When Should You Hire A PEO?

When should you hire a PEO?

Whether you’re just starting on your small business journey or have been running your own business for years, HR administrative tasks can be a challenge. Hiring new team members, managing payroll, administering benefits, and complying with employment laws may not be as streamlined as other operational activities, and could be costing you valuable time and money if you’re trying to manage everything internally. 

If it feels like too much of your time and resources are spent on operations that are not core to growing your revenue, you may be ready to explore a PEO partnership. By delegating those human resources functions to a third-party professional partner, you can free up time and resources to focus on your core business. But, all PEOs are not the same. You need to know what to look for when finding a PEO service, when hiring a PEO makes sense for your business, and which bottom-line advantages you can expect from a PEO partnership.

What Are PEO Services?

Let’s start with the basics. A Professional Employer Organization, more often referred to as a PEO, is a professional team that works with small businesses, startups, and nonprofits to help manage employee-related responsibilities. A PEO serves as an official co-employer responsible for the administrative functions of being an employer. PEO services allow business entities to outsource specific HR functions, as well, including benefits, workers’ compensation, payroll, regulatory compliance, and taxes. If you’re examining how efficient and effective your current HR resources and strategies are, hiring a PEO could be the most lucrative and advantageous solution to any current shortfalls. 

Here are the basic HR services a PEO partnership can offer your company:

  • Payroll Administration & Processing
  • Employee Benefits Administration
  • Human Resources Administration
  • Insurance Plans & Management
  • Safety Programs & OSHA Compliance
  • Tax Compliance
  • Government & Industry Compliance
  • Recruiting & Onboarding Support
  • Workers’ Compensation
  • 401(k) Retirement Administration
  • Training & Workforce Development Courses
  • Unemployment Insurance Benefits

The Many Advantages of Working with a PEO Business Model

As you consider your options for outsourcing your HR tasks and activities, explore the PEO services business model when you need to reduce your liability and overall HR workload. But there are additional advantages of working with  PEO, too. Focus more of your efforts on your business’s core functions and enjoy the benefits of a PEO partnership.

  • Manage payroll taxes and unemployment administration seamlessly and professionally
  • Free up your HR teams to focus on company culture and employee satisfaction
  • Reduce administrative tasks you handle internally
  • Have access to better employee benefits, usually only reserved for large businesses
  • Ensure legal compliance in all facets of your operations by trained, knowledgeable professionals
  • Gain additional legal protections against litigation
  • Keep current with Federal and state employment law changes and  compliance
  • Improve HR functions related to talent acquisition and hiring
  • Reduced operational costs
  • Reduced turnover

Are PEO Services Good for Employees?

Before you take any steps toward outsourcing your HR and hiring a PEO, you want to be sure it’s a good move for your employees. You won’t want to adopt a new HR partner if it compromises your staff relationships or complicates their working experiences. An effective PEO can simplify being an employer and let you focus on managing the performance of your team while the PEO takes care of the HR operations. This is why so many small businesses are making the transition to PEO partnerships. There are significant advantages to working with a PEO, especially for your participating staff.

An Improved Employee-HR Experience

How satisfied are employees with your current methods of human resources management? If you’re not sure or know that you need to make improvements, consider the PEO solution. Because a PEO handles all the detailed and repetitive tasks of managing HR, you can focus on improving your company culture. And with a dedicated team of professionals available to your employees, they’ll experience a more comprehensive HR experience with prompt attention and support.

Better Benefits Opportunities

With a PEO partner, your employees can enjoy more cost-effective benefits plans. Because a PEO can combine your employees with its other clients and employees, it can leverage better negotiation for medical, dental, vision, and life insurance plans. For those businesses with more employees, a PEO can provide experts across different practice areas of HR including benefits administration, so your employees have support for all their insurance-related questions. Your teams will appreciate the better coverage opportunities with the reduced premiums.

Retirement Planning

A PEO can offer employees additional help with retirement options, including 401(k) plans. Some PEOs will provide an employer-sponsored contribution plan whereby employees can add to their retirement with matching contributions. In a report by the Investment Company Institute, 92% of employees said that employer-sponsored retirement accounts with automatic payroll deductions make it easier for them to save.

