These days, managing employee benefits and human resources is an increasingly complicated process. Employers need to stay compliant with new government rules and regulations while creating a benefits package that both manages costs and is competitive in the marketplace. To better manage this work, companies are increasingly turning to professional employer organizations (PEOs).
What Is a Professional Employer Organization?
PEOs focus on running other companies’ human resource departments and benefits programs, as the National Association of Professional Employer Organizations (NAPEO) explains. When you sign up with a PEO, you’re outsourcing your HR to them. Your employees technically become employees of the PEO, but they still work for you and you keep managerial control.
Every month, you send the professional employer organization money to cover the cost of your employees’ wages and benefits. The PEO is in charge of running payroll, managing benefits, handling workers’ compensation, handling unemployment insurance claims and processing all other employee regulatory manners, which lets your company focus on its business operations.
Benefits of PEOs
Professional employer organizations make managing your employees much more convenient. Your company will no longer need to operate its own HR department, which helps you save money because the professional employer organization’s fee often costs less than hiring internal HR personnel. According to the NAPEO, “a conservative estimate is that PEO clients enjoy a 21 percent savings on HR administration.”
Beyond that, your company can also qualify for better rates on benefits. Professional employer organizations combine the employees of multiple companies, which gives them more buying power. PEOs offer a variety of different plans, so you’ll be able to customize your benefits program when you sign up. However, you are limited to the options your PEO provides, and you should make sure it offers the programs your employees need. For example, if you have a branch in Ohio, the PEO you pick must provide benefits in that state.
Choosing a PEO
As you’re comparing different professional employer organizations, cost should definitely be a factor because different companies charge different amounts for their services. You also need to make sure your PEO has the right expertise, warns the NAPEO. The PEO you pick needs to understand the regulations for your industry and for all the states in which your company operates. In addition, ensure your PEO offers a variety of benefits so you can put together the package your employees want.
The PEO also needs to have quality customer service. If you or your employees run into a problem with benefits or human resources, your PEO will on the hook to sort everything out.
Your company doesn’t have to be on its own when it comes to managing human resources. If you’re looking for a way to simplify this responsibility, a professional employer organization could be the solution.
David Rodeck is a professional freelance writer based out of Delaware. Before writing full-time, he worked as a health- and life-insurance agent. He specializes in making insurance, investing and financial planning understandable.