Most small business owners spend at least one day every week on HR tasks. That’s a full day every week they're not spending on their actual business and generating. Between paperwork, payroll, workers' comp, and compliance, HR can quickly become overwhelming.
So, if SOS is your most-used acronym, keep reading to see how a PEO could be the solution you've been looking for.
What is (and isn't) a PEO?
PEO = Professional Employer Organization
A PEO, or Professional Employer Organization, is a business that provides HR services to other businesses.
They typically work with small and medium-sized companies and provide admin paperwork, compliance oversight, payroll, employee benefits, risk management, and culture support.
A PEO does not take over ownership of your business. You still have complete power over personnel and business operations. The PEO acts as a partner, absorbing some of the cost and liability of being an employer.
What does a PEO do?
While it differs from PEO to PEO, these are typically the services they offer. Some operate on a "buffet-style" model, and others require you to pay for each service.
Employee administration
- Write and update employee handbooks
- Stay current on state, local, and federal laws to ensure compliance
- Provide time-tracking software
- Complete on-boarding and off-boarding paperwork
- Optimize job descriptions
- Conduct employee satisfaction surveys
- Manage performance review processes
- Create and update organizational charts
- Implement and manage employee recognition programs
- Provide HR consulting and support
- Assist with conflict resolution and mediation
- Manage employee records and documentation
Payroll administration
- Process payroll checks and direct deposits
- Provide detailed payroll reports
- Issue W-2s to employees
- Report, collect, and deposit employment taxes with local, state, and federal authorities
- File 941 & 940 forms
- Answer employer and employee HR & payroll questions
- Manage garnishments and levies
- Process year-end adjustments and reconciliations
- Provide online employee self-service portals for pay stubs and tax forms
- Ensure compliance with wage and hour laws
- Manage paid time off accruals and tracking
- Generate custom payroll reports for management
Benefits administration
- Administer and enroll employees in benefit plans
- Provide tax advantages through Section 125 plans
- Offer 401(k) or other retirement options
- Respond to employee benefits questions, claims, and inquiries
- Manage open enrollment periods
- Provide access to health savings accounts (HSAs) and flexible spending accounts (FSAs)
- Offer life and disability insurance options
- Provide dental and vision coverage
- Manage COBRA administration
- Negotiate with insurance providers for better rates
- Offer employee assistance programs (EAPs)
- Provide voluntary benefits options (e.g., pet insurance, legal services)
Workers' comp and safety
- Provide employee safety training
- Implement risk management strategies
- Administer workers' compensation claims
- Assign a dedicated risk manager
- Conduct workplace safety audits
- Develop safety policies and procedures
- Provide OSHA compliance assistance
- Offer return-to-work programs
- Investigate workplace accidents and incidents
- Provide safety equipment recommendations
- Offer crisis management and emergency response planning
Wellness programs
- Implement programs to reduce healthcare costs
- Develop initiatives to increase productivity, morale, and self-esteem
- Create strategies to lower rates of absenteeism
- Implement measures to reduce injury and accident rates
- Offer health risk assessments
- Provide access to nutrition and fitness resources
- Organize health fairs and screenings
- Implement smoking cessation programs
- Offer stress management workshops
- Provide mental health resources and support
- Organize team-building activities focused on wellness
- Offer incentives for participating in wellness initiatives
What are the benefits of a PEO?
Partnering with a PEO offers both direct and indirect benefits. While they depend on how you choose to partner with a PEO, these are typically the most significant benefits.
Find more time for revenue-driving activities
Partnering with a PEO allows businesses to focus on core operations and growth. By freeing up time and resources, companies can redirect their efforts towards revenue-driving activities, enabling them to concentrate on what truly matters for their business success.
Get better health insurance and retirement plans
PEOs provide access to comprehensive benefits packages that are typically out of reach for small businesses. By leveraging economies of scale, PEOs can offer better health insurance and retirement plans, helping smaller companies compete with larger corporations in attracting and retaining top talent.
Avoid compliance fines
Regulatory compliance becomes much easier with a PEO partnership. PEOs stay up-to-date on complex labor laws and regulations, ensuring that their client companies remain compliant. This reduces legal risks and saves businesses the time and effort required to navigate the ever-changing regulatory landscape.
Save money
The cost savings associated with PEO partnerships are substantial. On average, businesses save $1,775 per employee per year. Moreover, the return on investment (ROI) for PEO services is impressive, with companies experiencing a 27% average ROI. These financial benefits can significantly impact a small business's bottom line.
Grow faster
Companies that partner with PEOs typically experience accelerated growth. Studies show that businesses working with PEOs grow 7-9% faster than their counterparts. This increased growth rate can be attributed to the efficiency and support that PEOs provide, allowing businesses to expand more rapidly.
Attract and retain employees
Employee retention is another area where PEO partnerships shine. Businesses using PEO services see, on average, 14–16% lower employee turnover rates. This improved retention can be linked to better benefits, more efficient HR processes, and the ability of business owners to focus more on creating a positive work environment.
Myths and facts about PEOs
There are some misconceptions out there about PEOs, so let's set the record straight.
❌ Myth: PEOs are only for general businesses.
✅ Fact: Some PEOs, like PRO Resources, have niche industry experience.
❌ Myth: PEOs are only for larger businesses.
✅ Fact: Some PEOs (*ahem* PRO Resources) specialize in serving clients with as few as 10 employees.
❌ Myth: PEOs are more expensive.
✅ Fact: PEOs can be very affordable for small businesses.
❌ Myth: PEOs take control of your employees.
✅ Fact: The co-employment model ensures you retain control over your workforce.
Is a PEO right for your business?
Determining if a PEO is right for your small business depends on several factors. Consider your company's size, growth stage, and specific HR needs. If you're spending significant time on administrative tasks instead of focusing on core operations, you should at least reach out to a PEO.
Evaluate your current HR challenges, such as managing payroll, ensuring compliance, or offering competitive benefits. A PEO can be particularly valuable if you're struggling in these areas or if you're looking to scale quickly without expanding your internal HR team.
Finally, assess your budget and the potential return on investment a PEO could provide. While there are costs associated with PEO services, the efficiencies gained and potential savings on benefits and compliance often outweigh the expense for many small businesses. Ultimately, if you're looking to streamline HR processes, reduce administrative burden, and gain access to better benefits for your employees, a PEO partnership could be a smart move for your business.
Curious? Wait till you see the numbers
You know that what you're doing right now isn't cutting it. But there are other options. If any of the benefits
of working with a PEO resonated with you, get some more information. We've put together a guide on the financial benefits of working with a PEO that you might like. And once you're ready to talk, we're ready to listen.