Support, Training, and Career Development

Another core function of HR that your PEO can support is workforce and career development. A PEO provider can help by creating new training initiatives and developing better onboarding efforts. Some PEOs even provide a learning management system for self-paced training. PEO services may also include recruiting both full and part-time employees.

What Business Entity Types Use PEO Services?

A PEO can be an ideal solution for a variety of business entities, including traditional small businesses, startup companies, and non-profit organizations. Because the PEO service model outsources HR functions in a co-employer relationship, these types of entities work well with PEO services.

However, if you are a self-employed individual as a sole proprietor or single partner, you are not a work site employee and are ineligible to be an employee of a PEO service provider. And should you partner with a PEO provider, know that any non-employee status workers, including independent contractors you might bring in for peak seasons or special projects, will not benefit from the PEO service.

Signs You’re Ready to Hire a PEO

So, should your small business hire a PEO? Understanding how PEO services work and how they benefit your staff and your bottom line is a great first step. Now, explore these signs that indicate you should take the next step and hire a PEO.

Human Resources Management Is Burdensome

If your existing HR staff is overburdened by the full range of HR-related operations, a PEO is a great solution. Talk with your designated HR manager and inquire about the sustainability of the workload. Outsource tasks that will alleviate the stresses and eliminate the risks of potential HR-related oversights, like benefits administration, payroll, and workers’ compensation.

Your Budget Won’t Allow for a Dedicated, In-House HR Administrator

For some small businesses, there just isn’t a budget to hire a professional HR staff member as an internal position. Instead of taking on the additional cost of an annual salary and benefits, you can explore hiring a PEO that charges a flat fee per employee, which may save you money while providing an entire team of experts.

You’re Launching a Startup or Growing Your Company

New companies and startups benefit greatly from a PEO partnership since developing a full-service human resources department won’t be feasible yet. Brand-new entities can leverage the PEO for recruiting efforts, including competitive benefits that attract better talent, along with payroll management and risk management in the early stages.

Small business entrepreneurs who are ready to scale are often positioned much like a startup. Before ramping up production or core offerings, those companies need additional employees, and in turn, will need to handle more HR responsibilities and assume more risk. A PEO can be a great partnership to help those efforts as companies scale.

You’re Concerned About HR, Payroll, or Safety Liability

Another sign you might be ready to hire a PEO is a growing concern about liabilities. Whether you have an HR staff internally or not, there are risks you assume regarding employee laws, ACA-compliant benefits, payroll, and safety. If you’re concerned that you might not be taking all the necessary steps to mitigate those risks, or you feel your internal staff is not up to date with the latest requirements and guidelines, a PEO is a great option.

How to Select the Best-Fit PEO for Your Business Model

Once you’re ready to explore a PEO partnership for your small business, there is more to consider. Not all PEO providers are created equal, and any PEO you hire should be a great-fit asset to your organization. Prepare a vetting strategy and checklist. Add these questions to your conversation, ensuring you make the best PEO partnership decisions.

  • Does the PEO commit to dedicated response time for providing HR support?
  • Does the PEO understand your core values, company culture initiatives, and growth strategy?
  • Will the PEO make impartial recommendations and provide HR advice?
  • Will the PEO provider offer a dedicated contact person for your team members?
  • Does the PEO provide on-site availability for emergencies?
  • Does the PEO offer assistance in employee training, performance oversight, and career development?
  • Does the PEO prioritize your employees with convenient and efficient processes and self-service technologies?

With the right PEO partner, you can grow your business and focus efforts on core operations. And due to the ever-changing workforce dynamics and compliance, you’ll have an HR support partner to handle all the required tasks for a streamlined employee experience and reduced liability. Now that you’re ready to explore your PEO options let Human Capital Concepts be your guide! As a Certified Professional Employer Organization, we work with your business as an employer partner and extension of your human resources. You’ll enjoy a dedicated team of HR specialists, actionable recommendations, compliant oversight, and incredible support. Contact the HCC team today and discover how hiring a PEO can be game-changing for your small business’s success!