What is a PEO? The solution to making your company great!
A Professional Employer Organization, or PEO, allows businesses to outsource their administrative needs to a third party that specializes in these duties. This can include (but is not limited to) managing human resources, taking care of payroll, overseeing workers’ compensation issues, and offering employee benefits. The relationship is beneficial for both the owner and employees of a business: the boss is able to focus on the bottom line without being bogged down by details or red tape, and workers can rest assured that their needs (specifically job security and satisfaction) are taken care of.
A Professional Employer Organization is especially attractive to small businesses, as groups with few employees or a small number of locations may not have the resources or expertise that a dedicated HR department requires. They also allow employers to offer benefits and other perks (e.g., insurance options, training programs, retirement and savings plans) that would be inaccessible otherwise. Employees essentially get the best of both worlds: the casual, amicable culture of a small business environment paired with the draws and rewards of a large business environment!
Some business owners balk at the idea of hiring a Professional Employer Organization because they worry that the PEO will gain control of their company and employees. Fortunately, that’s not how PEOs work. Employees instead enter a co-employment relationship with the PEO company, and the tasks involved with running the business remain with the business owner and the PEO is in the background. The business owner is still in charge of the day-to-day operations (including development and production, marketing, sales, and services), and meanwhile, the PEO handles employee-related issues. PEOs can even work alongside existing unions or HR departments. If the business owner decides that they don’t like this arrangement, they’re free to either re-negotiate their contract or hire a different PEO.
It’s worth mentioning that a Professional Employer Organization are not temporary staffing companies. Although a PEO may facilitate HR management duties that include employee orientation and management training, the PEO does not outsource their own employees to fill vacancies at their clients’ businesses. They also aren’t interested in finding employees whose job description includes an expiration date. Employee retention tends to be a sticking point for any company, so PEOs help their clients obtain and retain trustworthy “team players.” Ideally, the perks and services that the PEO enables the client to offer will then encourage the cream of the crop to stay put!
To verify that a certain Professional Employer Organization is reputable, a business owner should look for accreditations from such groups as the Employer Services Assurance Corporation, the Centre for Fiduciary Excellence, and/or the Certification Institute. These are just a few of the “gold standard” awards for the industry; they’re the sort of accolades that all PEO firms strive to achieve. And any PEO that obtains these certifications will be more than happy to furnish proof of them upon request.
It doesn’t matter whether a company consists of 20 employees or 200, or if it’s a medical group or a group of plumbers. Nearly every size or type business can benefit from a PEO relationship. So if you’re wondering if a PEO is right for your company…chances are, the answer is ‘Yes!’
Mark Sinatra is the CEO of Staff One, a leading human resource consulting and professional employer organization licensed in 44 states. Mark is actively involved in the PEO industry as a Board Director of both ESAC and NAPEO. He’s also Vice Chairperson of First3 Years and a Board Director with Social Venture Partners – Dallas..