What Is a PEO: Pros and Cons of Professional Employer Organization
What does a PEO do?
A professional employer organization is an outsourcing company that provides human resources for small and midsize businesses through co-employment agreements. These are some ways a PEO simplifies your business’ HR duties:
- It reduces the number of administrative and HR tasks your business has to handle itself.
- It helps you adhere to federal regulations, reducing your compliance risk.
- It offers comprehensive benefits for all employees.
By partnering with a PEO, small business owners gain more control over their companies because they have more time to lead and focus on driving employee performance, according to Brian Michaud, senior vice president of ADP TotalSource. “A PEO offers built-in protections and helps ensure holistic compliance, from payroll to HR (i.e., discrimination and harassment) to insurance,” Michaud told business.com. “PEOs allow owners to focus on knowing and executing on their business, rather than needlessly worrying over potential fines and lawsuits that can come unexpectedly.”
Is a PEO the right HR solution for your business? Learn about the pros and cons of PEOs.
One of the primary reasons many small businesses choose to work with professional employer organizations is to provide high-quality benefits to their employees at a lower cost.
PEOs manage many HR-related services, such as payroll processing and payroll taxes, health insurance, workers’ compensation insurance, and retirement plans like 401(k)s.
The alternative to using a PEO is hiring an in-house HR team. Some small businesses choose this so they can hand-select HR specialists who will understand and act in the best interest of their businesses.
A professional employer organization (PEO) isn’t right for every business, but this HR solution can elevate your employees’ experience with your company. Before deciding to turn over the keys of your HR department to an outside service, it is important to understand the pros and cons of using a PEO compared to offering the same services in-house.
Managing a human resources department, employee onboarding, payroll, and benefits can be a lot to handle for many small and midsize businesses, as it requires in-depth knowledge and support that may be difficult to come by. PEOs can relieve some of the stress and take on many HR responsibilities, making it easier to keep your business operating smoothly. However, while there are a lot of benefits to partnering with a PEO company, there can also be some downsides.
What makes CLEAR PEO the best choice for your business?
With CLEAR HRO, you have a dedicated HR expert with unlimited phone support for all of your questions, so that you have more time to run your business.
- Recruit and retain top talent
- Maximize your productivity
- Free yourself from HR administration
Your employees are your most valuable asset. Working with CLEAR allows you the flexibility to maintain that important relationship by:
- Offering Fortune 500 medical plans
- 401Ks and more
- Make every dollar count
Payroll & Tax Administration
CLEAR removes the stress and hassle of payroll and tax administration duties, allowing you to focus on other important facets of your company. Our payroll service offers the following:
- Service that’s accurate
- Cost-effective administration
- Personal, stress-free relationships
Keeping your company compliant with all of the various employment laws and regulations can be overwhelming. CLEAR has the experience needed to handle this with ease. We can assist with:
- ACA compliance
- ADA compliance
- FLSA compliance
- EEO-1 reporting
- And much more
Frequently Asked Questions
Q: How does the co-employment arrangement work?
A: Co-employment, also referred to as employee leasing, allows small businesses to maintain day-to-day control of employees. However, the PEO becomes the employer of record for tax purposes and is responsible for all HR-related tasks, such as providing benefits. You are still in charge of your employees in terms of wages, hours, and management. The PEO assumes responsibility for benefits and compliance issues.
Q: Do small businesses use PEOs?
A: Yes, typically. Though even big businesses can use a PEO, it is usually the small businesses that have the greatest opportunity to benefit from a PEO. Small companies in tech, manufacturing, construction, health and wellness, retailers, mechanics, firms???plumbers, among others, use PEOs.
Q: What type of liabilities will the PEO assume on behalf of my company?
A: The PEO company may assume the responsibility to comply with HR-related laws and regulations concerning wages, benefits, insurance, and taxes.
Q: Will I lose control of my business by using a PEO?
A: No. You are operating as a partner with your PEO provider; you are still in charge of your business and how it is run. Your employees are still yours to direct. The PEO is responsible for your employees from a benefits standpoint.
Q: Will a PEO offer options of health insurance plans I can choose from, or do they offer just one plan?
A: PEOs will generally give you options from different insurance types, including provider organizations and deduction options. However, others may have a negotiated competitive deal that they offer to their clients. Some PEOs have a pre-qualified plan and require their employees to sign up for it. Whatever the case, you can and should always ask for a justification of the plan identified.