Topic Outsourcing HR / PEO

Why Use a PEO?

Why Use a PEO?

A Professional Employer Organization (PEO) is the most comprehensive HR outsourcing solution available. By providing payroll and tax support, giving you access to high-quality benefits, increasing your team's productivity, and guiding and assisting you with all matters related to HR, a PEO can help your business grow faster and better. 

6 Reasons to Use a PEO 

To figure out whether a PEO is right for you, consider the following top six benefits. We think you'll conclude there's no good reason to not partner with the right PEO.

1. The Average ROI of a PEO is 27.2%

PEOs provide your company with access to HR experts and other benefits, which allow you to focus your team toward common goals and keep your business growing. A PEO is not meant to replace any HR staff you may currently have, but rather to complement your internal team and remove the need for you to hire additional internal HR staff. This can reduce your costs and give you access to HR experts, skilled in the specific areas of HR you need. 

Workers' Compensation Insurance 

Finding affordable workers' comp insurance coverage can be challenging for small businesses. By partnering with a PEO, you get access to their experience modified rate, which could be lower than yours, lowering your premiums. A PEO also bills you on a pay-as-you-go basis with no upfront deposit required, giving you quick access to affordable workers' compensation insurance coverage, required for most employers. Your PEO will also challenge any invalid workers' comp claims and represent you in hearings, saving you time, effort, and money. 

Employee Benefits 

PEOs use economies of scale to purchase Fortune 500 benefits at prices small businesses can afford. Negotiated at scale by experts, the insurance coverage you would have access to provide your employees with extremely sought after high-quality insurance without the astronomical premiums. This increases your employee engagement and loyalty while also ensuring the plans you offer fit within your budget. 

Unemployment Insurance 

Many small businesses have high turnover rates, which can lead to increased unemployment insurance costs. A PEO will manage the unemployment claims you get to minimize the number and size of claims, reducing your overall costs. 

Return to Work Programs 

When employees get injured at work, they can collect workers' compensation benefits. The more benefits paid out, the higher your costs may become. A return to work program brings your injured employees back to work as quickly as possible, even if they're not doing their normal job. This gives them a paycheck but also eliminates their workers' comp benefits, reducing your overhead.

2. Avoid Non-Compliance Fines

HR deals with laws and regulations on a daily basis. Not every HR employee is qualified to deal with these complexities. And when an employee makes a mistake, even an innocent one, it can lead to costly fines and penalties, and possibly even employee lawsuits. 

Payroll is an incredibly important HR task but also ripe for mistakes. If overtime is calculated incorrectly or an employee's pay is off, it can trigger audits from government agencies and employees could sue. To help you manage these complexities, a PEO staffs HR experts in every area to make sure your business is on top of constantly changing laws and regulations.

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3. Free Up In-House Team's Time

A PEO easily takes on the following HR duties: 

  • Payroll 
  • Tax remittance 
  • Benefits administration 
  • Workers' compensation administration 
  • Unemployment claims administration 
  • Risk management 
  • Onboarding and offboarding 

Whether you do all of this yourself or you have a small HR department to support your employees, they are probably stretched thin. And they're not able to focus time on building an attractive company culture which can help you hire and retain top talent in your industry. 

By outsourcing these and other mundane and complicated HR duties to a PEO, you free your internal HR team up to focus on revenue generation and culture building. Shifting your internal team's focus can help you grow faster, become more profitable, and better engage your employees.

4. Access Best-in-Class HR Technology

One of the biggest challenges for HR is data retention. Pay stubs, employee personnel files, benefits, employment verification forms, background checks, and countless other items must be retained and, in some cases, kept confidential. Many small HR teams simply use paper files, which can be cumbersome and ripe for mistakes. 

A PEO can help your team better organize by giving you access to their HR technology. These systems let you store documents electronically, restricting access, and giving employees the ability to view documents relevant to them like performance reviews and pay stubs.

5. Improve Productivity

By outsourcing your HR needs to a PEO, you give your internal HR team the opportunity to create a more engaging work environment. This can increase productivity and loyalty among your team members, increasing your profitability. 

But it also increases your HR team's productivity and engagement. When they shed those boring and mundane activities, you can release their creativity, making them more engaged.

6. Risk Management

HR risk management is the process of identifying and taking action on employee-related risks. For example, if you have a disengaged workforce, you risk losing employees and dealing with costly turnover. 

A PEO can help you combat that by ensuring all employees are satisfied. That happens through engagement and loyalty, including providing high-quality benefits through your PEO. 

Reach Your Potential with PEOs 

To help you continue growing your organization, you may need to rethink HR. With a PEO, you get access to HR experts who can keep your business compliant and help retain your top employees. 

What Today's Business Owner Has to Know About HR

Jason Randall

Jason Randall

Jason L. Randall is the CEO of The Questco Companies. He regularly speaks on topics related to strategy, growth, and organizational performance.