Human resource (HR) management is a neglected area in business management. Such negligence leads to many wasted resources, time, and profit loss. It’s not only recently that business owners started paying attention to it.
Hence, today, there’s a growing trend of using PEOs to enhance one’s HR department. This trend made it possible for the PEO industry to grow and be highly valued at $219 billion.
What is a PEO, and why is it gaining large attention from the business sector? Read on to find out!
What is a PEO: Defining Features of PEO
You might have heard of a staffing company, but do you know what is a PEO company? For starters, PEO stands for professional employer organization. A PEO company is an organization that manages human resource responsibilities and risks.
To differentiate, staffing companies provide employees for your business. The staffing company remains the sole employer of these workers. Here, you’re paying for the services of their employees only for a certain period.
Meanwhile, a PEO company doesn’t provide workers but assumes HR responsibilities. Hence, you’re not hiring a workforce, but you’re hiring an organization that can help with HR management. When you hire a PEO, your employees will also become that PEO company’s employees.
How Does PEO Work?
When you hire a PEO, you’re creating a business relationship referred to as “co-employment.” Co-employment is mainly based on contractual agreements between you and the PEO company.
Under your contract, the PEO company becomes a professional employer of your workforce. The PEO company will take certain HR-related tasks from your shoulder and carry them.
Thus, you become a co-employer as you both share employer responsibilities. Which HR responsibilities the PEO will carry will depend on your agreement.
PEO companies are usually the ones processing payroll and withholding and paying taxes. PEOs also become HR consultants aside from providers and administrators of employee benefits.
Now that you know what is a PEO company, then let’s take a look at what a PEO company isn’t. There are a lot of misconceptions about PEO circulating business owners. This is why only a few are currently reaping the benefits of hiring a PEO company.
Misconceptions About PEO To Be Mindful Of
For one, a PEO company doesn’t control your business operations. The only area they can provide service for is your company’s HR administration.
Other aspects of your business, such as financial management, are off-limits to them. Thus, you still have full control over your business.
A PEO company also won’t replace your existing internal human resources staff. PEOs can help in enhancing the recruitment process. However, PEOs don’t make hiring and firing decisions for you.
Further, hiring a PEO company won’t disrupt the workflow in your organization. When a PEO company joins you, there will be little to no disruption to your existing employees. This is because PEOs are flexible and can integrate with existing teams seamlessly.
Benefits of PEO
PEO companies provide better employee benefits. PEO companies concentrate their funding on enhancing the employee benefits they can provide. Thus, when you enter a co-employment relationship with a PEO company, your workforce can gain access to a better and wider range of employee benefits.
With a PEO, your employees can access medical insurance covering dental and vision services. They may also get life insurance, retirement plans, and other benefits at better rates.
PEOs can also provide a better employee experience through training and development. With these advantages, you can recruit and retain talents with ease.
Reduce Company Liabilities
Responsibilities aren’t the only thing you share with a PEO under a co-employment relationship. Even the liabilities associated with human resource management are evenly shared. The good news is that PEOs can efficiently and effectively mitigate risks.
Most PEOs have a law specialist who has a deep understanding of employee-related laws. With such expertise, it’ll be easier to assess, pinpoint, and correct HR company practices that contradict what’s legally accepted.
Further, you’ll be able to comply with the legal changes easily should a shift in regulations occur. This is because that same specialist monitors state and federal laws. This practice enables your company to stay abreast of shifting laws.
Another way that PEOs can reduce risk is through proper work compensation. This is important as many employment lawsuits involve wrongful employee compensation.
Moreover, PEOs can also review the safety programs in your company with help from a specialist. This will help prevent injuries before they happen.
Helps You Save on Cost
Hiring a PEO can prevent unnecessary costs and instead increase your profit. For one, a PEO can help you design a recruitment process based on your business needs.
It may help you improve the candidate selection skills of your hiring managers. Whatever the case is, note that better hiring practices reduce recruitment turnover. This, in turn, prevents the waste of time and resources.
A PEO can also help create and implement a new employee appraisal program. This is important as the more motivated your employees are, the more productive they become. A productive working day implies maximized resources and higher business profit.
Helps You Focus on More Important Matters
With a PEO company, HR responsibilities and tasks are adequately delegated. Hence, at least half of your HR obligations are off your shoulders. As a result, you can focus more on more important aspects of your business, such as the provision of client services and marketing.
Grow Your Business with PEO
A PEO company provides various services such as strategic recruiting and hiring. Other services include employee performance management and development and strategic HR guidance. Acquiring these services can help you grow your business.
For instance, your PEO company can help you develop a strategic HR plan for your aspired future directions. This plan will serve as a blueprint and will guide you in making HR management decisions.
Partner with a PEO Company Today!
With a PEO, HR services such as policy compliance and employee benefit, among others, are efficiently streamlined into a relationship. This co-employment relationship will not only save you time and money but can also decrease liabilities and increase work productivity. So, don’t hesitate to share the time-consuming and tedious HR load with a PEO!
Now that you found the answer to your question about what is a PEO, don’t quit and keep expanding your knowledge. Head down to our website today and check out some of our latest posts. We’ve got more exciting articles waiting for you!