We’ve been recently working with a few companies that belong to a PEO (Professional Employer Organizations) and it’s been intriguing to learn about how they work. Essentially, PEO s enable small and medium businesses to outsource most of their HR overhead — think payroll, benefits, compliance, etc. — and stay focused on your business.
A full-time HR professional can earn over $60K a year, which is quite an investment for many small and medium-sized companies. A PEO will cost your organization a fraction of that amount.
It works like this — your employees officially become employees of the PEO , while staying employees of your company as well. This allows the PEO to assume HR administrative functions, and share some of the liabilities, while you still manage the employee directly. With a PEO your company pays the PEO directly for the amount of the salaries and benefits they are paying to your employees, with an administrative fee added on top.
In addition to the peace of mind of having all your HR details handled by professionals , you also get the benefit of buying power — the PEO can negotiate for things like 401K programs, health insurance and other benefits as a much bigger entity, giving it more favorable terms and lower administrative costs then you would have alone. In addition, many PEO s offer a suite of technology offerings that help you save time and money on recruiting and hiring, time tracking, managing payroll so you have more time to focus on your business.
According to the National Association of PEO s ( NAPEO ), in 2010 there were over 700 PEO s operating in the U.S., covering 2-3 million workers. As businesses start to see the benefits of working with a PEO , this number will only grow. If you’ve wondered how you can reduce your administrative overhead, it’s worth exploring.
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