PEO or Professional Employer Organisation is useful to mid-sized and small sized businesses. It helps their employees to derive better access to more affordable benefits. It also streamlines many administrative HR functions such as workers’ compensations, compliance, benefits and payroll. 

Companies traditionally would require outsourcing completely such HR functions to the best peo companies. Modern PEOs are known to use the latest technology that helps them to automate their vital information in-hose. At the time, they do profit immensely from advisory services, time savings and other benefits. 

Helping businesses of all types

Operating any business is not an easy task irrespective of the domain it belongs to. At the same time HR demands do add up especially with more employees opting to work from home. This needs managing companies spread across different states. If businesses fail to offer top-tier benefits, then recruiting top talents and retaining them can become a tough task! This is an area that the PEO are considered as experts. 

Specialisation

The PEO specialises in labour, HR, benefits and payroll compliance services. It also allows the organization to streamline several employees related administrative duties. At the same time, it helps free up valuable resources and time essential to carry out high value activities. The PEO by co-employing the company staff can automate or take over numerous vital tasks like enrolling employees for benefits, running payroll, employment laws, labour laws, etc. 

It can be safely stated that PEO helps ensures higher employee satisfaction combined with 14 percent lower employee turnover. Besides employees, studies also revealed that average savings in annual costs from using PEO services amounts to about $1,775 per employee. On the other hand, per employee average PEO cost is $1,395. Thus, the annual ROI yield is 27.2%. Companies using PEO are found to grow much faster while becoming more well-established than those not using it. 

Its functioning

The fact is PEO pricing structures is based on the services offered. Hence, it will be useful to know how it functions for start-ups and small businesses. 

Help co-employ employees

On joining a PEO, it is likely to co-employee the workforce to undertake administrative work like filing payroll taxes and paying employees. Still, you as the business owner can have full control over whom to hire, the type of benefit plans as well as designs to be provided to employees including other vital human resource decisions. 

What is Co-employment?

Co-employment is rather termed as the contractual allocation as well as sharing specific employer responsibilities between client and the PEO. It effectively means that both PEO and you get to employ your workers. Thus, employer responsibilities get divided in the following ways:

• You tend to act as worksite employer while maintaining complete authority over the employees. It also includes whom to hire/fire and amount to pay. You also get to manage your organization’s overall business operations and strategy. It includes product development, research, customer support, sales, marketing, etc. 
• PEO is rather a statutory employer or administrative employer as IRS has defined it. They employ your employees for tax purposes. Generally, they process benefits, wages, taxes and withholdings under federal EIN (Employer Identification Number).

It is essential to understand that each party is likely to be held responsible to carry out specific employment obligations. Both parties might be held responsible to share the duties and obligations while being an employer. However, for all purposes, neither party can be termed to be the employer. 

Services rendered

PEO offers a variety of services to manage efficiently your HR tasks. They can automate or take over employment related HR administrative work. It includes the following:

• Employee Benefits: The PEO is rather a large group. They can easily leverage their economies of scale, thereby negotiating the price aspect with different providers. They also help streamline process claims, employee enrolment, etc. 
• Payroll: On partnering with the PEO, they pay and withhold taxes and employees, etc. Modern PEOs help with automation f this in-house while requiring you to spend a couple of seconds on every pay run. 
• HR Compliance: Employment and Labour laws are quite complicated, often changing and tend to vary between states. The PEO guides you to adhere to the prevailing laws of the land while avoiding hefty fines in the process. 

They rather bring in the latest technology, established processes and HR expertise. This way, you can save on precious time especially on those time-consuming administrative functions, while ensuring compliant business. 

Helps save money via economies of scale

Each PEO can be found to employ workers selected from numerous individual businesses. They have the expertise to negotiate with different insurance providers with the objective to secure quality, cost-effective benefits. Thus, they assist in reducing employment costs while encouraging business bottom-line. 

What is their cost?

The total cost is likely to be based on several factors like company size, type of services you prefer to avail, and pricing structure charged by the PEO. They generally use any of the given below pricing structures:

• Payroll percentage plus applicable taxes, EPLI (employer practice liability insurance) and workers’ compensation. 
• Fixed monthly fee/employer

Both methods are found to invite varying administrative fees, other costs and setup charges. You need to understand properly to ensure avoiding hidden fees. Do go through your contact s well as the total cost involved to ire the PEO. 

Internal HR teams vs. PEOs

The significance of internal HR teams cannot be neglected. It is necessary to understand that PEOs are not their replacement. Rather, PEOs are hired by mid-sized and small businesses to streamline several time-consuming tasks. They also ensure that their clients are compliant with the prevailing labour laws of the region. Thus, your HR executives can stop focusing on such aspects as the PEO professionals will take care of the same. Having enough free time in hand, your HR department can dedicate towards taking strategic initiatives such as developing powerful company culture to identify/retain top talents. 

Hence, the benefits offered by PEO are huge for start-ups and small businesses. It will be useful to discuss with them on how your organization can be benefitted by their services.