PEO – Professional Employer Organization

• Why would you want to welcome a co-employera into your business? Well, as it turns out, for many reasons. PEOs can have a profound impact on a company’s bottom line.

Here are just a few examples of why co-employers are actually a good thing:

• You’ll pay less for insurance. Since your employees also become the PEO’s employees, you’ll be able to find better insurance policies and lower premiums. When shopping for plans, a PEO can pool your employees with those of other companies. Instead of paying higher rates as a small business, you’ll finally have more leverage to command better prices.
• Your employees will stick around for longer. Workers want to go where they get the most benefits. Even if they love working for your small business, if you can’t offer them the insurance they need, they’ll end up looking elsewhere. PEOs not only handle benefits packages, but they can also engage in programs to increase retention rates.
• It will cost you less in the long run. Hiring an in-house HR department isn’t cheap. Not only do you need to find the space to put an HR team, but you should also expect to provide them with the office tools they need.
  On top of that, HR managers command a top salary. PEOs are a more affordable option. And since they will work from their own office, space is never a concern.
• Managing workers’ compensation will be a lot easier. Many small- and medium-sized businesses dread finding workers’ comp policies. Coverage isn’t cheap, and many insurers overprice their plans for smaller businesses. And if you can’t find anything else, you end up with the State Fund. PEOs take the dread out of obtaining coverage. They often specialize in high-risk industries, and finding a pay-as-you-go plan will even eliminate the annual audit.

• Most companies that partner with PEOs only wish they had done it sooner. Handing many of your daily responsibilities over to an expert makes it easier to tackle other aspects of your business. And you’ll probably save a good chunk of money in the process.

• However, it’s not fair to sing the praises of PEOs without touching on some of the downsides. Weighing the pros and cons will ensure you make the best decision for your company.

Keep these things in mind:

• PEOs reduce face-to-face interactions. When you have an in-house HR department, your workers can stop by the office at any time to speak with someone. It’s easy to set up on-site training or implement policy changes. Since PEOs work offsite, you won’t have that same personal connection.
• You’re not the PEO’s only co-employer. PEOs cannot survive with just one client—some of the best ones have thousands. While you may not get the personal one-on-one attention you crave, you’ll still get the expert service you need in a timely manner.
• You lose some control. Entrepreneurs love to be in control of the situation. But since both you and the PEO are co-employers, you must trust them to handle their assigned tasks. For instance, if they want to change your benefits package or workers’ comp plan, you need to believe it’s in the best interest of your business. Truly great and established PEOs will never lead you in the wrong direction.
• You need the right number of employees. PEOs usually specialize in serving smaller businesses. The majority require you have 5-500 employees, although it’s sometimes possible to find a PEO for one employee. However, it’s usually not necessary, and self-employment insurance may be the better option.

• When it comes to the cons, those are pretty much all of them. If the idea of having more money and time to allocate to the growth of your business sounds like a good plan, then PEOs are the way to go.