Helpful Insight Into The PEO Industry

A Professional Employer Organization (PEO) provides an integrated and cost effective approach to the administration of human resources and other employee-related duties. The PEO and the client partner in a co-employment agreement where they share the duties and liabilities of the human resource and administrative tasks. The PEO assumes responsibility for payroll, tax administration, risk management, legal compliance, and in most situations worker’s compensation. The business maintains control of its day-to-day operations, establishing pay rates, determining policies, the hiring and terminating of employees, and just about everything else related to running the business.

Statistics about the PEO industry, according to studies by NAPEO (National Association of Professional Employer Organizations):

  • 14-16% of small businesses (with 10-99 employees) use a PEO.
  • There are an estimated 3 million American workers currently employed in a PEO arrangement.
  • Compared to other businesses, PEO clients grow 7-9% faster
  • Companies that use a PEO are 50% less likely to go out of business
  • Companies that use a PEO have 23-32% lower turnover

Most common reasons why businesses use a PEO:

  • Necessity: for businesses who seek relief from time consuming, back office tasks
  • Security: for compliance with the ever-changing ACA (Affordable Care Act) Laws regarding employment
  • Ability: to offer a full array of “Fortune 500 type” benefits to their employees
  • Proficiency: in all HR, Benefit, and Payroll tasks and regulations

Common questions:

Will I relinquish any control over my business?

No. All decisions pertaining to the business and the way you run it remains with you.  The PEO is just there to provide assistance, support and guidance – not dictate policy or require you make any decisions.  And with the PEO handling the HR function, there’s no more wasting time on paperwork and non-core activities –which is the reason why most businesses feel like they actually GAIN control after partnering with a PEO…they can spend time on whatever THEY choose.

Will my employees feel uncomfortable with this arrangement?

At first, it is going to seem different to them.  “Wait, I am now getting my check from another company?” they will ask.  But after it is explained that their job doesn’t change one bit, they don’t report to or answer to anyone at the PEO, they have more time to focus on business at hand, and they typically will have more health insurance options and stronger overall benefits….most employees become quite happy that their employer chose to work with a PEO.