What is PEO? How is it beneficial for Your Organization?

Author: TASC Outsourcing
May 23, 2022

PEO, or professional employer organization, is a type of full-service human resource outsourcing also known as co-employment or Employer on Record. In this arrangement, the PEO performs various employee HR functions, such as payroll and benefits administration, on behalf of a business. Some PEOs also have strategic services, but no two are exactly alike, so it’s important to research providers and compare their capabilities.

According to the National Association of Professional Employer Organization’s (NAPEO) definition, “PEOs enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll, and workers’ compensation.” The PEO industry has been around for 30+ years. PEOs operate in every remote location globally and provide services to small and mid-sized businesses. 

We have found PEO clients enjoy a wide range of improved financial and non-financial outcomes relative to their peers who do not use PEO services. These benefits include higher business survival rates, higher growth rates, lower employee turnover, and higher employee satisfaction.

If partnering with a PEO concerns you that you might lose control of your organisation, then you’re not alone. The reality is that you will never lose control of your business when you hire a PEO. In fact, the analysis shows that working with PEOs has significant value adds to organisations.

The areas where PEOs can deliver significant value to their clients can be divided into three broad categories: 

  1. Improving clients’ ability to attract, motivate, and retain employees
  2. Enabling clients to focus on their core businesses while PEOs handle all HR matters
  3. Lowering HR-related expenditures.

Why Do You Need PEO Services?

A PEO has the experience and strategic understanding of employee management and hiring processes. Therefore, with these services, one can ensure steady business growth without hassles. PEO services include:

  • Tax Filing and Payroll Processing: PEOs can optimize your payroll processing by integrating it with attendance and time to reduce errors and duplicate entries, and they also manage the local, state, and federal employment tax payments. 
  • Optimize Performance and Efficiency: PEOs have a better understanding and reach within the industry, and therefore, they can provide several benefits, usually at better rates. With the services of a PEO, you can also provide a better employee experience. Your employees receive better benefits and a smoother working culture that boosts their performance and improves overall efficiency and employee retention rates for your company.
  • Compliance: PEOs can help you maintain compliance with the various employee, tax, and nationalization regulations. They have experienced compliance experts who can protect your business from fines and penalties by managing various compliance processes such as payroll tax law and reporting requirements, HR compliance, workers’ compensation, and unemployment insurance.
  • Business Security: Along with employee management and hiring services, partnering with a PEO can also help you reduce risks. With various services such as Workers’ compensation, Payroll processing, and HR administration, PEOs can help you meet the reporting requirements and regulations, ensuring risk-free smooth business operations.

How does PEO Save Money?

With the help of a PEO, you can significantly reduce the cost of hiring and employee management. Here’s how:

  • Optimized recruitment practices save money
  • Better employee experience improves employee performance
  • In-depth insights and market forecasts help in making better strategies for the future

Along with these benefits, a PEO also provides you with a single source for all your HR recruitment services and Employee management and hiring activities. Therefore, you get better control over overall investments in your employees. 

Here are some PEO services that help you reduce investments and boost ROI. 

  • Recruitment Services: PEOs help you develop optimized hiring processes to improve cost-effectiveness. They can help with better development of job descriptions and improve the interviewing and candidate selection skills of the hiring managers. PEOs also conduct wage and salary surveys to provide you with better control over the funds. 
  • Employee Management Services: The wide range of employee management services offered by PEOs can help you improve the performance of your employees. Services such as compensation resources and tools, rewards and recognition program designing, pay structure optimization, etc., can improve the overall operations and boost the performance of your employees effectively. 
  • HR Plans: PEOs can also provide optimized HR plans to improve HR management and recruitment decisions. With better decision-making abilities, your managers can deliver higher efficiency and ensure business growth over time. 

How does PEO work?

PEO basically handles your employee hiring and management process so that you can focus more on the regular business operations. Therefore, PEO handles various employer responsibilities such as payroll processing, payroll tax payments, employee benefits, and HR resource guidance. So, when you partner with a PEO, you share the employer’s responsibilities and improve the performance with expert planning and guidance. 

Full Control Without Hassles

A PEO handles all your employee hiring and management processes. However, the PEO will not make independent decisions or interfere with other departments like sales, marketing, and product distribution. The PEO will also regularly report to the company about its activities and suggestions. So, with PEOs, you remain in full control of the entire hiring, employee management, and employee benefits processes. 

Benefits of Partnering with a PEO

Here are some of the key benefits you get when you partner with a reliable PEO. 

  • PEO services reduce workload related to employee benefits, hiring, employee management, payroll management, payroll taxes, etc. 
  • They provide a better employee experience and maintain a healthy working atmosphere for the employees. 
  • PEO services save time and money, and the business managers can focus more on the actual operations. 
  • With better employee management, you can expect better performance from your employees. 
  • PEOs help maintain compliance with various employee regulations and nationalization requirements. 
  • PEOs take care of medical insurance, workers’ compensations, and work visa processes. 
  • Due to the extensive reach and understanding of the industry, PEOs can help businesses with budget-friendly insurance packages. 
  • PEOs help companies save money by simplifying various employee management tasks. 
  • With in-depth surveys and market analysis, PEOs help companies reduce risks and ensure business growth overall. 

Which Businesses Can Benefit From PEO Services?

PEOs work with all business types belonging to various industries such as: 

  • E-commerce & Digital
  • Health Services
  • Real Estate Organizations
  • Legal services
  • Healthcare
  • Pharma
  • Accounting & Auditing
  • Plumbing and Handyman services
  • Electricals & HVAC
  • Wholesale Organizations

Conclusion

As you can see, PEOs offer a wide range of services that help small, medium-scale, and large-scale businesses with simplified hiring processes, employee management, employee benefits, medical insurance, onboarding, payroll processing, etc. 

Companies partnering with a reliable PEO benefit from steady business growth, business safety, higher employee retention, and better overall performance. Recent studies show that companies that use PEO services experience a growth rate increase of more than 7%, and there is a 50% less chance of going out of business. 

Therefore, PEO services are also highly essential when you are expanding to a new location. Leading PEOs like TASC have highly experienced recruitment experts who understand the local culture and nationalization regulations, so you can expect a smooth expansion process with reduced risks and maximum benefits.

So, with reliable PEO services, you can relax and focus on your business operations while enjoying world-class hiring and employee management services at budget-friendly rates.