Myths and Facts of PEOs
Frequently Asked Questions
Q: What is a PEO?
A: A PEO (Professional Employer Organization) is a company that provides HR outsourcing services to small and medium-sized businesses. PEOs typically handle payroll, benefits administration, and other HR functions for their clients.
Q: How does a PEO work?
A: When a business partners with a PEO, the PEO becomes the employer of record for the business’s employees. This means that the PEO handles all HR functions, while the business retains control over day-to-day operations and management.
Q: What are the benefits of using a PEO?
A: Some of the benefits of using a PEO include:
– Access to better and more affordable benefits packages
– Assistance with compliance and regulatory issues
– Reduced administrative burden for HR functions
– Improved risk management
– Increased focus on core business operations
Q: How much does a PEO cost?
A: The cost of a PEO varies depending on the services provided and the size of the business. Typically, PEOs charge a percentage of payroll or a flat fee per employee.
Q: How do I choose a PEO?
A: When choosing a PEO, it’s important to consider factors like the PEO’s experience, reputation, and service offerings. It’s also important to ask for references and compare pricing and contract terms before making a decision.
Q: Can I switch PEOs?
A: Yes, businesses can switch PEOs if they are not satisfied with their current provider. However, it’s important to review any existing contracts and consider the costs and logistics of making a switch before doing so.
Q: What happens to my employees if I terminate my contract with a PEO?
A: If a business terminates its contract with a PEO, the employees typically return to being the responsibility of the business. It’s important to have a plan in place for HR functions and payroll before ending a PEO relationship.
Myth #1: PEOs are Expensive
Fact: A PEO is often less expensive than maintaining your own human resources department. What’s more it can save you thousands by eliminating fines most businesses pay for errors in reporting, and the costs involved in lawsuits. Now add the productivity improvements from a workforce that receives great benefits and training. Finally, consider that the average business owner has 147 tasks related to being an employer. Do you want to spend your time on exhaustive, unproductive paperwork or on strategy, operations, business development? What’s the value of your time?
Myth #2: I’m Too Small (or Large) for a PEO to Make Sense
Fact: Most PEO clients are between 20-200 employees, but PEOs can partner with companies that have 500 or more employees and add capacity to their existing HR team, allowing them to focus on strategic issues while the PEO focuses on HR administration.
Myth #3: My Employees Will Be Confused, or Will Resist the Change
Fact: Once your employees understand that they will be receiving better benefits, they will easily embrace the change. Hiring the right PEO actually increases employee morale and reduces turnover.
Myth #4: I’m Giving Up Control of My Employees, Including Hiring and Firing Decisions
Fact: You decide who to employ and who to let go. A PEO can provide crucial recruitment assistance, finding you the candidate who fits your culture and has the right skills. When it comes to firing, your PEO will train supervisors on performance management including discipline and documentation, protecting you from future lawsuits. What you are giving up is the back-office administration of having employees.
Myth #5: My Current Staff Can Do Everything a PEO Can, and It Won’t Cost Me Extra
Fact: If you’re like most employers, your HR staff is spending most of its time on employee recruitment and discipline. Strategic projects, like consolidating all employee information to streamline operations never makes it to the top of their plate.