What is a PEO? If you asked 10 people that question right now, how many of them would be able to answer that question? If you are lucky, maybe 3 of them would be able to give you a good overview of the PEO industry.
The Professional Employer Organization (PEO) industry is one of the most consistent, growing industries in the U.S. What does that mean exactly? Well, this industry, otherwise referred to as the “employee leasing” or “co-employment” business, has continued to show growth since its inception in the late 1980’s. In fact, during its first decade of existence, employee leasing grow at a 1000% rate. Since the year 2000, the industry has continued to grow at a 30%+ rate per year. How could an industry, one that is not widely known or understood, have such phenomenal growth?
The simplest way to explain a PEO, is to think of it as an “outsourced human resource department.” Every business with employees, could benefit from using a PEO. In fact, unless your firms focus is “Human Resources,” you should look into using a PEO. Why? It’s simple, save money and increase your human resource value within your organization.
PEO’s offer considerable savings in areas such as payroll, benefits, workers’ compensation and general human resource related affairs. This varies state-by-state as well as PEO-by-PEO, but the general idea remains the same, PEO’s can save you money. With money saved is money and value earned. In many scenarios, you may be able to take advantage of the significant savings offered by a PEO to completely off-set the initial investment for their services! This industry has one focus, and that focus is HR. They can help manage your employees and all of the processes that go along with HR.
Whether your business has 5 employees or 500 employees, you can benefit from a PEO. It does not cost you anything but time to get a quote, so why not? If you truly value your time, then you would stop worrying about changing HR laws, payroll reporting, benefits administration and all of the other monotonous HR related duties and start outsourcing these tasks to the professionals. This does not mean that your firm does not have a professional HR department, but in most situations your company does not have the group buying leverage a PEO does. For example, Landrum Human Resources has over 10,000 employees under its PEO umbrella. Consider the efficiencies and buying power of an organization that is dedicated to doing one thing, managing your HR functions.
Do some research before you jump into bed with a PEO. After all, they are going to be handling your most valuable assets, your employees. Even though you retain all decision making for your employees (hiring, firing and direction of daily work), you still want to research your PEO and make sure you are getting your money’s worth. DO NOT pay for PEO services, and get stuck with “Payroll-Only.” If they claim to be a true PEO, make sure they are experts in the HR arena.
For example, how well does the PEO handle an EEOC claim? Do they fight these battles for you? What kind of training does the PEO offer for your employees? How can they help your productivity levels? How can they help your turnover rate? What kind of accreditation’s do they carry (ESAC, NAPEO, WC Cert. etc.)?
A PEO is a trusted advisor, not a vendor! I am willing to bet that you take your time in choosing the right attorney to represent you as well as a reputable CPA…why not choose the best PEO as well? Just like everything else in life, sometimes you get what you pay for. There are many PEO’s that promise lower health care rates and lower billing rates, only to turn around and raise them on you a year later. Make sure you look at their historical rates as well as their financial stability. If they are going to be handling your payroll, you will want some guarantees that they will pay your employees on time and any applicable claims.
In summary, a PEO just makes sense. Stop thinking about everything that can create value in your business as an expense, and start thinking of it as an investment. When you find the right PEO, they can give you a great return on investment. Yes, its great to see the initial hard cost savings right when you sign up with a PEO, but don’t get caught up on initial costs/savings. Think long-term with your PEO provider, why wouldn’t you?
Jacob Hesse
Good job Jacob, I've always believed it's not the initial savings but the increased profitability of being able to "focus on the business of business".
ReplyDeleteNot being burdened by the regulations associated with the business of employment allows business owners to spend their time on their business.