A Professional Employer Organization (PEO) is responsible for the outsourced management of human resources, pay/benefits, workers’ compensation and ensuring benefits compliance. PEOs are ideal for businesses who do not have the in-house capabilities to manage the wide variety of necessary back-end tasks. For these kinds of businesses, hiring a PEO is often a cost-effective method for filling that capabilities gap.
Benefits Of Working With A PEO
PEOs frequently relieve the day-to-day admin burden from small businesses, allowing them to focus on their core business. Here are some of the top benefits of working with a PEO.
HR Responsibilities Are Taken Care Of
Most businesses which utilize a PEO, do so primarily for the value they bring in relation to HR duties and responsibilities. HR is often a time-intensive and complicated business function, and there can be serious repercussions if those functions are mismanaged or absent. PEOs relieve businesses of the HR burden by entering into what is known as a “co-employment” agreement, where the PEO assumes the role of the business’ employer of record.
This shifts all HR responsibilities and liabilities off of the business and onto the PEO. This also means that the business must abide by the PEO’s policies, although the business is still completely autonomous when it comes to creating company culture, internal management and work responsibilities.
Under a co-employment model:
- The business payroll uses the PEO’s tax ID numbers
- The PEO assumes risks associated with employment
- The PEO is responsible for setting policies, procedures and sometimes handbook language
Knowledge Of Current Regulations
Every employer is subject to federal health and employment laws and responsible for reporting their compliance with those laws to federal agencies. While these laws and regulations are essential for ensuring the fair and standardized treatment of employees nationwide, they can also be intimidating if a business has no prior experience navigating them.
The Department of Labor is responsible for overseeing these regulations and ensuring that companies are adhering to them and properly documenting compliance. Maintaining and demonstrating compliance is vitally important for all businesses, as failing to do so (or documenting it incorrectly) can potentially result in hefty fines or even prosecution.
Another major benefit of working with a PEO is the peace of mind businesses have knowing they are remaining compliant and are up to date with the latest changes. PEOs rigorously track the frequent and eclectic changes that are made to laws and regulations every year, and provide actionable guidance on how to keep on top of them. Some compliance regulations PEOs can help with include:
- The Affordable Care Act (ACA)
- Consolidated Omnibus Budget Reconciliation Act (COBRA)
- Department of Labor regulations
- Medicare and Medicaid
- Employment Retirement Income Security Act (ERISA)
- Health Insurance Portability and Accountability Act (HIPAA)
- IRS regulations
Ability To Negotiate Competitive Employee Benefits
Employee benefit packages can often be a major deciding factor in whether a prospective employee accepts a job with your company or goes with another competing offer. As such, employers know that offering a top-tier employee benefits package is vitally important to attracting top-tier talent. However, effectively selecting and managing benefits packages can be a complicated and daunting process.
Because of their size, PEOs are able to take advantage of mass purchasing power in order to secure top-tier coverage and employee benefits at a lower price than the business would be able to obtain on its own. PEOs also provide businesses with more employee benefit options in their desired price point, helping businesses customize employee benefits packages in a manner that most directly benefits their employees.
Mitigation Of Employment Related Risks
Lastly, a PEO brings a variety of new talent and specialization to small businesses, providing them with both licensed HR professionals and experienced attorneys. These professionals are vital for both proactively and reactively avoiding any business risks that arise. PEOs help businesses to avoid risks associated with:
- Maintaining and demonstrating legal compliance
- Employment eligibility and I-9 requirements
- Equal opportunity employment
- Claims resolution
Speak To An Experienced HR Consulting Firm For More Info On What Is A PEO
Stop dedicating critical man hours to admin tasks like onboarding employees, running payroll, recruitment and workers’ comp. A PEO allows your executive team to focus on expanding your team’s talent, without wasting time on administrative hassles. A PEO often also has a large group health plan, thanks to their relationship with many employers, allowing smaller, growth-minded businesses the chance to reap the benefits of a lower-cost health plan.
Get back to the things that really matter, and let a PEO take care of the rest. Our expert team will show you exactly how it can work for your business. New City works with all the major PEOs. Our experienced staff provides recommendations for the best organizations that suit your needs. As not all businesses qualify for a PEO, we conduct thorough market research to ensure all your options have been made available. For more information give New City a call at 888.210.2759 or request a consultation online.