Employee leasing company
• Staff leasing company
• Human resources outsourcing organization (HRO)
• Administrative services organization (ASO)
• Managed payroll organization

In a PEO partnership, you share certain responsibilities that are not achieved through HR Outsourcing (HRO). A PEO acts as a co-employer, which means it’s the employer of record and is responsible for managing many employee-related liabilities like taxes, payroll, risk management, and insurance – while also providing Fortune 500-level benefits and other employee perks.

Within an HRO agreement, the client remains the employer of record. They have the option to outsource some, or all, of their HR functions. This could mean help with administering existing benefits, general HR responsibilities, or simply running payroll (and giving some much-needed sanity back to an overworked HR Manager!).