Professional Employer Organization Firms
A professional employer organization (PEO) firm functions as a co-employer to help your company grow. Read about the best PEO firms available today.
Running a business requires a dedicated albeit multi-faceted approach. This is especially true if you are operating a new business or a company looking to expand beyond its current employee count. A professional employer organization (PEO) firm functions as a co-employer, handling multiple administrative tasks so you can dedicate time and resources to company growth. Choosing to join a PEO is an important decision involving many important factors beyond employee count and pricing. Continue reading to learn more about professional employer organization firms and how to choose the right PEO for your needs.
Overview of Professional Employer Organization Firms 101
A professional employer organization (PEO) firm serves as a co-employer with your company. The primary purpose of a PEO is to relieve you and your indispensable staff members of certain duties and functions so your collective efforts can prioritize company growth. Duties handled by PEOs include mostly human resources-related tasks such as payroll, health benefits, personnel decisions, records and bookkeeping, risk management, workers’ compensation, and overall administrative tasks.
While all these tasks are important to the success of a business, they also demand significant resources and time. When you are a small to medium-sized company you might not have adequate finances to pay full-time administrative staff or dedicate alternate financial resources to growth. PEOs help make it beneficial and affordable to handle both, provided you find the right PEO for your needs.
What Types of Companies Use PEOs Today?
Companies who join PEOs average just over twenty-one employees on staff. PEOs represent approximately fifteen percent of companies who have between ten and ninety-nine employees. Eighty percent of those companies’ employee counts average less than fifty, however. These statistics indicate the efficacy of PEOs is more centralized around companies with fifty or fewer employees.
Small business owners have ambition and focus but not always training in human resources (HR) or accounting. The paperwork involved in both those departments is often overwhelming, even without including the administrative tasks required for every other department. PEOs offer multiple accounting, HR, and many other administrative solutions to take the pressure off you. This allows you to focus on increasing your customer base and overall financial growth.
While PEOs seem to function best for companies with fifty or fewer employees, this is not always the case. No limitations based on business type, size or otherwise are technically imposed. Aviation businesses through finance companies benefit from signing up with PEOs. Retail stores to real estate agencies also benefit from signing with a PEO. Construction firms looking to expand their client base benefit from hiring a PEO to handle daily administrative and hiring/termination tasks, so they have more time to research new prospects. Even small to medium-sized law firms and healthcare clinics have uses for PEO services today.
Things to Consider When Evaluating Professional Organization Firms
Researching PEO firms requires consideration for much more than your company’s employee count. Company growth is a constant consideration. Businesses with over one hundred employees might also need assistance with administrative and human resources tasks. PEOs are not all created equal, however. Some PEOs can handle all aspects with equal effort and success. Others specialize in certain areas over others. So how do you choose the best PEO for your company?
Consider hiring an advisor to help guide you with your decision. An experienced professional advisor is able to evaluate the PEOs in consideration and assess pros, cons and compatibility with your needs. The first thing to assess is if a PEO is state-approved. PEOs are required to comply with state laws the same as you and your company are. Most U.S. states regulate PEO positions regarding worker’s compensation. The National Council of Compensation Insurance (NCCI) helps maintain national standards on applicable issues.
PEOs also need to be self-insured to protect you and your company from multiple liabilities. Either you or your advisor needs to research each PEOs customer service standards and follow-up protocols. How proactive is a PEO pursuant to risk-assessment regarding employee welfare? Legal compliance is also essential. A top-tier PEO provides employment law resources and only recruits, hires and terminates employees in adherence to state and federal laws. This includes compliance with laws pertaining to:
The Affordable Care Act.
The Americans with Disabilities Act.
Hostile workplace environments.
How much administrative control is a PEO capable of assuming on your behalf? Does the list of benefits offered include everything you need from a PEO? Answers to these questions help decide which PEO best serves your needs. It is of course also vital to assess the cost vs. savings benefits of joining a PEO. PEOs need to provide verifiable proof of the financial benefits they have created for other companies in the past. Joining the National Association of Professional Employer Organization (NAPEO) gives you access to multiple research documents and other PEO-based assessment resources. PEOcompare.com provides additional resources to help you locate the best PEO for your needs, including those with proper FUTA, SUTA and FICA positions.
Best Employer Organization Firms
The best PEO firms offer a combination of efficacy, financial savings, compliance, and growth. Multiple PEOs are in business today offering these types of benefits and more. Some of the best PEO firms available today include:
Professional Organization Firms - Pros and Cons
The pros of joining a PEO outweigh the cons, but some of each does exist. A PEO gives you time and resources to expand your business. In exchange for this benefit, you are forced to give up some internal control over your daily business operations. PEOs provide better oversight but often create a more impersonal feel inside your company. PEOs create a lot of change with healthcare plans, which might be confusing to keep up with. Conversely, PEOs provide increased liability protection, save you money and help you expand your customer base and profits.
Frequently asked questions and the answers to them include:
What are average PEO prices? Prices vary based on employee count and services provided but average between two and twelve percent of wages.
What is an additional resource to help me find PEOs? The Chamber of Commerce has PEO information and search resources.
Where can I find a list of government certified PEOs? The Internal Revenue Service (IRS).