A Guide To Choosing A PEO
Managing the operations of a small business is costly and requires time away from more valuable projects. That’s why many small and mid-size businesses outsource human resources, payroll, employee benefits, and risk management services. A PEO (Professional Employer Organization) can help take these responsibilities off the plate of business owners, so they can focus on the growth and success of their business.
We’ve put together a guide to understand what PEO services entail and how to choose the right PEO for your business.
What is a PEO?
A PEO provides comprehensive business solutions and services. Through the co-employment model, PEOs work with small and mid-size businesses to:- Manage payroll and tax administration
- Manage human resources and risk management functions
- Provide employee benefits
- Stay compliant
- Grow 7 to 9 percent faster
- Have 10 to 14 percent lower employee turnover
- Are 50 percent less likely to go out of business
How to Choose a PEO
There are more than 900 PEOs in the U.S., according to NAPEO. With so many options, it can be hard to know which one to choose. Follow these tips to help you to choose the right PEO for your business.Assess Your Business Needs
Before talking to a PEO, you should take stock of your business needs. What current challenges does your business face? Do you anticipate any changes to your company that could impact the services you need? Look at facets of your business, such as:- Payroll: Between managing payroll and filing taxes, small and mid-sized companies spend an average of $2,000 per employee each year to handle payroll and many incur IRS penalties each year due to compliance issues. Outsourcing payroll services to a PEO can save you time and money by providing you with a simplified, online payroll system.
- Human Resources: From recruiting and retaining employees to tracking vacation time, managing your company’s HR responsibilities takes a lot of time. Outsourcing these HR functions to a PEO can help you save time and money, while growing your business.
- Risk Management: Managing your company’s risk on your own can be time-consuming and costly. Instead, you can build toward a more secure future by outsourcing to experts at a PEO. PEOs can help you qualify for workers’ compensation discounts, keep unemployment tax rates down, and create a safer environment for your employees.
Build Your Benefits Package
Employee benefits will make your business a great place to work and help retain talent. While you’ll be hard pressed to find a PEO that doesn’t offer access to health insurance, the providers they work with and the amount of coverage their plans provide will vary. In addition to assessing your business needs, you’ll need a good sense of what types of health coverage your current and future employees will require and what you’re willing to spend on it. When you work with a PEO, instead of directly with insurance companies, you’ll be able to leverage buying power through mass policies, which lets you take advantage of purchasing multiple policies at typically lower premiums. Speaking of multiple policies, you’ll also want to consider other benefits like dental, vision, and life insurance as well as 401(k) retirement savings programs to make your business more attractive to quality candidates. Additionally, wellness programs can help manage your premiums, while keeping your business running like a well-oiled machine. Whichever benefits are most appealing for your business, you’ll want to do your research to make sure you find a PEO that has everything you require.Perform a PEO background check
When vetting PEOs, it’s important to look at their history, experience, and qualifications. Ask questions, such as:- How many companies do they partner with?
- Do they have experience working in your industry?
- How many employees do they represent?
- What is their client retention rate?
Evaluate a PEO’s Technology
The purpose of PEO is to make your life easier. If the technology platform that a PEO offers isn’t simple to use, then the PEO is going to be more of a burden than an asset to your company. Web-based payroll portals benefit employers by compiling everything they need to manage their back office in one place. They also help employees get paid on time, track time, and access W-2’s and paystubs. Your PEO’s online payroll system should help employers:- Manage and access payroll information
- Complete payroll in minutes, not hours
- Easily keep track of deductions
- Simplify workers’ compensation calculations and payments
- Generate on-demand payroll reports
- Employee reviews
- Timekeeping and PTO requests
- Health insurance and employee benefits
- Company communication
- Employee handbooks