Does this scenario sound familiar? You are a small business owner in the computer technology field and you have recruited the best talent in the area. You landed a large contract for services with a local company, you covered all of your bases and you’re ready to rock and roll … or are you?
Are you certain that your new-hire procedures are in compliance with your local employment laws? Are you up to date on the regulations that govern your benefit plans? Do you know all of the laws you have to follow that relate to the workplace? Chances are you don’t. In this situation, a professional employer organization (PEO) may be the answer you need to ensure your company not only thrives, but stays competitive in your industry.
PEOs originated when accounting firms started providing human resources-related services to their small clients. They expanded their standard accounting services to include payroll processing, payroll tax filing and other HR administrative functions. The difference between a PEO and other HR or payroll-outsourcing companies is the unique “co-employment” relationship between the company’s worksite employees and the PEO. The PEO, as the statutory employer, assumes the responsibility of specific employment-related liabilities. In this relationship, you as a small business owner do not have to be an expert on workplace regulations, since the PEO handles that for you.
The basic services offered by a PEO include: payroll processing, payroll tax filing, risk management, workers compensation administration, unemployment administration and benefit administration. Furthermore, many PEOs offer additional HR services for an additional fee. In most instances, the client company retains complete control of the recruiting, hiring and firing processes. The PEO ensures the client is in compliance with current employment laws. Additional fee-based services can include: employee and supervisor training programs, performance reviews, employee counseling, preparation of policy and procedure manuals and creation of employee handbooks.
There are two primary advantages for a small business when it comes to retaining PEO services. First, the PEO’s trained HR professionals perform the payroll and HR functions. The client company can focus on growing their core business. An individual at a small company who has “taken on” these HR duties may lack the required experience and understanding of all the rules and compliance complexities surrounding employment administration. Researching employment regulations, processing payroll and filing tax returns takes time away from the client company’s primary business, costing the company money. Until the company reaches a size that allows for a full-time HR professional, enlisting a PEO is a cost-effective alternative.
In my experience, I have found that a PEO is an excellent alternative for small businesses. A PEO allows client companies to concentrate on what they do best. At the same time, the PEO helps the company differentiate itself from its competitors by giving them a recruiting and retention advantage. After all, in the end, it’s all about getting ahead of the competition.