Should You Use a PEO Service? Yes, and Here’s Why

There are around 32.5 million small businesses in the country. As a small business owner, it can be difficult to juggle everything you need to accomplish on a daily basis. One aspect of your company that likely takes up a large amount of your time is human resources.

Outsourcing your HR activities to a PEO service organization is a great way to decrease your to-dos without hiring additional full-time employees. You can access the benefits and experience of a PEO company without the hefty price tag of hiring an in-house person.

This guide will discuss what PEO services are and why you should outsource your HR tasks to one.

What Are PEO Services?

professional employment organization (PEO) utilizes a co-employment model when they partner with small businesses. The PEO serves as the employer of record for their client’s employees. The PEO takes on more of the liability since everything is getting filed under their tax ID number.

PEO service companies allow you to outsource a variety of tasks to them, alleviating your workload and streamlining your company.

Some of the tasks a PEO company can manage include:

  • Benefits administration
  • Payroll processing
  • Tax compliance
  • Outplacement and recruiting support
  • Workers’ compensation
  • Retirement plans
  • Development and training courses
  • Safety programs

With a PEO company, you get direct support in the areas you need assistance.

What Do PEO Services Cost?

There are two main ways a PEO company charges for its services. The first way is a percentage of your payroll. This includes the following:

  • Your company’s total payroll for a pay period
  • State, federal, and local taxes
  • Employer Practice Liability Insurance (EPLI)
  • Worker’s compensation

There are additional administrative fees on top of a percentage of your total payroll.

Another way a PEO company charges for its services is per-employee-per-month. This fee is negotiated with the PEO company when you sign your contract.

Benefits of working with a Global PEO company

Partnering with a PEO can bring your business some advantages. Like with any partnership, it’s important to fully understand what you’re getting yourself into before you sign a contract.

Access to More Employee Benefits

As a small business owner, you might not be able to access a variety of health and benefit plans for your employees. When you work with a PEO, your employees are in a large group with the other co-employees of the PEO.

A PEO can provide all of the employees with access to health care rates and plans that large corporations can. Your employees can find health coverage options that work better for them at a more affordable rate.

Save Money Hiring Employees

A PEO can help you recruit and train new employees. The PEO company has interviewing methods that they’ve honed throughout the years. They’ll be able to identify key talent more quickly, saving you time.

Support Your Remote Teams

Your organization might have employees in different states, or even different countries. Global PEO services can assist organizations with meeting the compliance obligations that vary in each region.

They can also keep you up to date on relevant state and federal labor laws that affect your remote workforce. Your company needs to comply with the different laws in each state or country. Your provider can help you navigate these employment and tax laws.

Protection Against Risk

Many new businesses get fined each year for making payroll errors. Staying in compliance in all areas of your business can get complicated. There are a lot of different insurances your company needs and paperwork to fill out.

PEO companies are experts in all things related to compliance. They’ll know what documents you need to file and fill out so you don’t encounter any fines.

Focus on Growing Your Business

As a small business owner, your days are likely filled with endless to-dos. Managing compliance issues and your other HR tasks could take up the majority of your day.

When you outsource your HR activities, you can spend time growing your business. You’ll have more time to develop relationships with your current clients and bring in new customers.

Frequently Asked Questions

Are you still struggling to see how a PEO can benefit your company? Let’s go over some of the most frequently asked questions about PEO services.

What’s the Difference Between Outsourcing Your HR and Hiring a PEO?

When you outsource your HR activities, you don’t enter into a co-employment model. That company will handle your HR tasks. Your organization is still liable and responsible for the work that they do.

Partnering with a PEO minimizes that risk. Since they become the employer of record, they take over any HR-related liability.

Do Small Businesses Typically Use PEOs?

PEO services tend to be geared more toward smaller companies. Large corporations often have internal HR teams to handle their activities. Usually, a small business that has fewer than 22 employees uses a PEO company.

Will a PEO Take Control of My Company?

When you work with a PEO, you’re forming a partnership with them. You’re in charge of your organization and how it operates. You still direct your employees.

Does a PEO Only Offer One Healthcare Plan?

Most PEO companies offer multiple healthcare plans that your employees can take advantage of. The state you live in might limit the options that are available to you.

Save Yourself Time and Increase Your Revenue

Hiring a PEO service company is a great way to decrease your daily activities. You’ll decrease your company’s risk of violating any employee-related laws while giving your employees better benefits.

To read more about different ways to grow your business, check out one of our other articles.

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