How PEOs Are Saving Small Businesses Time and Money

by:  Frugal Entrepreneur

When you’re a small business owner, you’re always busy.

You’ve got to manage the daily operations of your business. You’re responsible for your employees. You need to keep current on the trends in your industry, make long-term strategic development plans, and implement tactics every day. And, this comes on top of all the responsibilities and challenges of growing your business.

When you’re this busy, the last thing you want to worry about is reading up on new unemployment tax regulations, filing reams of paperwork, or managing 401k plans.

For this reason and a few others that I’ll mention below, working with a Professional Employer Organization (PEO) can be a total game-changer for your business.

What is a PEO?

Professional Employer Organizations are organizations that provide human resource-related services to other businesses. They are specifically designed to serve small and medium-sized companies.

Human Resource management can be a huge challenge for start-ups, family businesses, and entrepreneurial endeavors alike. Regulations, rules, and laws regarding employment are constantly changing. Healthcare benefits, insurance, payroll and related areas can be extremely complicated. A PEO offers small businesses the opportunity to receive high-caliber HR services—the likes of which are usually only available to large corporations. Though these services do cost money, if you do your research you can find reasonably-priced, competitive rates.

PEOs give small businesses access to the same benefits of an HR division at big businesses.

How do PEOs Work?

When a small business partners with a PEO, they enter into a “co-employment” relationship. That means that the PEO manages all administrative aspects for personnel. That can include:

  • Paying employee wages
  • Payroll taxes
  • Administering benefits
  • Managing retirement accounts
  • Managing the Human Resource Services

As the owner of a small business, you retain complete control over who works for you, what tasks are assigned to which teams, and which direction you’d like to encourage your employees to grow.

When a PEO handles the administrative functions, it leaves you more time to do what you do best: run your business.

How Can PEOs Help with Recruiting?

When you’re looking to hire new employees for your company, you want to attract the sharpest candidates—and keep them as happy employees. PEOs help you recruit and retain top talent.

Offering a competitive benefits package is critical to enticing the best workers. Even if you’re not offering retirement accounts or supplemental insurance, it’s a good bet that your competitors are. With a PEO, you have access to highly competitive benefits for your employees, including:

  • Health insurance
  • Dental insurance
  • Life insurance
  • Supplemental insurance
  • 401(k) plans

Not only are you able to offer competitive benefits, you are able to secure these benefits at a lower cost. Since PEOs “employ” thousands of people, PEOs are generally able to secure better rates for insurance and other services. These savings get passed on to you.

PEOs enable you to offer better benefits at a lower price.

What services are typically offered by PEOs?

PEOs  can offer a variety of services to different clients; in other words, every relationship is unique. But, there are some standard services, such as:

  • Payroll Processing, Management, and Administration-
  • A PEO will manage all aspects of payroll for you. This includes withholdings, disbursement, timekeeping, and workers’ compensation.
  • Tax Services: All company taxes will be managed, including liability for business taxes and filing state and federal taxes.
  • Recruiting & Training: PEOs can assist with interviewing, hiring, training, and holding reviews for employees.
  • Performance Management: A PEO can assist with job descriptions, promotions, disciplinary procedures, and separations.
  • Employee Benefit: PEOs generally offer healthcare benefits, supplemental insurance, and retirement plans.
  • Risk Management: OSHA compliance, training, and safety policies for your company can be managed by a PEO.
  • Unemployment Insurance: PEOs ensure the proper workers comp coverage is achieved and manage unemployment claims.

How common are PEOs?

According to the National Association of Professional Employer Organizations, 2-3 million workers are covered through a PEO. This means that small companies across the country are relying on PEOs to manage their HR functions and assume their liability and responsibility. It is also estimated that over 250,000 businesses are in a PEO relationship.

How can partnering with a PEO save you money?

PEOs take a huge quantity of time-consuming tasks off of your plate, and as we know, time is money. Freeing up your time enables you to concentrate on business development. Beyond that, PEOs bundle services together, meaning that there is an economy of scale in the pricing. PEOs can also secure competitive rates for services like insurance, meaning that the costs to your company are reduced.

PEOs can also help shield your company from improper unemployment claims, regulation infractions, and other costly problems.

In short, PEOs can save you a whole lot of time and money.


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