Many businesses can benefit from partnering with a professional employer organization (PEO). However, many business owners fail to understand how PEOs work. In fact, they may fall for various common PEO myths that can deter business owners.
Understanding these myths and their reality helps businesses decide whether partnering with a PEO is right for them and how they can find the benefits of working with a PEO.
This myth comes from a misunderstanding of the difference between co-employment, the mechanism PEOs use to allow them to remit employment taxes and add your employees to their benefits, and employee leasing.
People see PEOs as akin to temp agencies, who handle hiring and firing and send you a suitable employee. This could not be further from the truth. Instead, you maintain absolute control over hiring, firing, bonuses, and promotions. You manage the day-to-day operations while the PEO helps you handle the HR administration.
Another myth is that PEOs are too expensive for smaller companies and that you are better off with a less comprehensive human resources solution.
PEOs offer a very high ROI, and the money you spend will easily be recouped due to the increase in growth and revenue that comes when nobody has to worry about tedious tasks. Many small businesses take a DIY approach, which can easily result in the business owner spending hours on paperwork instead of revenue generations and growing the business. Companies without HR often get the most benefit from partnering with a PEO, which enables them to afford HR expertise they might not otherwise be able to obtain.
PEOs do not replace in-house HR, and if you run a company without HR, a PEO will take the place of an in-house team. They can reduce the resources you need to spend versus hiring a team. Why?
PEOs have the expertise to handle things like compliance, do payroll accurately, and give you advice. However, your in-house HR (if you have an HR team) have an intimate knowledge of your business that allows them to work on developing a company culture that reduces turnover or designing hiring strategies for your long-term goal.
Partnering with a PEO makes your in-house HR team happy as they can now focus on the fun part of the job.
There is an image of PEOs as working primarily with office workers and white-collar staff. PEOs work with all types of businesses. Choose the right PEO, and you can find a solution in manufacturing, construction, healthcare, or any other industry. Some PEOs specialize in specific industries; others are more general. You can partner with a PEO regardless of your industry or focus.
You want to provide human resources solutions for your employees. Looking at a PEO, it's easy to assume that, like other total HR solutions, they provide one-size-fits-all plans, perhaps based on company size.
PEOs are often highly flexible and offer customized services that cater to your needs. While they may suggest services you did not know you needed, they will work with you to find the best professional HR solution for you. This might include the type of health plan you want to offer, retirement benefits, and if you wish to work with them on a wellness or safety plan.
Another common perception is that employees will be impacted negatively. Perhaps they won't be able to get the answers they need quickly. This also ties into the fear of loss of control.
PEOs have been shown to reduce turnover. Your employees will get better benefits without having to pay more for them and they'll have 24/7 online access to their information too. PEOs also tend to improve workplace risk management, reducing the risk of injury for workers in manufacturing, construction, and trucking. And as businesses that work with PEOs tend to be more stable, employees get more job security.
Not all companies are the same in any industry, and PEOs are no different. You must make sure you choose a high-quality PEO, understand the services you will be getting, and avoid low-quality payroll services. But if you have had a bad experience with one in the past, it can be easy to fall into this trap.
You should always ask a PEO questions to determine if their professional HR solutions are right for you. PRO Resources, for example, helps clients in a variety of industries, even those that are often seen as benefiting least from PEO services such as manufacturing, construction, and transportation.
Do you have more questions to ask a PEO? Don’t be afraid to ask! At PRO Resources, we know these myths and are ready to answer any misconceptions.