In today’s unpredictable economy where layoffs are becoming more abundant and headlines screaming dismal news, many business owners are turning to a PEO for relief. A top challenge that small and mid-sized businesses face is managing and caring for their employees. Factoring in payroll, taxes, and workmans compensation insurance costs, employee-related costs can be one of a company’s largest expenses. For the business owner PEOs take on the headache of payroll taxes, regulatory compliance, and an array of HR issues, from hiring to drafting an employee handbook to mediating conflicts. Although PEOs have been around since the early 1980s, the industry has been growing at 15 to 20 percent annually over the past several years, according to the National Association of Professional Employer Organizations (www.napeo.org), an industry trade group.
The trusted advisers at First Place Employer Services want to add this very important note, Professional employer organizations, or “PEOs,” are not a quick fix and were never intended to be. We firmly believe as much as our industry has tried to educate, more is needed.
Historically, the government including our new administration has made managing employees today a costly and potentially dangerous proposition. Failure to comply with laws such as EEOC, ADA, COBRA, OSHA, FMLA and others could prove very costly. A small business owner could possibly lose their business as a result of a legal action for wrongful discharge or a dispute over wages.
Did you know? Most studies indicate the cost of “employment” ranges between 6 and 16 percent of your payroll.
No business owner is in business to write checks, file tax reports, shop for employee benefits, deal with workers compensation claims and audits, or answer unemployment claims. Time devoted to these activities not only removes valuable time from the operational aspects of your business but, worse than that, generates no profit.
For those readers who may not be following this blog and are wondering, what is a peo we will answer that question again here:
The PEO concept is designed to be simple. Its origin can be traced to members of the accounting profession who wanted to provide relief for many of their small business clients who spent a great deal of time dealing with administrative challenges such as payroll and payroll related taxes, ongoing tax penalties, and unemployment plans and workers compensation coverage.
For a reasonable fee, a Professional Employer Organization (PEO) assumes responsibility and liability for the “business of employment,” including risk management, workmans compensation insurance, human resources, labor law compliance, payroll, and employment taxes. The customer or client (business owner) manages product development and production, marketing, sales and service. The PEO and the client contractually allocate some and share other traditional employer responsibilities and liabilities. Subsequently, both the PEO and the client enjoy an employment relationship with the workers.
Typically, a PEO offers a much wider selection of benefits often at considerably lower cost due to the large numbers of employees in its pool. PEOs and their clients enjoy a complete suite of Fortune 500 type benefits.
Did you know? 2,500 PEOs are open for business and enjoying annual growth rates as high as 30 percent. Moreover, experts contend PEOs have tapped a bare 2 percent of their market potential.
As a premier PEO brokerage firm the trusted advisers at First Place Employer Services assist our client’s locate the best PEO for their unique business needs. A franchise owner will have different HR and benefit needs from a dental practice. Before representing a partner PEO, we thoroughly check each PEO for stability and strength. We encourage our prospective clients to check the references of the PEO. It is always sound practice to speak with clients who have used the PEO. Contact the licensing agency in your state and ask if there are any past problems or complaints filed.
Did you know? If we match a client to a PEO, and the PEO performs poorly, we may lose your business.
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