Businesses are always looking for a way to improve their productivity, increase revenue, and get the best return on their investments. A Professional Employer Organization (PEO), which is basically a company that acts as your outsourced HR staff, can help you do all three—plus more.
The PEO industry is one that is consistently growing with approximately 700–900 PEOs currently operating in the U.S., according to the National Association of Professional Employer Organizations (NAPEO). This growth is partly because of the more recent "start up" boom, as well as the growing number of small to medium-sized businesses being formed every day. With a PEO, these companies can run like their larger corporate counterparts, without having to hire an extensive HR staff.
Many companies that choose to hire a PEO are saving thousands of dollars every year. Here are four ways a PEO can help keep thousands in your pocket.
1. A PEO will ensure you remain compliant.
A PEO will keep an eye out for your company to assist you in staying compliant and on-track with both state and federal regulations. The services that are provided will save your company the stress and anxiety of ensuring that you're compliant with ever-changing laws and regulations. Experts will assist in all levels of HR compliance, including employment policies and forms, employee relations, benefits administration, 401(k) plans, and payroll.
2. A PEO will handle your employment taxes.
According to a recent survey by the National Small Business Association, the complexity of the tax code remains a significant challenge to small businesses with the majority reporting they spend more than 40 hours per year dealing with taxes. More than 1/3 report spending in excess of 80 hours—two full work weeks—per year on taxes.
The time and money spent on taxes, coupled with the fact that 84% of small-business owners must pay an external tax practitioner or accountant to handle their taxes ought to be a clear determinant that the tax code is far too time-consuming to handle in-house. When you hire a PEO, you get a team of employees that are well-versed in the proper calculation of remittance of federal and state employment taxes, complete with accountants, tax law specialists, etc. A PEO will also remain responsible for employment tax audits and deposits, while helping keep your company up to par on the main labor and tax laws impacting your company.
3. A PEO can help decrease the cost of your workers' compensation coverage.
Working with a PEO can generally save you a considerable amount of money on your workers' compensation coverage. As you may or may not know, your workers' compensation rate is determined by a claims experience modifier. It's applied to each company's rate and is determined by their claims experience performance in the industry. The worse your company performs, the higher a modifier you have to apply, resulting in a more expensive rate.
In some states, you will ultimately be able to apply the PEO's claim experience modifier which more often than not is less than your company's. In most cases you also receive the benefit of the PEO's discounted rates, which can reach upwards of 40% in savings. The PEO's loss control team can assist in developing a safety plan and provide training to address any claims issues that you might be experiencing. The loss control team will also take the lead in managing any claims so that the employees who do need medical treatment are treated appropriately and back to work as soon as possible, thereby lowering the cost of the claim and the time the employee is off work and not productive.
4. A PEO helps you attract and retain top talent.
According to Forbes, 75% of companies are struggling to attract and recruit the top people they need. Thanks to the PEO industry, many small to medium companies are able to offer their employees benefits and health care that are comparable to Fortune 500 companies.
PEO clients will not only keep employees who are already experts in their jobs but also attract more qualified and skilled future employees. And while every company wants to add new talent to their work force it is just as important to want to retain the employees you currently have on staff. Studies show that it costs $3,500 to replace one $8.00/hour worker, when you count the cost of recruiting, interviewing, hiring, training, and initial reduced productivity. Don't lose money because you are not able to stay up to par with other companies and their benefits packages.
Hiring a PEO is like hiring an HR department but for less money and you gain valuable time. A PEO can save the day with their expertise plus you only have to work with one company. So the next time you feel like saving thousands of dollars in your pocket think about hiring a PEO.