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Meet the PEO: The Gold Standard for HR Outsourcing

At the heart of the PEO is this mantra: Stick to what you know.

This tried-and-true piece of advice for business success has helped companies double and triple down on doing what they do best. So why is it that so many small businesses make the mistake of branching out beyond what they know? Too often, it is the minutiae of tending to HR tasks and regulations that pulls them away from their core business objectives.

Sure, it’s part of running a business. But what a lot of business owners may not realize is that this part of running a business is huge and can distract from your other goals and business needs. You don’t have to get so bogged down by the HR end of things that you forget what you went into business for in the first place.

This is why the PEO—Professional Employment Organization—exists.

Understanding PEOs

Professional Employment Organizations (PEOs) allow you to step back and focus on what you know, while they step in and help with what they know—payroll and HR needs. Hiring a PEO means outsourcing the paperwork side of things and turning your focus back to your business. You are still responsible for hiring, firing, and supervising your staff, but the PEO makes sure you are remaining in compliance with various HR and payroll laws, while also acting as a resource to your staff and ensuring they are paid timely and accurately.

So how does that work? Well, PEOs are experts on those areas you may not be as well versed in: ADA, OSHA and payroll compliance, the forms that need to be filled out for hiring and firing employees, the steps that need to be taken so that payroll goes out on time, and even how to institute a 401(k) plan. PEOs take care of all of that, offering your business peace of mind while you focus your resources on your core competencies.

And PEO service goes beyond simply outsourcing HR. They are often able to arrange better deals on health insurance policies for your company, based on the fact that they work with thousands of other companies as well—giving them more negotiation power than you could ever have as a singular small business.

What a PEO is NOT

One common mistake people make when thinking about PEOs is assuming that they will be giving up control of their business if they hire one. Nothing could be further from the truth. You still maintain control of your employees and major business decisions. The PEO is not there to disrupt your day-to-day operations. Their role is to help you manage your liability and expenses by taking over the HR and payroll tasks that you otherwise may have needed to hire an entire in-house team to manage.

Another mistake is assuming that a PEO is a staffing agency (in our case, we have an entire division dedicated to supporting staffing and recruiting!). Keep in mind that PEOs are providing a service: They are not providing a pool of temporary employees for you to have at your disposal. PEOs have their own team in place, ready to meet your needs and provide the services you are looking for on a regular and consistent basis, with the PEO providing the oversight so that you can focus on your core objectives.

You might think that a PEO is likely too large an expense for your organization to take on, but you would probably be wrong there as well. PEOs often save companies so much in terms of benefits expenses that the costs of their services are almost offset from the start. And the benefits of having experts ensuring that you are remaining within HR and payroll compliance can be priceless. Conservatively estimated, the average business that works with a PEO gains a 27.2-percent return on investment, according to the National Association of Professional Employer Organizations (NAPEO).

Other Options

For larger organizations, where it makes sense to have some in-house HR presence, there are still options for HR outsourcing with the more menial day-to-day tasks that could otherwise distract from core objectives. Utilizing a Human Resources Outsourcing (HRO) organization allows companies to be pickier about what services they need, whether that means help with just benefits and recruitment, or more broad-spectrum assistance. The a-la-carte servicing options separate HROs from PEOs, where all of your HR responsibilities would be handled directly by the PEO. Both have pros and cons to consider and it really just comes down to deciding what level of assistance your corporation could benefit from.

Remember, a successful business is one that is able to focus the most time and energy on doing what they do best. Your goal should be choosing the option that best allows you to stick to what you know.

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