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How Does A PEO Operate?

November 23, 2020 by New City Insurance

a sme can outsource some of their hr duties to a peoCompanies in today’s fast-paced world are constantly seeking new ways to make their business processes more efficient and cost-effective. This is especially true of small organizations that begin to grow at an extremely rapid rate and that have few employees to carry out their essential operations. Fortunately, there exists a valuable resource that businesses can use to perform these functions: Professional Employer Organizations (PEOs), but how does a PEO operate?

What Is A PEO?

A PEO is an organization that contractually assists a small business with several employee and human resources-related functions such as managing payroll-related taxes, access to benefits, recruiting and hiring, and several other administrative tasks. A PEO will not replace a business’s internal HR staff or take complete control of an organization. According to the National Association of Professional Employer Organizations (NAPEO), there are 907 PEOs in the United States, and these organizations offer assistance to 175,000 small and mid-sized businesses.

What Does A PEO Do?

PEO’s provide many different types of services. These services and the advantages they bring can be classified into three distinct categories: streamlining HR processes, managing payments, and helping small businesses concentrate on growth. Here is a close look at each of these three objectives.

Streamline HR Processes

Human resources managers and executives are typically responsible for handling several different tasks, including HR planning (recruitment, training, promotions, etc.), employee compensation and benefits administration, employee relations, and performance management. A PEO can help streamline these processes by using its outside perspective to identify and resolve any inconsistencies they may contain. Streamlining can then, in turn, potentially lead to significant time and cost savings for your business. (According to a 2015 study by Business Insider, 33% of small businesses get fined each year for payroll-related errors).

Additionally, a 2012 survey conducted by the Society for Human Resource Management revealed that 20% of respondents said one of the greatest challenges facing HR executives over the next 10 years is “creating smooth and efficient HR processes that ensure a good employee experience.”

Help To Manage Payments

peo does not replace a companys hr department but its presence can make the department more efficient and optimized for growthIn addition to streamlining HR processes, a PEO can help manage your organization’s important payments such as payroll-related taxes, rent and utilities, outstanding debts, and key vendors and suppliers (if applicable). A PEO will help your organization prepare for a cash flow issue in advance by setting aside enough money to pay all expenses and creditors, especially during times of financial hardship. It can thus help your business mitigate risk by devising a strategy to keep its debt-to-equity ratio low (at or below industry average). If your company has shareholders, a low debt-to-equity ratio may entail a reduced likelihood of bankruptcy when an economic downturn occurs.

Allow You To Focus On Growth

In a more general sense, a PEO can help your small business focus on short-term and long-term growth. There are several ways you can help your company grow. You can build a sales funnel, research competitors in your industry, create a customer loyalty program, form strategic partnerships, or build passive income streams.

An organization’s growth can also be measured using several different metrics, depending on the industry it belongs to. For example, growth may be determined based on sales growth or overall employee productivity. However, it can also be estimated by calculating your business’s book value (assets minus liabilities) or its market capitalization (the product of your current stock price and the total number of outstanding shares).

Ultimately, it is important for your company to identify its priorities upon entering into a contractual agreement with a PEO. Once you have pinpointed all of your objectives, your company and your PEO operate may develop a plan to help make your HR processes and other business operations more efficient and to spur more growth.

Work With Experienced PEOs

peo can help handle a growing company hr obligationsReach out to the professionals at New City Insurance in San Diego for more information about PEOs and how PEO operate and how they operate. Since our founding in 2008, we have been dedicated to providing our clients with high-quality insurance solutions and to reshaping the insurance industry as we know it.

At New City Insurance, we understand that as companies grow, the responsibilities of their HR departments also grow. A Professional Employer Organization can help streamline your company’s processes and centralize your standard core business services via a co-employment relationship. There are several notable benefits to working with a PEO, including access to better employee benefits, legal protection, and stronger retirement plan management. A PEO can help your business shift its focus to what matters most while taking on responsibility for many administrative tasks.

Call New City Insurance today at (888) 210-2759 or contact us online to request a consultation.

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New City Insurance
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Mary Jane Deyette
Mary Jane Deyette
00:57 11 May 20
Jeff Stoltey is so awesome...even thru my company had only two employees, he took the time each year to research and find the best plan for us. The only reason I am leaving New City Insurance is because we no longer have any employees. Thank you Jeff
Tricia DeYoung
Tricia DeYoung
19:49 13 Feb 20
I was very thankful I inquired about this info. with Brendan. He was very helpful so I understand the benefits available much better now. Thank you Brendan.
Alma Ortiz
Alma Ortiz
22:25 23 Feb 20
Brendan was awesome! I couldn't figure out how to pick my plan and he returned my call on a weekend to help me. Outstansing service!
B Bayer
B Bayer
17:43 24 Sep 19
NCI handled almost everything from start to finish. Clayton and Brendan made the plans easy to understand and walked me through the application process. They got me my ID numbers before my cards arrived so that I could keep an appointment I had already scheduled. My last broker wouldn't have done that. 5 stars!
jessica kavanagh
jessica kavanagh
19:53 13 Feb 20
Brendan was so helpful I definitely recommend him if you’re in need of good help and getting it done promptly. Thankyou so much again.
Jessica Lehr
Jessica Lehr
03:36 07 Jun 19
Our staff was interested in a health plan, but we didn't know how beneficial a solid employee benefits package would be for our business to expand. We'd lose prospective employees because they had more options for their medical insurance which was sometimes more valuable than more pay. The New City team was amazing and gave us as many affordable options as possible so that everyone had their needs met.
T W
T W
22:32 30 Aug 20
I love New City Insurance. I never had a good experience dealing with insurance brokers until I started working with Brendan. He’s awesome! He is patient with me and takes the time to answer all my questions. I’m very grateful for all his help and hard work!
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