Is a PEO Right for Your Organization?

Sometimes companies have trouble meeting their human resources needs, especially while also trying to increase profits. To assist in this area, some companies hire professional employer organizations (PEOs). When hiring a PEO, the company and its employees become employees of the PEO, and the company delegates many of its HR responsibilities to the PEO. Though the company still officially hires its employees, the PEO handles payroll, benefits administration, workers’ compensation, medical insurance and retirement accounts. Then, the organization pays the PEO for its services (often a percentage of total salaries), along with an amount to cover the payroll for the employees.

Common PEO-provided Services

A typical PEO provides the following four main services to its clients:

• Human Resources Associate. The PEO itself acts as an off-site HR department, offering consultation and guidance, providing background checks, assisting in recruitment and retention efforts, completion of employee reviews and more.
• Employee Benefits Administration. A PEO will seek out cost-effective benefits plans by pooling together the groups it represents, which can ultimately lead to a larger premium base, yielding lower annual rate increases compared to a smaller business shopping for itself. PEOs typically shop for the following benefits:
  • Healthcare
  • Dental
  • Vision
  • Long and short-term disability
  • 401(k)
  • Section 125
  • COBRA Compliance

• Payroll Administration. PEOs will take responsibility for the following:
  • Payroll
  • Employee Taxes
  • Quarterly Reports
  • Workers' Compensation Insurance
  • Premium Audits
  • Claims Management
  • Benefits Procurement

• Handling Risk Management. The PEO will manage any workers' compensation or unemployment claims that may arise, typically at a lower claims cost as compared to what an organization may be able to achieve on its own.

Determining if a PEO is Right for Your Organization

It is important to consider the advantages and disadvantages of a PEO when finding the best fit for your organization. While PEOs allow an employer to spend less time on HR tasks, and more time on running their business, the company does lose some of the flexibility over benefits packages offered to the employees. PEOs can offer quite a bit of administrative support and a reduction in some areas of liability, and oftentimes improved technological resources, while on the other hand, it may lead to some confusion for employees when they have questions on who to turn to for support, the PEO, or the employer. To determine if a PEO arrangement is the right fit for your organization, reach out to your AssuredPartners team today for individualized guidance.