The Best Advantages of PEOs for Small Business Owners

Have you decided to keep your HR responsibilities in-house?  If so, you might run the risk of overextending your employees or adding unnecessary overhead costs for internal HR staffing.. Managing the many administrative complexities and changing regulatory environment that comes with “all things HR” often increases your risk and detracts focus away from revenue-generating functions and activities.  

If HR has you feeling overwhelmed as a business owner, it may be the right time to explore the many advantages offered by a Professional Employer Organization (PEO) to help address your critical needs. Here’s an overview of how a PEO works and some ways it can help your business grow. 

What Is a PEO?

A Professional Employer Organization, or PEO, is a separate business entity that allows you to outsource various HR needs. Typically, PEOs provide specialized experience that can help your business run more efficiently when it comes to “all things HR.” PEOs handle the day-to-day operations of payroll, benefits, Workers’ Comp, compliance, training, and more.

PEO Advantages for Your Business

What can a PEO do for your business? Business owners who outsource their HR tasks to a PEO can expect the following benefits:

Lower Operational Cost

How much are you currently spending on HR? A recent accounting publication reports that small business owners are spending over $18,000 per year on administrative HR. Worse, these expenses are often going to employees with little to no background in human resources. 

Those who do hire an in-house HR resource can expect to spend over $40,000 annually for an HR assistant, while HR Managers will cost upwards of $60,000+.

Not only does a PEO deliver the needed capabilities and experience of a seasoned HR professional, but it can do so at a fraction of the cost. This is especially important during times of economic volatility. Partnering with a PEO can reduce your overhead costs and help you stay afloat amidst financial instability and soaring inflation.

Efficient Benefits Administration

According to the U.S. Bureau of Labor Statistics, employee benefits account for 31% of all payroll costs. A PEO can provide you with access to competitive benefit programs that can save your company thousands each year without compromising the quality of your employees’ benefits.

PEOs handle a host of employee benefit related tasks such as plan enrollment, qualifying event changes and any employee questions or needs.. Additionally, PEOs can help with tax forms (IRS Forms 1094-C and 1095-C), COBRA administration, claims assistance and marketplace/exchange notices and appeals.

Payroll Automation

Payroll is arguably one of the most immediate HR needs that most employers face. A PEO can automate this process to ensure efficient, reliable pay for your workers. This includes making sure your employees receive their paychecks and direct deposits. But a PEO can also automate attendant functions, such as withholdings and garnishments.

The best PEOs provide up-to-date payroll reports to keep business owners informed about these overhead costs. PEOs also have great technology platforms for managing PTO, vacation, sick leave, and more.

Recruiting and Onboarding

A recent study from Gartner revealed that 36% of business owners say that their recruiting strategies are insufficient for finding the skills they need. A PEO can review and improve your recruiting process to help you attract and source the talent your business needs. PEOs can also help ensure your hiring methods from ads to interviews avoid language, practices or questions that could be discriminatory and expose your business to unnecessary risk. 

Additionally, a PEO helps make the onboarding process a breeze. Using cloud-based HR platforms, electronic onboarding allows companies to say goodbye to paper-based new hire packets. By working with you to understand your company and industry, a PEO can also help you create or update fully-compliant employee handbooks and training resources to help you bring new recruits up to speed in no time. 

PEOs can also develop resources to provide your entire team with developmental opportunities that keep them happy and engaged throughout their time with your company.

Legal Protection and Compliance

How confident are you in your knowledge of the FLSA, equal employment opportunity (EEO) and other major employment laws? Even a single lawsuit can devastate your business. PEOs invest significant time and money to understand and keep their clients current ever-changing federal and state laws and regulations impacting employers. This can be particularly useful for businesses operating in more than one state (or that have employees working in different states), as employment laws can vary widely. 

While this is no substitute for legal counsel, a PEO can provide input to help you navigate these requirements and serve as an additional layer of protection and support, ultimately. helping you avoid costly litigation or claims dealing with discrimination, wrongful termination, and more. 

Workers’ Compensation and Unemployment

In addition to administering your regular employee benefits, PEOs can assist with handling workers’ compensation and unemployment insurance. The exact requirements can vary by state, so it’s important to choose a PEO that understands the regulations in the location(s) in which you operate.

Your PEO can also help you manage insurance premiums and claims, complete annual audits, and all of the paperwork and certification that these programs require. Assigning these tasks to unskilled office workers only complicates matters should you need these programs in the future.

Make the Transition Today

Focus HR provides HR services at a fraction of the cost of hiring an in-house HR team. The transition from your current setup can be surprisingly seamless. 

As one of our clients told us, “The transition from our last payroll service to Focus HR was very smooth… They took the reins on all of our benefits programs and even implemented improvements to them.” 

To read more about the benefits of a PEO for small businesses, read “The PEO Advantage” a recent report by the Guardian here

Ready to see for yourself? Fill out the form below to request a consultation for your business.

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