What a Professional Employer Organization Can Do For Your Business

Part 1

Over the last few years, tax, employment, safety, and health insurance regulations affecting businesses have changed at an incredible pace.  Regardless of whether these changes have been helpful or harmful to your business, they have had one similar effect on all business owners…uncertainty.  Changes to tax laws, health care reform legislation, changes to federal safety requirements, and changes to the rules governing employee benefits are very difficult, time consuming, and in some cases expensive to keep up with.  In fact, keeping up with the changes in any one of these areas, let alone all of them, can be a full time job.  Not keeping up with all of the changes can lead to costly mistakes.  According to the IRS, one third of all employers have been penalized for payroll tax mistakes.  These penalties have totaled billions of dollars.

That being said, the increasing popularity of Professional Employer Organizations or PEO’s should come as little surprise.  But many small to medium sized companies have only a limited understanding of the benefits provided by working with a PEO.  This 6 part series of articles is designed to address many of the concerns and questions an employer may have when considering partnering with a PEO.  These articles will cover the following topics:

Part 1:   PEO basics

Part 2:   Payroll and Tax Administration

Part 3:   Human Resources Services

Part 4:   Safety and Risk Management

Part 5:   Benefits Management

Part 6:   Summary And Additional Benefits

So, let’s begin with Part 1:  PEO Basics.

A PEO or Professional Employer Organization is a business designed to handle a majority of the Human Resource tasks involved in running a business with employees.  For a business with say 10-200 employees, there may be only one or two HR staff members to manage and maintain an incredible amount of information and insure compliance with state and federal laws.  A good PEO typically has a staff numbering in the 100’s, each one a professional in a specific area of Human Resources, safety, compliance, payroll, benefits, etc.  The collective knowledge of these professionals effectively gives a business who partners with a PEO a very large and professional HR staff with years of experience.

Not only does the size and specialization of the PEO’s staff benefit its partners,  the cumulative number of employees handled by a good PEO for small and medium size businesses can number in the 10’s to 100’s of thousands.  By combining hundreds of smaller companies together to make up a company totaling thousands of employees, a PEO can use this volume and buying power to buy down and/or…reduce the costs of health insurance, workers’ compensation insurance, taxes, payroll services, HR services, benefits management, risk and safety management services, and a host of other services tailored to meet each client’s needs.

The goals of using a PEO boil down to increasing profitability, and reducing exposure to fines, risks and penalties. Doing so provides a well rounded and efficient workplace, therefore saving a business money while providing its employees with the kind of offerings that attract and keep the best talent.

–Eric Snethkamp.  Eric@ExpertPEO.com.