Most business owners agree that the world of human resources offers no shortage of challenges; however, many small and medium-sized companies have found that PEOs are the answer. Here, StaffScapes details why:
What Is a PEO?
The acronym PEO stands for Professional Employer Organization. It refers to a company that operates as a co-employer with a client company. As a co-employer, it handles some of the more time-consuming and labor-intensive aspects of running an organization. A PEO will usually take care of the client company’s human resources needs, as well as its legal and accounting responsibilities. A PEO can take care of HR tasks like onboarding and the administration of benefits. They may also manage compliance risks on the client company’s behalf. For tax purposes, a PEO with staffing responsibilities is the official employer of the client company’s workers, though the client will still direct and instruct their staff on a day-to-day basis.
The Benefits of Working with a PEO
Managing payroll and taxes are among the more tedious but essential duties that come with running a small business. PEOs provide tax experts who understand state and federal taxes and know what it takes to protect their clients from the risks of penalties and lawsuits. They will administer a company’s payroll for both full- and part-time employees and can take care of payments to vendors and contractors as well.
Partnership with PEOs gives small businesses the buying power of larger ones. For example, a small business can gain access to health insurance for its workforce without the lengthy, tedious process of shopping for the best deal. A PEO will evaluate the client company and find health insurance to meet its needs. In many cases, the savings on group health plans will more than cover the cost of hiring a PEO. The PEO will inform employees of the plan and manage the enrollment process. If employees have questions, the PEO will answer them.
PEOs help with 401(k)s as well. Most 401(k) providers prefer to work with more substantial companies with more to invest. Because a PEO will have an extensive network, the 401(k) provider has to offer a higher discount, which lowers the client company’s cost per employee. The cost of 1,000 employees will be significantly lower than the cost of 10.
Working with PEOs, like StaffScapes, saves small businesses money by providing access to low rates usually for much larger companies, but they lower costs in other ways as well. PEOs provide safety services and promote workplace safety. They can reduce the number of accidents in the workplace and lower a company’s claim costs.
Compliance is an area that can cost a business a lot of money; PEOs help to lessen the cost of being compliant. Modern companies have numerous complex regulations that they must follow to stay in compliance. As a result, many small and medium-sized companies now find themselves having to take significant risks by neglecting regulations.
A PEO can offer compliance support to help with everything from workers’ compensation to W-2 and 1099 filings. Similarly, employers must carefully observe wage and hour regulations and violating them comes with steep fines. Making mistakes in these areas can result in excessive financial losses. PEOs have the resources to tackle the treacherous world of governmental regulations and help a business to come up with a compliance management strategy.
Why Use a PEO?
The most important way that a PEO can save a business money is by saving its owners time. When a business owner partners with a PEO, they get to leave the worries of being an employer behind. Instead of worrying, they get to channel their time and energy into the business and leave the complicated aspects of managing a workforce to the PEO.
