A PEO (Professional Employer Organization) becomes the employer of record for payroll processing, employee benefits, workers’ compensation, compliance, and HR services, while the client is the worksite “employer” for management and determining wages. This way, a small business can retain complete control of their staff while outsourcing non productive HR functions. In addition, a PEO client is tapping into much larger employee base to gain economies of scale for benefits and workers’ compensation. Typically, a PEO can save up to 20% on insurance costs.
A PEO enables clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers’ compensation. PEO clients can thus focus on their core competencies to maintain and grow their bottom line. A Professional Employer Organization (PEO) provides comprehensive HR solutions for small and mid-size businesses. Payroll, benefits, HR, tax administration, and regulatory compliance assistance are some of the many services PEOs provide to growing businesses across the country.
By providing payroll, benefits, and HR services and assisting with compliance issues under state and federal law, PEOs allow small businesses to improve productivity and profitability, to focus on their core mission, and to grow.
According to a recent study by noted economists Laurie Bassi and Dan McMurrer, small businesses that use PEOs grow 7 to 9 percent faster, have 10 to 14 percent lower employee turnover, and are 50 percent less likely to go out of business.
Through a PEO, the employees of small businesses gain access to big-business employee benefits such as: 401(k) plans; health, dental, life, and other insurance; dependent care; and other benefits they might not typically receive as employees of a small company.
Any business can find value in a PEO relationship. The average client of a NAPEO (National Association of Professional Employer Organizations) member company is a business with 25 worksite employees. Increasingly, larger businesses also are finding value in a PEO arrangement, because PEOs offer robust web-based HR technologies and expertise in HR management. PEOs can partner with companies that have 500 or more employees and work in conjunction with their existing human resources department.
PEO clients include different types of businesses ranging from accounting firms to high-tech companies and small manufacturers. A broad range of professionals, including doctors, retailers, mechanics, engineers and plumbers, also benefit from PEO services.
