Debunking Six Common PEO Myths
Payroll, human resources, benefits, and risk management can be confusing tasks for business owners. If you’re unfamiliar with how these departments work and their terminology, it’s easy to feel overwhelmed.
By partnering with a professional employer organization (PEO), you can hand off these responsibilities to the experts while staying in control of your business. If you’re like most business owners considering a PEO, you’ve likely encountered several misconceptions about PEOs within your research. We’re here to debunk some of the most common myths about PEOs so you can make an informed decision for your business.
What Are PEOs?
A PEO is a business that specializes in providing human resources services to other companies. Employers usually contract PEOs for human resources, payroll, benefits administration, and workers’ compensation claims.
Myth #1: Hiring a PEO means losing control of my business.
Fact: PEOs give you greater control over your business.
The purpose of a PEO is to give companies the flexibility to choose their HR processes to fit their individual business needs. With the expertise of HR professionals, processes can be efficiently completed. PEOs enable businesses to streamline communications across HR, payroll, risk management, and benefits to free up your time. Instead of spending time on repetitive administrative tasks, you can focus on revenue-generating projects.
Additionally, the assigned HR professionals can find and identify opportunities across back-office disciplines such as benefits administration, compliance management, or employee training programs. Ultimately these opportunities help you save money and reduce financial risk while improving cash flow through economies of scale. To summarize, you call the shots. PEOs make it easier to create efficient, well-informed business decisions.
Myth #2: I will lose control over hiring and firing decisions.
Fact: Hiring and firing decisions are up to you.
The truth is those decisions will remain entirely up to you, but PEOs can supplement your efforts. PEOs can write job descriptions, set up job ads, and review applications. They increase the efficiency and effectiveness of recruitment processes so that you don’t have to spend hours trying to find someone who fits your needs.
If you need to fire an employee, PEOs protect you from rising unemployment taxes (should one be filed) by taking care of all the details. In short, you improve employee recruitment and limit financial risk to a fraction of the time it would take to do it yourself.
Myth #3: PEOs supply workforce labor.
Fact: PEOs are not temporary staffing agencies. When you partner with a PEO, you and that PEO agrees to a co-employer relationship.
The biggest myth about PEOs is that they supply labor. They don’t. In fact, it’s the opposite. You continue to manage your employees and their day-to-day operations while the PEO focuses on strategic HR and other administrative tasks.
In turn, you can concentrate on growing your business while enjoying the savings and flexibility of outsourcing the additional functions to them. You also qualify for discounts and better insurance rates that you could not have gotten without a PEO (and they’re always looking for ways to reduce costs).
Myth #4: PEOs will negatively impact my company culture.
Fact: PEOs don’t want to change your culture; they want to enhance it.
PEOs understand happy employees are more productive and engaged, which means they’ll find ways of working together more effectively and efficiently. This can be as simple as providing benefits such as health insurance or paid time off (PTO). Still, it can also mean giving employees access to resources that help them improve their work performance (for example, learning management programs). If your employees enjoy working for you now, imagine how much better it will be when they realize you’ve given them access to a Fortune 500–level benefits package. Plus, once word gets out about your competitive benefits, you’re more likely to attract top-tier talent!
Myth #5: I’ll have to let go of my HR team.
Fact: A PEO is not a replacement for an HR team, they complement your HR staff.
PEOs aren’t only payroll and employee benefits specialists; their expertise extends to help you with hiring, training and development, employee relations, and more. By taking the daily tasks off your HR team’s plate, they can focus on improving and strengthening your company. In addition, a dedicated PEO stays current on all local, state, and federal legislative changes to labor laws to confirm your business complies with regulations.
Myth #6: PEOs are too expensive.
Fact: PEOS can lead to overall savings for your business.
PEOs give you access to better employee benefits packages. Since you enter a co-employment relationship with your PEO, your employees are considered co-employed by the PEO and therefore grouped with the thousands of other employees across the organization. The PEO can then negotiate benefits packages with lower benefit-related costs, giving you rates competitive with those of Fortune 500 companies.
Additionally, the mismanagement of HR paperwork, workplace safety protocols, and labor laws can become incredibly costly errors, including Workers’ Compensation claims, lawsuits, and government fines. PEOs ensure your business complies with local and federal regulations and each employee is appropriately trained on safety protocols to prevent accidents and expensive mistakes. Finally, a PEO is a one-stop shop for all HR verticals. Instead of shopping around to source multiple vendors to cover all your needs, you can save money by outsourcing the work to a single vendor.
How To Find A PEO
While searching for a PEO to partner with, there are a few items you should look out for to ensure you select the perfect organization for your business.
- Ask for references to determine the effectiveness of their solutions. First-hand experience from past or current customers will give you an inside look at working with the company.
- Keep an eye out for any hidden fees. Their pay structure should be clearly laid out to ensure pricing transparency.
- Finally, while it may seem obvious, make sure they are a certified PEO (CPEO) by the IRS, especially if you’re in regulated industries such as health care or financial services.
It’s Time To Partner With A PEO
As a PEO and benefits administrator for over 25 years, we are happy to answer any lingering questions you may have about our services or what it’s like to partner with a PEO. Additionally, check out our resources section for more blog posts covering topics pertinent to business owners. We have years of experience helping companies find the right solution for their needs; contact us today to find the perfect solution for your business.