Frequently Asked Questions 2017-03-07T16:27:48+00:00

Frequently Asked Questions

A Professional Employer Organization (PEO) is an integrated, cost-effective human resources management support system for small and medium-sized employers. Imagine a qualified, fully staffed and equipped human resource department dedicated to the support of small business owners and their employees. Smaller employers may acquire the expertise and leverage of a larger employer at a fraction of the cost of a fully staffed HR department.
Small business owners are under increasing pressure to find and retain good the best employees, produce paychecks accurately and legally, provide quality benefits at reasonable rates and comply with a maze of government regulations. At the same time, they are working to control costs and optimize their return-on-investment from all assets, especially from employees. PEOs bring relief and support in all these areas, creating more time to focus on business growth and more peace-of-mind for the business owner.
Engaging a PEO creates what is called a “co-employer” arrangement. This arrangement essentially separates the employer responsibilities into three areas: the client’s, the PEO’s and those that both parties share. This allocates employer activities so that the client retains control and authority critical to running the business while delegating much of the human resources management and employee administration “back-office” work to the PEO. Responsibility for functions that require timely communication may be shared by both parties.

Many PEO clients describe the relationship as an “employment partnership” in which the employees enjoy an enhanced work environment, expanded benefits, clear communications and fewer employment “issues.” Management, likewise, experience the peace-of-mind of having a new strategic advisor in one of the most complex areas of business management.

Simply said, to increase their return-on-investment in what is usually their most expensive business asset. Many business owners understand that employees are their most powerful asset. The most accomplished also understand that it is less about how many employees you employ and more about how you employ and lead the employees they have. This is an area of immense complexity that is constantly changing. In the same fashion that one engages a legal firm and an accounting firm for the complexities of their professions, business owners engage a PEO as their advisor and “back-office” support system to control their exposure to legal risk and optimize the return on their investment in employees.
Qualified HR managers focus much of their time on face-to-face interaction with employees, including training. Many are overloaded because of the administrative paperwork the department requires. Staffing increases with their firm seldom include a proportional increase to the HR department. The PEO becomes a valued, fully qualified “back-office” support team, allowing the HR manager to use their time and qualifications more effectively.
The client retains control over its operations. Control of complex human resource management issues and administration? Do you have control now? Because HR is an ever-changing profession, many business owners don’t know what they don’t know about the latest regulations and methods. As your HR “back-office” team, the PEO stays up-to-date and handles this complexity for you, reducing your exposure to employer legal risk. By recovering at-work hours lost to overhead activities, you have more time to run your business and direct your employees. You actually gain additional control!
If you manage one employee or several hundred, a PEO could be your best solution. Typically, a company will be more focused and productive at the functions that generate it revenue, no matter its size. Many smaller firms may allocate HR to several internal employees who are more qualified in other areas, making their HR work lower in priority. Larger firms may have a qualified HR “generalist”, but lack the “back-office” support need to handle the headcount workload. Either way, the PEO is an expert, outsourced resource that relieves you of the overhead and turnover challenges of additional internal staff.
It depends. The PEO industry is developing rapidly across the nation as cost-effective way to “be” an employer. CPA firms that have kept up with this development frequently recommend that their clients consider PEOs. In the same fashion that your legal firm and accounting firm are a collection of experts in their field, the PEO is a collection of qualified specialists, working together, to support you in the complex area of employment. From recruiting strategy to post- employee termination activities, these specialists not only advise on compliance and options, they physically do much of the work for you. The PEO becomes your third strategic advisor.
The fees are surprisingly reasonable. Why? Economy-of-scale is created when a fully-staffed and qualified HR department serves a large number of smaller employers as opposed to one large firm and headcount. Because of the diversity of smaller employers, special technology and flexibility is designed into the PEO. Each client shares the cost of one group of specialists with a large number of similar sized businesses. In addition, most PEOs collect more, and frequently better, benefits than the typical small employer can access and administer. If you consider the entire human resource management process and the costs incurred to handle it legally, the PEO will likely be the most cost-effective method available.
The PEO offers a truly unique solution to the challenge of providing employees with cost-effective benefits and services. Small employers are frequently at a disadvantage when competing with larger firms for the best employees. The characteristics of the “co-employer” arrangement creates increased “buying power” for many benefit plans including medical, dental, vision, life insurances as well as retirement plans and other employee “perks.” Even more impressive is that the PEO usually absorbs the burden of administration of and compliance related to these plans. The business owner can offer a large company suite of benefits without having to do the work related to them.