Businesses continue to try to answer the age-old question: how is it possible to achieve growth using proven methods?
And this growth translates to businesses: companies in PEO arrangements grow 7-9 percent faster and have lower employee turnover.
What is PEO, and why is it so effective?
Below we’ve created the following guide explaining the benefits of using a PEO service and how it can grow your business.
What Is a PEO?
A professional employer organization (PEO) works with small to mid-sized businesses to give them access to better resources and provide them with more efficient HR functions.
Traditionally, companies would either need to rely on in-house HR or outsource HR completely. With PEO, businesses can automate certain processes while keeping their private information in-house. Meanwhile, they’ll benefit from all of the PEO’s professional services.
A PEO typically specializes in payroll, benefits, HR, and labor compliance services. It will streamline company operations and may even help your company grow faster.
How Does a PEO Work?
PEO’s work by co-employing your employees. The PEO will use your workforce for administrative purposes like paying employees and filing taxes, but you will still have full control over who you hire and the benefits offered to employees.
The PEO will act as the administrative employer, while you act as the worksite employer. This means that they employ your workers on record for the purpose of taxes as you maintain fulfillment authority over your team members.
Each party will have certain responsibilities, but you never lose control of your company’s overall strategy, business operations, or marketing and sales.
7 Benefits of Using PEO Services
Using PEO services will benefit your operations in more ways than one. Below are 7 of the top benefits of using a PEO company.
1. Smoother Payroll
Maintaining smooth payroll operations is necessary for a high-functioning business, but it can be difficult to master. Executing the process seamlessly, from handling withholdings to recording accurate employee hours, is a time-consuming and imperfect process.
A PEO will make your payroll run much more smoothly and reduce accounting costs. PEOs can automate numerous parts of your payroll process, handling important documents like your W-2s, and take care of your withholdings.
2. Better Employee Benefits
PEOs often have thousands, if not, hundreds of thousands, of employees in their system. This gives them leverage with insurance companies and other benefits providers.
Ultimately, they’ll be able to secure the same benefits for your small or mid-sized business that only a large company typically has access to.
Most PEOs are able to offer some combination of these services:
- Healthcare plans
- Worksite benefits
- Mental health support
- Commuter benefits
- Life insurance and disability insurance
Companies that may not have been able to offer anything more than basic benefits will be able to provide employees with an array of options thanks to a PEO. This is especially relevant following the Covid-19 pandemic, as a recent survey revealed that 4 out of 5 employees would prefer more benefits over a pay raise.
While every business hopes never to face a lawsuit, sometimes they do happen. A single lawsuit can devastate your business, but working with a PEO will help to minimize damage.
PEOs share some of the liability associated with certain employment-related claims. The PEO will also have numerous experts who can help you mitigate a tense situation.
4. Payroll Compliance
Both federal and state employment laws are constantly changing. If you don’t follow them vigilantly, you’re subject to pay high penalties. More than 40% of small businesses are fined each year for missing payroll taxes, according to data from the IRS.
Staying compliant with taxes and laws is necessary for the healthy operation of your business, but this process takes long hours from your week.
A PEO will help maintain compliance and monitor employee liability, giving you the assurance that your business is meeting law requirements.
Many PEOs assist with areas including payroll compliance, benefits compliance, and out-of-state compliance. Their expertise will allow them to stay on track with regulations in a more timely manner than individual HR employees within your business.
5. Saves Time
Many PEOs assist with areas including payroll compliance, benefits compliance, and out-of-state compliance.
Your HR team is likely spending a significant amount of their time working on mundane tasks from filing paperwork to reading through changing employer-related laws.
Using a PEO will free up the time of your HR team so it can focus on helping you grow your company.
PEOs will work to automate routine tasks like tracking hours for payroll, paying employees, and general employee management.
6. Saves Money
Research from NAPEO shows that the ROI from using a PEO was over 27% in cost savings alone. Each PEO essentially “employs” workers from numerous individual workers, which gives them an advantage when negotiating with insurance companies.
This advantage allows them to obtain cheaper and high-quality benefits for small business employees while simultaneously lowering the cost (a PEO will usually use a fixed monthly fee per employee or percentage of payroll.)
7. Recruiting Benefits
As a result of all of the benefits that a PEO will provide, your business will have a more competitive position when it comes time to recruit new candidates.
You’ll be able to offer similar benefits as a larger company while providing the tight-knit feel of a small business. Candidates will not feel like they have to compromise between a personal working environment and the great benefits traditionally only associated with working at a larger firm.
Leveraging a PEO Service
Using a PEO service does more than just streamline your business operations it can be a catalyst for growth. By saving time and money with numerous business processes, you can free up resources and leverage them to gain more opportunities.