Looking for a professional employer organization (PEO) in 2017? Our guide gives you everything you need to know about what a PEO is, what it offers, the pros and cons, and how to choose one. If you already know what you’re looking for, visit our best picks page to see which ones we recommend.
What Is a PEO?
A PEO provides small and midsize businesses with a wide range of human resources services, including the following:
- HR management
- Benefits administration
- Insurance plans
- Section 125 plans
- Payroll administration and processing
- State unemployment insurance
- 401(k) retirement plans
- Workers’ compensation
- Safety programs (OSHA)
- Training and development
- Recruiting and outplacement support
- Government compliance
The cost of a PEO varies greatly depending on the services you want, the number of employees you have and the type of business you operate. The cost structure also varies by PEO provider. Some PEO services charge on a per-employee basis. Under this structure, employers pay a set amount for each employee. Other providers base pricing on a percentage of gross payroll.
“A PEO is a partnership that creates a co-employment relationship between a small to midsize business and a provider,” Lonny Ostrander, vice president of human resources services for Paychex, told Business News Daily. “This relationship results in the business’s ability to gain access to benefits normally available only to Fortune 500 companies.”
Pros and Cons of a PEO
1. Fewer administrative tasks: Companies don’t have to spend time working on tasks such as payroll and benefits administration, because the PEO handles them.
“A PEO can take some of the critical work of managing a company off of a business owner’s plate so that they can focus on building and maintaining their core business,” said Sarah Grimstead, regional sales manager at Insperity.
2. Better benefits: PEOs allow small businesses to offer a robust benefits package. Working with one often gives companies access to better health, retirement and workers’ compensation benefits for their employees, Grimstead said.
3. Cost savings: PEOs can negotiate lower group insurance costs, workers’ compensation discounts and, in most cases, lower state unemployment insurance rates, Ostrander said. However, keep in mind that you are paying the PEO a fee for this benefit. To make sure you’re coming out ahead, it’s important for you to weigh the service fees against the added benefit cost savings.
Read more: https://www.businessnewsdaily.com/2391-outsourcing-human-resources.html