What Is a PEO? A Quick Guide

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What Is a PEO? Consider Taking on PEO Company for Small Business

Did you know that 70% of small businesses in the United States handle HR with ad-hoc team members who have to spend 13 hours out of their workweek on HR-related tasks? This takes away significantly from their regular core responsibilities. 

If you are concerned that your ad-hoc or regular HR team will not be able to take on the additional administrative duties related to increased employee count, then you should consider a PEO or Professional Employer Organization.

Let’s read on to see what is a PEO and what are its many advantages. 

What Is a PEO? 

A PEO company is an organization that will enter into a joint employment relationship with your small business. PEOs typically act as professional employers of the clients’ employees. 

The PEO would then lease employees to your company so that it can take care of the many administrative duties and paperwork related to HR.

This also allows the PEO service to share and manage the HR functions (as if outsourced to the PEO), such as employee benefits, payroll administration, and worker’s compensation. 

Advantages and Disadvantages of a PEO

The great thing about the PEO is that the employee liability shifts to the PEO, instead of your small business. This is especially advantageous for a small business that might not have the bandwidth (time or resources) to take care of all HR functions, like payroll or HRIS. 

Depending on the contract between the PEO company and the small business, some or all of the HR functions can be outsourced to the PEO. These include:

  • Benefits admin
  • Payroll admin
  • Unemployment admin
  • Workers’ compensation
  • Drug testing programs
  • Recruiting and hiring
  • Family and Medical Leave Act admin

The advantage to the employers is that they can access a greater number of benefits (more options) at lower rates. 

But there are some things to watch out for with a PEO service. There is definitely a loss of control over the essential processes and people, not to mention the mixing of cultures of two different companies.

Your internal HR team might start feeling resentful or redundant if they aren’t managed properly. There might also be a lack of security in your vendor’s system and a general resistance from your employees to adding in a PEO. 

That’s why it’s extremely important to choose the right PEO. With the right PEO services in place, your HR burden will be reduced and your employees will remain content. This company here offers business services to companies in Orange County. They take care of all the paperwork, so you can take care of the big picture. It’s a win-win situation. 

Consider Taking on PEO Services for Your Small Business

If you or your HR team feels overburdened by HR tasks, then consider getting a PEO company to help you out. Now that you know what is a PEO, you know there are many advantages to them and very few disadvantages. IF done right, it could be a huge boon to your company, where you and your employees could start focusing on the big picture rather than administrative tasks. 

If you liked this article, consider checking out the other business-related articles on our website.