Should Your Business Use a PEO?

Professional Employer Organizations (PEOs) work with small businesses to provide an opportunity to outsource HR functions, decreasing the burden on employees, increasing options, and cutting costs. PEOs take on things like compensation and payroll administration, taxes, employee benefits, FMLA and/or workers’ compensation. They can handle the nitty-gritty of payroll and allow their clients’ HR teams to focus on other areas.

PEOs cater to the organizations they work with, taking on as much, or as little, as the organization would like them to. They can handle aspects of recruiting, hiring, and onboarding, administer benefits and take care of all associated paperwork. Another benefit of working with a PEO is its ability to aggregate the employees of many small businesses. Often, more affordable healthcare rates are out of reach for small businesses. PEOs offer the ability to harness the collective buying power usually only available to larger businesses by pooling together the employees of multiple businesses.

In addition, PEOs can offer compliance support. With ever-changing laws, it can be challenging to keep up with compliance, especially if you don’t have HR knowledge or expertise. PEOs offer support in this area, taking over the risk of compliance and alleviating some stress for you. PEOs can also offer benefits to organizations outside the essentials, such as providing and administering 401k options or providing commuter benefits that allow your employees to use pre-tax dollars to purchase things like a Metro pass.

While a PEO may initially sound amazing, it is important to evaluate what the PEO can do for and to your organization. In taking over many of the HR functions, they take on risks for your organization — risks you no longer have control of. In addition, they can change the culture in your organization and may make some of your team members feel obsolete. When deciding whether or not to work with a PEO it is essential to look at all aspects of the relationship and see if it is a good fit for you, your employees, and your business.

Some companies choose to opt-out of using a PEO because they want their employees to navigate payroll issues. Some fear that it will provide an outside influence on company culture or increase the unknown risks. Loss of control over these things can seem scary, and for some teams feelings that it may diminish their worth and ability to remain with their current company.

While these things can be true, it is not always the case. Relationships with PEOs can help an organization thrive, but this is only the case when the decision is well thought out and plans have been laid ahead. When deciding to work with a PEO it is essential to know what you would like the PEO to provide to your organization, know how duties will be divvied up between the PEO and your current team and create a plan for how to anticipate and reign-in any employee frustrations or changes to your culture. Ultimately, know what pieces you need to ensure comfort, respect, and quality for your employees and your organization.