Professional Employer Organization | Human Resource Outsourcing
Professional Employer Organization | Human Resource Outsourcing
Human resources is a vital part of every company, whether they have an HR department or not.
Even if all the responsibilities fall on the owner of a small business, checks still need to go out on time, new hires have to be entered in the system, and so on.
Human resource outsourcing allows you to transfer some (or all) of your HR-related workload to a professional organization. They’ll take care of everything from payroll taxes to benefits administration.
It’s easy to see why HR outsourcing is appealing to businesses that don’t have their own staff. But even companies with an experienced HR department can use outsourcing to reduce operational costs.
Professional Employer Organization
PEO stands for professional employer organization. During your research, you may have heard PEO services referred to as co-employment, business process outsourcing, or HR outsourcing. According to the National Association of Professional Employer Organization’s (NAPEO) definition, “PEOs enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll, and workers’ compensation.” The PEO industry has been around for 30+ years. There are more than 700 PEOs nationwide. PEOs operate in every state and provide services to between 156,000 and 180,000 small and mid-size businesses, employing between 2.7 and 3.4 million people.
PEO Services: What PEOs Can and Can’t Do for You
If you’re concerned that working with a PEO means you’re going to lose control of your company, you’re not alone. The reality is that you will never lose control of your business when you hire a PEO. In fact, a PEO will help you make more informed HR decisions that will make your business stronger.
PEOS DO
Handle comprehensive HR services for employers, including payroll processing, HR compliance, risk management, employee benefits, employment tax, and time and attendance management
Help reduce liability for payment of wages, payroll taxes, and state unemployment taxes
Assist with employee recruitment and reduction of employee turnover
Make your business more attractive to current and potential employees
Save you time so you can focus on the day to day operations and growth of your business
PEOS DO NOT
Take control of your business
Supply labor to worksites
Make hiring and firing decisions for you
Why Use a PEO: Benefits of Outsourcing HR Functions to a PEO
There are many reasons why employers use a PEO. Businesses that outsource HR services to a PEO typically experience:
Positive ROI. Employers see an average annual return on investment of 27.2% from using a PEO.
Faster growth rate. Businesses who use a PEO grow 7-9% faster and are 50% less likely to go out of business.
Greater employee retention. Businesses in a PEO arrangement have 10-14% less turnover.
Competitive benefits and health insurance. PEOs leverage their purchasing power to negotiate more affordable benefits and insurance offerings for small businesses.
Improved compliance. PEOs stay up-to-date on business regulations to reduce risk and ensure your company remains compliant.
