A PEO (Professional Employer Organization) is an all-inclusive outsourcing option for your HR tasks and employer liabilities – those that are typically your sole responsibility, such as payroll and benefits. Some PEOs also have strategic services, but no two companies are exactly alike, so it’s important to research providers and compare their capabilities to find the best fit for your business.
Often, companies will miss out on the opportunity to work with PEOs due largely to misconceptions and misunderstandings. Here we will discuss some of these myths, and the actual truths that exist behind them:
1. PEOs Replace Your HR Staff
This myth is simply not true; PEOs were not designed to replace HR employees, instead they complement the work your HR staff does. Working with a PEO means that your current HR staff can focus on other parts of their job; the human aspect. A good PEO will be able to handle the monotonous tasks of things such as benefits administration, calculating payroll taxes, and dealing with the ins and outs of labor law compliance, therefore freeing up your HR staff to tackle more human issues at the workplace. As more employee issues are addressed properly, you will find that your staff feels more empowered and comfortable in the workplace, resulting in work being accomplished more efficiently.
2. Partnering with a PEO Means Losing Control
A good PEO would never make important decisions without you, and especially ones that aren’t in your company’s best interest. The idea behind a PEO is that they can take over many of the administrative burdens that your staff would be tasked with otherwise, freeing up their time to accomplish the parts of their job that require judgement calls to be made. A PEO should, in this way, do the opposite of taking over control, because they will free your staff to do the things that need their judgement and control the most. A good PEO will work with you, not instead of you.
3. PEO is Another Name for Employee Leasing
People often mistake these two, but they are not the same. Employee leasing is when a company leases out employees to a business to do a job temporarily, or for a short period of time. When this occurs, the leasing company then technically has some sort of say in day-to-day decision-making regarding employees.
With a PEO, this is not the case. The PEO takes over some tasks, but decision-making is not one of them, leaving the control still with you and your company.
4. IRS Certification is Not Important
While a PEO that is not IRS-certified could potentially work well with your company, one that is IRS-certified is guaranteed to have a certain quality, as they officially meet the standards set by the SBEA (Small Business Efficiency Act). A company that meets this certification criteria will be able to provide you with certified proof of all quarterly tax payments, audits by a CPA, and access to tax credits for which your business might not have otherwise been eligible. Perhaps most importantly, wage base tax restarts are eliminated to prevent double taxation. So, while you may find a great PEO that works for you without this certification, it is often worthwhile to find a company that is certified in order to fully maximize your benefits.
5. Employees Will Not Like Working with a PEO
Often times, people simply do not like change or the possibility of things being different. We tend to push back against things that are new. However, it is often change that makes things better in ways that we hadn’t even considered before.
Once your company utilizes a great PEO and your staff truly notices the benefits and advantages of the situation, it is quite unlikely that they will dislike working with a PEO. In fact, most businesses that work with PEOs report that they have more engaged employees after this change is made.
6. PEOs Do Not Have a Positive ROI
Many factors play into this statistic, but in general if you work with a professional and quality PEO, this will most certainly not be the case. ROI stands for a “Return on Investment”, and this is how companies determine if the methods they use are beneficial/worth the money they put into them. The average ROI for a PEO is 27.2%, and quality PEOs provide an even higher ROI for businesses.
Most of these savings come from your company’s ability to provide employees with a high-quality benefit plan at a reduced cost; not only does this allow you to save money in the immediate sense, it also saves money in the long run by helping to reduce turnover. Reducing turnover then limits the costs associated with hiring and training new employees, which can certainly add up over time. Therefore, it certainly is beneficial to work with a PEO, as your ROI will be noticeable and significant.
7. PEOs Do the Same Things as ASO’s
While at first glance they may seem similar, an ASO (or an Administrative Services Organization) provides limited services to clients, and cannot do all the things a PEO can do for you. For instance, an ASO would provide you with basic payroll services such as issuing payments, but an ASO cannot file payroll taxes on your behalf.
Another major difference between the two is that with an ASO, you do not gain access to any benefits options, while a PEO can provide this value to your business and your team by giving you access to their existing benefits plan. This in turn helps to reduce your overhead while providing your employees with access to an excellent healthcare package at an unbeatable price.
How BRG Advisory Group Can Help You
While there are many PEOs to choose from, BRG Advisory Group is a high-quality national HR Solutions Broker that not only works hard to identify your company’s individual objectives, but makes sure to match the best PEO candidate firm with the most competitive pricing to your objectives. Simply put, we care about our clients, and we will make sure that you benefit from our services in the most effective and cost-efficient ways possible. Call us today at 800-971-3006 or fill out our online form to find out how BRG Advisory Group can help you to reach your fullest potential!