Should Your Business Partner with a PEO?

At a glance:

• The main takeaway: A professional employer organization (PEO) is a company that provides comprehensive HR solutions to businesses that don’t have the resources to execute those functions in-house.
• Impact on your business: Partnering with a PEO could be the solution startups and small-to-mid-sized businesses need to provide essential HR benefits and perks under a tight budget.
• Next steps: Aprio’s Employee Benefits Services team can help assess your current situation and support you in making the benefits and HR decisions that provide the best fit for your business and employees.

Schedule a consultation today to learn more

The full story:

You are a budding startup or mid-sized company on the fast track to future growth. You have a passionate team assembled to help you achieve your goals and serve your customers. You are ready to dive in and take your business to new heights.

Although the building blocks are in place to help build your business’s success, you may be struggling to find a way to properly support your employees under thin margins. Partnering with a professional employer organization (PEO) could be the solution you need to provide essential HR benefits and perks on a tight budget and with limited resources.

In this article, we will explain how PEOs work and how to determine whether a PEO partnership is the right fit for your business.

What is a PEO?

Put simply, a PEO is a company that provides comprehensive HR solutions to small-to- mid-sized businesses. Most PEOs’ services typically include payroll management, benefits administration, regulatory compliance, workers’ compensation, and even employee training and development. Essentially, a PEO acts as a co-employer, taking on many of the administrative burdens that businesses face in managing their workforce. For a startup or small company with limited funds and staff, this can be hugely beneficial and cost-effective.

How do PEOs work?

When a business establishes a relationship with a PEO, it signs a co-employment agreement. This agreement means that both the employer and the PEO share certain legal responsibilities for the employees that work for the business. The employer retains control over day-to-day operations and decision-making activities, such as hiring, firing, and setting work hours. Meanwhile, the PEO focuses on administrative tasks that would otherwise fall on the employer’s HR department.

The co-employment structure allows businesses to benefit from the PEO’s expertise and resources, while still maintaining control over their core functions. The PEO can handle duties that can be incredibly complex and time-consuming for internal staff, such as payroll processing, tax filings, and employee benefits administration. What’s more, the PEO can also assist the business with navigating compliance issues related to employment laws and regulations, helping them avoid costly legal penalties.

Key services offered by a PEO

As I mentioned above, PEOs provide a wide range of HR services designed to simplify business operations. These services typically include:

• Payroll and tax administration: PEOs handle all aspects of payroll processing, including distributing checks or direct deposits, managing wage deductions, and ensuring taxes are accurately filed. This can be a major time-saver for businesses, especially those with multistate employees where tax regulations may differ.
• Benefits management: A competitive benefits package is crucial for employee retention and satisfaction. However, many growing small-to-mid-sized businesses are pressed for funds and time, making the process of navigating healthcare plans, retirement options, and other employee perks overwhelming. Fortunately, PEOs have access to large group benefits, often giving businesses better rates and a broader range of options than they could negotiate on their own.
• Regulatory compliance support: Employment laws can be difficult to navigate, especially for small businesses that may not have a full HR team in-house. PEOs stay up-to-date with changing regulations and can help ensure their clients are compliant with labor laws, OSHA standards, and other relevant rules.
• Workers’ compensation: A PEO typically manages workers’ compensation coverage and claims. PEOs can often secure better rates for workers’ compensation insurance because they pool employees across multiple companies. Additionally, PEOs handle claims processing and can help businesses create safer work environments to reduce risks.
• Employee training and development: Many PEOs offer resources for employee development, such as training programs, leadership development, and onboarding services. These services can help businesses foster a more skilled and productive workforce without the need for dedicated in-house training staff.

Does your business need a PEO?

While many small-to-mid-sized businesses can benefit from partnering with a PEO, certain scenarios make PEOs’ services particularly valuable and relevant. These scenarios include:

• Rapid growth: Companies experiencing rapid growth often find themselves needing to hire more people quickly, sometimes across state lines or even internationally. Managing payroll, benefits, and compliance can become increasingly difficult as the workforce expands. A PEO can take over these functions, allowing the business to focus on scaling without worrying about HR bottlenecks.
• Limited in-house HR resources: Small-to-mid-sized businesses often lack the financial resources for a fully staffed HR department; unfortunately, this means critical tasks like compliance, payroll, and employee relations may be handled by overworked or underqualified team members. A PEO can provide the support growing businesses need in HR and employee management, reducing the risk of errors or legal issues.
• Need for better employee benefits: Competitive employee benefits can be expensive and unattainable for startups and smaller businesses because they don’t have the same bargaining power as larger corporations. By joining a PEO, startups and small businesses can gain access to large group benefits, often at a lower cost than they could secure independently.
• Struggles with compliance: Employment laws change frequently and vary from state to state, making it difficult for businesses to stay compliant. However, failure to comply with federal or state regulations can result in costly fines. PEOs stay on top of these changes and can help ensure that businesses stay compliant.
• No time to focus on strategic business activities: For business owners who want to focus their time and energy on growth, product development, or customer service, a PEO can be a game-changer. By outsourcing key HR tasks, employers can free up valuable time and resources to concentrate on their core business objectives.

The bottom line

PEOs offer a wide range of HR services that can be invaluable to small and mid-sized businesses on the fast track to growth. From handling payroll and benefits to ensuring compliance with ever-changing employment laws, a PEO can take much of the administrative burden off the shoulders of business owners. Companies experiencing rapid growth, struggling with compliance, or simply looking for more efficient HR management might consider partnering with a PEO to streamline their operations and gain access to better employee benefits.
 

If you think your business may benefit from partnering with a PEO, contact Aprio’s Employee Benefits Services team. We can help assess your current situation and support you in making the decision that works best for your business and employees.

Schedule a consultation with our team today.

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