What is a PEO, is it right for you?
PEO EVALUATIONS
A Professional Employer Organization (PEO) provides integrated services to effectively manage critical human resource responsibilities and employer risks for small and medium sized businesses including:
- Benefits
- Workers Compensation
- Payroll
- Liability Coverage
- HR Administration
- Compliance
- Tax Administration
- Technology
The PEO relationship involves a contractual allocation and sharing of employer responsibilities between the PEO and the client. This shared employment relationship is called co-employment.
Is a PEO the right fit for your business?
Whether you're considering moving into a PEO, evaluating your current provider, or exploring an exit to the open market, BSB Consultants manages the entire evaluation process from start to finish.
We handle the heavy lifting—benchmarking leading PEO vendors, comparing technology, service models, HR support, benefits offerings, workers’ compensation, and total cost—so you can make an informed decision with complete transparency.
Our deep relationships across the PEO and employee benefits marketplace give your organization access to competitive pricing, strategic insight, and unbiased guidance designed around what’s actually best for your business—not a single vendor’s agenda.
By the end of the process, you’ll have a clear side-by-side analysis, full financial breakdown, and a confident path forward.
Why Use a PEO?
According to the National Association of Professional Employer Organizations (NAPEO), professional employer organizations (PEOs)provide "…comprehensive HR solutions for small businesses. Payroll, benefits, HR, tax administration, and regulatory compliance assistance are some of the many services PEOs provide to small and mid-sized businesses across the country."
The "advertised" benefits of a PEO include:
Increase Profitability
Through improved and consistent regulatory compliance fulfillment, PEOs help businesses improve productivity, increase profitability, and focus on their core mission.
Big-Business Benefits
PEOs can provide the employees of small businesses access to "big-business" employee benefits such as 401(k)plans; health, dental, life, and other insurance; dependent care; and other benefits not available to employees of a small company.
Reduced Benefit Costs
Benefit plan costs are established based on the PEO's pool of covered employees reducing potential costs, annual increases, and self-insured out of pocket costs.
Multi-state Compliance
Companies with multi-state operations can rely upon their PEO to handle all local regulatory reporting and compliance.
Co-Employment Model
PEOs operate in a co-employment model where they assume responsibility for the administration role for the company relative to employees. There is no loss of control over the work done. Work assignments, hire and fire decisions, along with compensation packages all remain the purview of the actual company.
Lower Turnover
According to a recent study by noted economists Laurie Bassi and Dan McMurrer, businesses that use PEOs grow 7-to-9% faster, have 10-to-14% lower employee turnover and are 50% less likely to go out of business.
Is a PEO Right for Your Organization?
One can readily appreciate the CFO's interest in saving money, increasing compliance, and improving employees' benefit plans. The question remains: is your company a candidate for a PEO?
A PEO Expert asks the following questions:
Why are you considering a PEO? What are the driving factors? Expert urges companies to test their motivation for the desired change to ensure they get what they initially seek.
How many employees do you have? The sweet spot for many PEOs is from 1-250. Some PEOs specialize in specific industries and cap the number of employees to no more than 100. Increasingly, however, larger PEOs are seeing mid-size companies (with as many as 1,000 employees) seeking their services.
Calculate the potential cost savings. It is important to remember there are PEO administrative fees. Are the savings sufficient to satisfy the cost-saving expectation alone?
What administrative responsibilities should be handled by the PEO? Can you accomplish the elimination of silos within HR?
Can you improve compliance with all regulatory requirements?
Does your company culture align with the prospective PEOs?
What changes can/should be made to the HR organization to support the PEO (e.g., who will be the primary contact for your company and the PEO)?
Does the leadership team understand the impact of the changes that come with a PEO? PEO Expert advises that communication is essential. Leadership and employees alike will need to understand the changed processes, procedures, and technology platforms.
The implementation of a PEO solution takes work. Companies should be prepared to run parallel systems for a couple of "payroll cycles" and endure a learning curve.
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