Start From Square One: What is a PEO?​

A Professional Employer Organization (PEO) provides businesses with a popular cost-cutting option that provides a complement to your existing HR team. Nearly 200,000 small and mid-sized businesses in the United States work with a PEO. There’s a good reason for this popularity.

What is a PEO?

A PEO is a company that helps your business grow by providing access to better benefits at a reduced cost and reducing administrative burdens. PEOs specialize in managing complex HR and payroll functions so your HR team can focus on driving the needle and taking your company to the next level.

Businesses that use a PEO see both faster growth and lower turnover compared to companies that do not use a PEO. Nearly 4 million employees in the United States currently fall under a PEO. Your business can add to this and reap the benefits and protections provided when you partner with the right PEO.

Why Use a PEO?

Providing competitive benefits can weigh down a company's budget, especially considering the annual increase of providing healthcare. Partnering with a PEO will give your business access to a better benefits package at a lower cost. Because a PEO has already negotiated rates, you may see a reduction in your administrative costs while providing your team with access to higher-quality healthcare options.

A major part of a PEO’s relationship with your business involves reducing your HR team’s administrative burden. These HR-related tasks continue to pile up and become more complex the more your business grows. A PEO will relieve your HR staff of this burden so they can focus on what is important: growing your business.

Software is an enormous expense for businesses. You may have one onboarding software, another for payroll, another for HR files, and yet another for reporting. This cost quickly adds up. Using a PEO, you get access to consolidated software so all of your HR data is easily accessible in one location.

Labor laws are constantly changing and fines are costly. By partnering with a PEO, you gain access to expert analysis to help keep your business compliant with ever-changing labor laws. You also get access to handbook and policy resources and advice on safety programs.

How Does a PEO Lower Costs?

A strong benefits package is a major factor that potential employees take into consideration. If you can offer a high-quality benefits package, you can attract the best talent in your industry. Many business owners worry about the cost of taking such action, but partnering with a PEO gives you access to all the benefits the PEO has negotiated with the healthcare provider. Because the PEO negotiates on behalf of all employees of all of their clients, these benefits are less expensive than what you could find on your own.

If you have an existing HR team, you can assure them you are not looking to replace them. All you want to do is make them more efficient and productive by removing the mundane and repetitive tasks from their plate. Doing so allows you to refocus their efforts on core business needs, helping you grow.

Working with a PEO can also increase your retention. Not only will your employees feel cared for by having an HR representative always available to them, but they will also see the added benefits and efficiencies added by the partnership. This will serve to better engage your existing staff which increases retention. 

Do PEO Alternatives Exist?

Your business can align with vendors that can provide some services that a PEO can. A PEO combines all of the following vendors into one solution for you:

• Payroll provider
• Benefits administration
• Administrative services
• HR consultant

However, none of these options can offer more affordable benefits or remit payroll taxes themselves. 

The Right PEO can Cut Your Costs While Providing Better Benefits

When you work with best-in-class PEOs, you do not have to use all of the services provided. You can customize a plan that works for your business. While you do need to use payroll services, everything else is optional. 

This makes a PEO a great complement to your existing HR team. A PEO can give your existing team additional support while taking administrative burdens off their shoulders.

The right PEO can provide you with benefits, compliance, and payroll functions for your business to complement your HR team. That allows you to allocate business resources to sales and growth. A PEO can be the exact solution you need to take your business to the next level.