A growing small business reaches a point where handling payroll, benefits, human resources, and regulatory compliance becomes overly burdensome. Professional employer organizations (PEOs) allow a business to outsource these tasks so they can focus on core functions.
According to the good folks over at VertiSource HR, PEO services provide vital administrative support that enables a business to scale up smoothly.
Reducing Administrative Burdens
As a business grows from 5 to 50 or 500 employees, payroll processing, healthcare management, retirement plans, workers’ compensation, and HR issues grow exponentially more complex. Administrative tasks divert focus from revenue-generating activities.
PEOs lift these burdens off a business’s shoulders through comprehensive HR outsourcing. They serve as a “co-employer” that manages payroll, benefits, compliance, hiring, firing, and more. This allows lean staffing for a growing company.
Access to Enterprise-Level Benefits
One huge advantage PEOs offer is access to large-group rates on employee benefits like health insurance plans. This can reduce a small business’s benefits costs by 5-15%. A PEO also lets small businesses offer more robust benefit packages to attract top talent. Access to economies of scale creates big cost efficiencies.
For example, a PEO may negotiate deals with carriers to get health plans, dental plans, vision plans, life insurance, 401(k) plans, disability insurance, and educational assistance at large-group rates. This improves a business’s ability to recruit and retain the best talent.
Compliance Expertise
Navigating the legal complexities around hiring, payroll, safety, healthcare, and family leave is daunting, especially for growing companies. PEO HR consultants possess deep expertise in employment compliance at the federal, state, and local levels. This protects clients from expensive lawsuits or penalties down the road because of any noncompliance.
A PEO proactively keeps up with ever-changing regulations so a client can avoid missteps. Their guidance enables legal peace of mind so entrepreneurs can focus on tenants, sales, R&D, or service delivery excellence rather than compliance minutiae.
Risk Management
With a PEO as a co-employer, they share liability for safety, healthcare costs, unemployment claims, workers’ compensation, and discrimination allegations. The PEO’s experts bring best practices around mitigating risks in these areas.
When safety training prevents just one major accident or a discrimination seminar avoids one lawsuit, the PEO services pay for themselves.
PEOs Can Save Money
While paying for PEO services seems like an added expense, it often saves money in the long run. The economies of scale around insurance plans and technology infrastructure reduce administrative costs significantly.
Risk mitigation through enhanced safety and compliance lowers expenses borne from accidents, claims, lawsuits, and penalties. The overhead reduction also allows strategic resource reallocation towards more important priorities than paperwork.
Key Indicators to Adopt PEO Services
Here are signals that show a business could benefit greatly from PEO services:
- Health insurance or workers’ compensation costs trending upwards.
- Payroll processing diverts over five hours a week of management capacity.
- Recent minor compliance infractions or safety incidents.
- Difficulty filling open positions quickly.
- More than twenty-five employees across multiple locations.
Onboarding Best Practices
When ready to adopt PEO services, taking the following steps leads to the smoothest transition:
- Consult an insurance broker and accountant.
- Get proposals from 2 or 3 leading national PEOs.
- Vet PEO track records carefully.
- Phase-in PEO partnerships over time.
- Communicate frequently internally around changes.
Conclusion
The burden-reducing, cost-controlling, and risk-management benefits from top PEO service firms provide an incredible platform for sustainable business scalability.
Their back-end infrastructure support allows leadership teams to stay focused on what matters most. For many fast-growing small and mid-sized businesses, adopting PEO services can be a real game changer.
