5 Benefits of Hiring a Professional Employer Organization (PEO)

What is a Professional Employer Organization (PEO)? 

Professional employer organizations are outsourcing partners that provide human resource services. However, unlike traditional human resources outsourcing (HRO) partners, PEOs act as co-employers and they share employment responsibilities with their clients. 

Their clients are the employer of record and are still responsible for hiring employees, but the PEOs handle HR tasks such as payroll and compliance. By performing various HR tasks on behalf of their clients, PEOs enable their partners to focus on business-growing processes instead.  

More importantly, though, PEOs represent hundreds of thousands of small businesses and their employees, which gives them more power to negotiate benefits packages with providers than small businesses have on their own. This allows small to medium-sized businesses to provide better benefits packages for their employees so they can compete with larger organizations when hiring. 

Interested in HR solutions? Search leading PEO companies on The Manifest. 

What Services Do PEOs Provide? 

• Benefits management
• Payroll & tax filing
• Compliance
• Risk & safety
• Hiring & Employee Training

Benefits Management 

As discussed before, one of the best reasons for small businesses to hire a PEO is because they represent many small businesses and thousands of employees. Because they represent so many people, they’re able to negotiate lower benefit prices with providers. In addition to negotiating prices, they also handle enrolling employees and processing claims. 

Payroll and Tax Filing

PEOs handle everything regarding payroll. This means that they deal with setting up direct deposits, withholding, and creating W-2s, and managing tax liabilities. They can also manage time and attendance and calculate the wages of hourly employees. 

Additionally, tax filing can be tricky. By hiring a PEO company that is well-versed in local, state, and federal tax laws, many businesses can prevent tax issues such as late penalties or interest. 

Compliance 

PEOs provide risk and compliance experts that are up-to-date on changing labor and employment laws. These laws vary in every state, so compliance has become very tricky, especially for companies with employees residing in different locations. However, companies that fail to comply with these laws often have to pay fines. 

Here are a few payroll, benefits, and labor compliance issues that PEOs can assist with: 

Payroll compliance

• Issuing and filing tax forms 
• Reporting and collecting tax laws 
• Assuring compliance with wage laws 

Benefits compliance 

• Affordable Care Act (ACA) 
• COBRA 
• FSA 
• HSA 

Labor compliance 

• Equal employment opportunity laws 

With a solid understanding of payroll tax law, unemployment insurance, and workers’ compensation, PEOs can prevent a lot of these issues from occurring. 

Risk & Safety 

To many employers’ chagrin, the workplace can be a dangerous place. PEOs often work to reduce health and safety complaints by reviewing safety procedures and training employees. With prosper support, they ensure that their clients pass Occupational Safety and Health Administration (OSHA) inspections. 

Hiring & Employee Training 

Some PEOs will also support recruiting, employee training, and engagement. If their clients already have an in-house HR team, they can work with them 

Search more PEO Firms on The Manifest. 

5 Benefits of Hiring a Professional Employer Organization 

1. Provide a better HR experience
2. Save money on benefits
3. Maintain compliance to reduce company risk
4. Improved employee engagement and retention
5. Allow companies to focus on internal business growth

Provide A Better HR Experience 

Having a solid human resource team is essential to keeping workers safe, healthy, and happy in their position. In addition to helping companies provide better benefits for their employees, PEOs can act as a single point of contact for employees who have questions or need access to certain information. By streamlining administrative processes, PEOs help reduce pain points for their clients as well as their employees. 

Many PEOs also offer training and culture-building strategies as well, helping to enhance the employee experience. PEOs can also provide training and leadership development services for employees, helping them feel more satisfied in their position and internal growth.

Business owners who are looking to enhance their workers’ compensation and retain employees can benefit from these partnerships. 

Save Money On Employee Benefits  

Employee benefits like health insurance, dental, life insurance, and retirement plans are extremely important to new and existing hires. In fact, what benefits a company offers are likely to sway whether a potential hire accepts a job offer and whether or an existing employee looks for other opportunities. 

Recently, benefits other than salary have become increasingly important to workers in the US. According to a report from Aflac, nearly half of employees will start looking for a new job if they’re not satisfied with their benefits. 

In addition to enhancing their workers’ compensation packages, companies can save money by working with a PEO to negotiate rates. 

A 2019 study estimated that companies who work with a PEO save an average of $1,775 per year per employee. For growing companies, this means that they can potentially save several tens of thousands of dollars per year depending on the size of their organization. 

For small businesses who don’t have the resources to provide some of these benefits on their own, or who aren’t in a place to negotiate benefits with providers so they can provide them, working with a professional employer organization is a strategic move. 

Maintain Compliance To Reduce Company Risk

Every once in a while, complex employment issues arise that require expert involvement in order to be sorted out. Whether it’s an employee claim or a regulatory violation, these issues can put the business at risk by adding financial strain on the company, disrupting business operations, and damaging their reputation. 

PEOs, however, can prevent a lot of these issues by complying with state and federal laws, filing taxes properly, and ensuring that the proper procedures are in place. Even if these issues still come up, professional employment organizations know how to handle them properly, ensuring that the business can return to business as normal. 

Improved Employee Engagement and Retention

It is an expensive and time-consuming process to recruit, hire, and train new employees. So retaining workers is often a huge priority for growing businesses. With better benefits and employee experience, companies can avoid a lot of turnover. It also can be a helpful recruiting tool for business owners who need to scale their team. 

Additional reading, ‘Employee Happiness: What Do Employees Value Most in Their Job?’

Allow Companies To Focus on Internal Business Growth 

PEO services are absolutely essential to any high-functioning business organization. However, they require extensive knowledge on HR functions and many resources to be successful. For many small and medium size businesses, it can be challenging to keep up with everything they need to to keep their HR department running smoothly. 

The services that PEOs offer allow companies to focus on what they’re good at so they can grow their business. 

Level Up Your Compensation Package With A Professional Employer Organization

Professional employer organizations provide a wide array of services from benefits management to payroll, tax filing, compliance, and employee training. While these services are essential to business operations, they can be tedious, time-consuming, and difficult to handle. 

Many small to medium-sized businesses benefit from the co-employment relationship they have with PEOs because they’re able to negotiate lower benefits prices and reduce company risk. As a result, they provide a better experience for their employees, which can improve retention and allow them to focus on growing their business.