With so many business owners looking for ways to save on insurance costs, it’s no wonder why PEO plans are more popular than ever.
Have you wondered why PEO (Professional Employer Organization) plans have garnered so much attention in the past few years?
Small- and medium-sized businesses face unique challenges when it comes to taking care of their employees. Budget and time limitations often make it impossible to tackle every task for the day.
And with the threat of COVID-19 at an all-time high, many employees worry about their insurance options. However, contracting a PEO can help boost productivity, save costs, and even improve worker morale.
What Does PEO Stand For?
Are you scratching your head, trying to figure out what does PEO stand for? This acronym is short for Professional Employer Organization. These companies provide a range of helpful tools to small- and medium-sized businesses.
Here are some of the services a PEO may include in your contract:
- Human resources management
- Payroll administration
- Employee benefits packages
- Workers’ compensation insurance
- Risk management
A PEO offers different services based on the needs of their clients. Plans are customizable. The goal is to help each business select the options that will best serve them both now and in the future.
What Is a PEO and How Does It Work?
A PEO is a company that handles many of the administrative tasks for businesses. But working with a PEO is different than merely outsourcing these jobs to others. Instead, you enter into a co-employment relationship with the provider.
You will continue to manage the daily operations of your company. But the PEO will take charge of other departments, including HR services and payroll.
As an HR provider, a PEO will find your company the best and cheapest insurance options. They often specialize in companies that have a State Fund policy or gaps in their coverage.
PEO insurance carriers usually offer lower premiums than you can find elsewhere. And a pay-as-you-go plan will even get rid of the pesky annual audit.
Payroll administration gets more challenging every year. There are so many rules you must follow, and the regulations seem to change all the time.
To be honest, most small business owners are not experts on payroll taxes or withholdings. But you can count on your provider to take care of any PEO tax implications throughout the year.
Workers’ comp claims require a lot of skill and know-how to resolve. You want to make sure your employees get the compensation they need quickly, but insurance companies often drag their feet.
If someone gets hurt at work, your PEO will jump into action immediately. They’ll file the necessary paperwork to ensure insurance covers the claim. Your injured employee will be able to focus on getting well.
What Are the Benefits of a PEO?
Smaller businesses often struggle to stay ahead of the game. You may have a tighter budget than larger entities. Hiring an in-house HR department may be out of the question. And as a business owner, you don’t have enough hours in a day to complete everything on your list. Scenarios like this are prime examples of how a PEO can help.
As co-employers, your employees also become the PEO’s employees. Sure, this arrangement may seem strange at first. But it will make your business eligible for many benefits you may not be able to get otherwise.
For example, companies with only a few workers find it challenging to purchase affordable insurance. When you team up with a PEO, they can pool your employees with those from other clients.
This tactic gives them more leverage when it comes to negotiating deals on health or workers’ comp insurance.
Hiring a PEO also reduces your liability risk. On-the-job injuries cost a lot of money. And if you don’t have workers’ compensation coverage, you may end up with a messy lawsuit on your hands. All it takes is a single incident to put a company out of business.
Your provider will offer guidance on how to minimize risks in the workplace. They will also look for any compliance violations to prevent costly fines.
Many small businesses have employees across the nation. Some may work in a central office, while others may work from home. Having workers in several locations can create a new range of issues for in-house HR departments.
Providing benefits to multi-state employees is tricker and more expensive, especially if you don’t have a large payroll. However, PEOs specialize in multi-state risk coverage. They can find you the best coverage at the lowest price.
PEOs also free up more time for you to focus on other aspects of your business. They will manage your payroll taxes and workers’ comp claims. You can use the extra time to find new clients or implement better marketing strategies. Just imagine how much more time you’ll be able to devote to growing your company.
In essence, PEOs offer smaller businesses the same advantages that many large corporations take for granted. Entering into this co-employment relationship will give your business more leverage.
Furthermore, you’ll be able to reduce your overall workload. Your employees will enjoy more perks, and you’ll be able to attract higher-quality talent to your company.
Are There Any Disadvantages of Using a PEO?
Although the pros of using a PEO are endless, it wouldn’t be fair not to touch on the cons.
Here are the most common concerns:
- Giving up control: Working with a PEO means owners must relinquish some of their control. And for many self-made entrepreneurs, this is a difficult move. For example, owners will need to trust their PEO to choose the best insurance providers to meet their needs. Even giving up control over HR proceedings may feel awkward at first. But having more time to invest in other areas of your business makes up for any control you lose.
- It’s a multifaceted relationship: In your mind, the success of your company and the well-being of your employees is all that matters. But when you partner with a PEO, you have to accept that they will have other equally important clients. PEOs cannot survive with just one client, and you wouldn’t enjoy the same cost-saving perks. While you may not always receive the one-on-one attention you crave, the tradeoff is worth it in the long run.
- There’s no get-out-of-jail-free card: PEOs are your co-employer. That means you are in this together, through thick and thin. Even though they may provide risk or claims management, they can’t put out fires without you. Whenever problems arise, both the business owner and PEO must step up to the plate to reach a resolution.
No one should overlook these disadvantages. But after weighing all the options, most business owners still agree that hiring a PEO is the best decision they could ever make.
What Is the Difference Between a PEO and a Staffing Agency?
People new to the world of PEOs often confuse their services with those of a staffing agency. But the two entities couldn’t be more different if they tried. Depending on the nature of your company, you may even do business with both.
Staffing agencies exist to fill workforce vacancies. They recruit and hire temporary workers for a variety of industries. These openings may be seasonal or due to a sudden influx of work.
Once a company no longer needs the worker’s services, the staffing agency will assign them to another job. Anyone hired by a staffing firm remains an employee of the agency. And it’s up to the staffing company to provide workers’ comp benefits to these workers.
PEOs, on the other hand, often provide human resources to their co-employers. Depending on the contract, they may or may not hire new staff.
However, the owner of the business remains in full control of day-to-day operations. You still have the final say in who you employ. PEOs may also take care of insurance benefits. These include health, dental, workers’ comp, and unemployment insurance.
So, which do you need?
When the time comes to fill temporary jobs, you’ll want to call a staffing agency. But if you want to lower your insurance premiums for your small business, a PEO can help you find the best options. Depending on your contract, a PEO may even handle HR, payroll, or risk management.
Is a PEO a Good Idea?
The majority of small- to medium-sized businesses benefit tremendously from a PEO. As one of the top 10 PEO companies, Coastal Work Comp Brokers can significantly reduce your stress levels.
Our services will decrease your spending costs, and we can reduce your insurance premiums by 30-40 percent. We also provide risk/claims management and human resources at no extra cost.
If you need affordable workers’ comp, Coastal Work Comp Brokers can help. Our pay-as-you-go plans will even eliminate the dreaded annual audit.
After all, you don’t know how COVID-19 will affect your staffing needs in the foreseeable future. Avoiding the audit is a must if you want to save money without losing your coverage.
At Coastal Work Comp Brokers, we’ll always keep your best interests in mind. We’ve worked with thousands of clients, and many have left us glowing PEO reviews.
Whether you have 5 or 500 employees, we can make managing your business easier. Our team specializes in all niche industries, such as high-risk, high-mod, multi-state risk, and new ventures. Call 323-543-4141 for expert help in finding out why PEO is the best option for your business.