While they've been around for 30 years, PEOs, or Professional Employer Organizations, are rapidly growing in use and delivering great results to small businesses. Why? Several benefits come to mind, including the ability to outsource the back-end HR functions, deliver consistent and compliant people leadership services, while buying into better benefit packages through broader buying power. It's the time of year for benefit package agreements, so it's a great time to evaluate a PEO option, and what you can get for your team. If you're considering a PEO, a recent study in Inc. conducted by the National Association of Professional Employer Organizations (NAPEO) might show that it's time to move, with some impressive results for businesses using a PEO:
- 70% report revenue increases since using a PEO, with double annual median revenue growth; 40% is generally projected
- 66% report profitability increases since using a PEO
- 98% of business owners would recommend using a PEO to others
If you like the sounds of those numbers, yet wonder how you'd manage your team, and build your culture to achieve your goals, NAPEO has found that offloading the tedious HR elements actually helps you to spend more quality time with your employees, focusing on business success.
PEOs that offer comprehensive solutions include payroll, benefits administration, tax administration, regulatory compliance support, employee sourcing, selecting, onboarding, training and development. Instead of hiring an HR manager, you contract with the PEO, and get these services provided based upon your number of employees and services needed. It amounts to a three-way relationship, where the employees are yours, and the employees also report to the PEO for their HR requirements. Your employees get support from a company representative that is skilled and effective at people leadership functions. The benefits to your employees include consistent HR support, higher levels of benefits, and prompt responses to their needs, which helps to boost retention and employee engagement, while making human capital management less burdensome to business leaders. You will have a primary representative who is like your HR manager, and who keeps you and your team informed. Sounds good, right? Let's get started!
Finding a PEO
There are some keys to be aware of in the process of finding and selecting a PEO. First, you need to consider what services you want and need to be managed, and then screen the companies to ensure that they offer those services, and that they are IRS certified and accredited by the Employer Services Assurance Corporation (ESAC). You'll also need to ensure that any PEO is authorized to practice in your state, and is well-versed on any state regulations. Several national PEOs include Abel HR, Insperity, and Paychex. Similar to hiring an HR manager, you'll need to find the right company fit to your culture and values, in addition to finding a good relationship with your primary company liaison. You can find more qualification info at NAPEO.
If you're not sure that a PEO is quite right for your company, it's likely for one of these reasons:
- You already have an HR manager/leader. You're not sure that you'd be happier with a PEO. You may want to explore a PEO business analysis of the cost/benefit between the two. The structures are different, however there are benefits to both models to consider in your decision.
- Your business is quite small. PEOs can offer some significant growth support advantages to very small businesses, while managing the HR elements actually helps most businesses to achieve growth faster. Leaders can focus on growth, not distractions.
- You don't trust another entity having control over your people. While this is a common concern, PEOs actually give the leader more control because you establish the guidelines and standards for your business (within regulations, of course).
- You don't know what you need or can afford within a PEO. If you're lost in the HR terminology and service options for your business now, or in the future, you may need some assistance to figure out the best plan for your business. We can evaluate your business needs, and provide the best PEO options at the best value. Click to get started:
People Leadership Success Tips
If you're a new business leader and have not managed employees before, a PEO might be a very good idea for your business, to provide more consistency, support and compliance to your employees. We've found that many business owners lack this experience, and this is a common factor in business failures. In addition, using a PEO can give economies of scale with the most time-consuming parts of your human resource management, like payroll, benefits and training. If you don't have core skills in that arena, a PEO or equivalent outsourced resource is a great investment and ROI! There are a variety of options in the market, and the best option really requires consideration of your business size, resource scale, and plan for growth. We'd be happy to help you find your best option - to find your answer.
Dawn Garcia is Principal and Founder of Pursuit of Excellence LLC, an independent business management consulting firm specializing in service-based businesses; delivering leadership, strategy and execution expertise. Experience the Excellence Driven® System for your business, and achieve the results you need! Every business needs help at some point; great business leaders actually get help when needed, realizing greater returns. When you need help, consult the experts. Our success is your success!