7 Common Myths about Working with a PEO

7 Common Myths about Working with a PEO

Posted by HR Division of Propel HR on 8/5/21 2:45 PM
HR Division of Propel HR
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Posted on: August 5, 2021

PEOs offer a number of great benefits for small businesses, such as increased productivity, improved employee engagement, business growth, better benefits, and significant cost savings.  Yet, with so many positive reasons to work with a PEO, many myths tend to hold employers back from taking the next step. Here are some of the most common.

MYTH 1:  Co-employment Means Losing Control of My Business. 

AdobeStock_245917326_02Co-employment is designed to help and protect your employees and your business -- not control it. The partnership means there is a contractual allocation of specific responsibilities between the employer and the PEO. 

The employer continues to maintain control over all business decisions, operations and manages day-to-day activities, recruitment and retention efforts, and core job functions of its workers.  In addition to providing HR expertise and services, PEOs are responsible for specific HR-related tasks, such as payroll and benefits administration, reporting, collecting, and depositing employment taxes with local, state, and federal authorities, and compliance. 

MYTH 2:  Working with a PEO is Expensive. 

Working with a PEO lowers HR-related expenses and saves your business money in many ways.  According to a report conducted by the National Association of Professional Employer Organizations (NAPEO), PEOs provide access to more HR services at a cost that is close to $450 lower per employee compared to companies that manage their HR services in-house. 

Most small businesses are surprised to find that by using a PEO, they can also lower health plan costs and provide better benefits at the same time. By partnering with a PEO, employers are able to offer top-rated health insurance plans and enterprise-level benefit packages similar to those offered at large corporations. This is because of a PEO’s ability to group employees of small businesses into one pool in order to negotiate better health plans at lower rates.

READ MORE:  Learn how Propel HR saved one business $97,000

By cutting out inefficiencies, reducing HR-related administrative tasks, and streamlining HR processes, PEOs can help businesses save time and money.  Studies show that companies that partner with a PEO see a 21% savings on HR administration. 

MYTH 3:  Co-employment Puts my Company at Risk for Increased Mistakes.

AdobeStock_167781689_01What happens if something goes wrong? Who is responsible for missed tax deadlines? Who pays the penalties for a compliance error? In a co-employment relationship, the risks are shared between the PEO and the employer. 

Because the employer reports its wages under the PEO's Federal Employer Identification Number (FEIN), PEOs are trusted with a body of sensitive information, such as employee data, Social Security numbers, and financial information. That’s why it’s important to work with a PEO certified by the IRS. If something goes wrong, the liability shifts to the certified PEO, not the employer. As a business grows, so does the risk of HR-related compliance issues. A PEO can help minimize the risks of costly compliance violations and protect your company. 

MYTH 4:  We No Longer Need Our In-house HR Team.

 By working with a PEO, your in-house HR team gains access to a team of experts who can fill the gaps, protect your company from risks, and help your business run more smoothly.  

READ MORE:   Complying with State Labor Laws

MYTH 5:  I will Lose Power over Hiring and Firing.

One of the benefits of working with a PEO is the guidance for staffing, firing, and discipline, if necessary. Your HR team will learn how to handle and document situations properly in the event of an employment claim. PEOs can also assist with recruitment efforts by helping to identify candidates with the right skills who fit your organizational culture.

MYTH 6:  PEOs Don’t have the Skills and Expertise Relative to my Business.

With the complexity of changing employment laws, your HR team may not be equipped to handle the growing demands of HR effectively. A PEO provides your business with access to an entire team of HR experts who can help your company achieve its goals.

MYTH 7:  PEOs are not Flexible and Can't Help my Business Grow. 

AdobeStock_109755635_01-1From payroll, compliance, and benefits administration, there are a number of HR services that can be customized to meet the needs that are specific to your business and work with you as your business grows and needs change. 

By aligning the outsourced business process with your company goals, employers can access new tools, implement more innovative strategies, and gain valuable industry expertise to impact your company’s performance.  According to a recent study, 70% of companies that use a PEO report revenue growth twice that of comparable non-PEO firms. In addition, the ROI for businesses that work with a PEO—based on cost savings alone—is 27.2 % per year. 

ARE MYTHS ABOUT WORKING WITH A PEO HOLDING YOU BACK? 

When you're running your business, it’s tough to step back and see the big picture. Are you looking for ways to become more cost-efficient and productive, reduce liability and save money? Then it may be time to consider working with a certified PEO like Propel HR. We offer a number of services that can be outsourced as a standalone service or as part of our IRS-certified PEO arrangement. 

Propel HR President Lee Yarborough 

Lee Yarborough YOU GOT THIS!Propel HR President Lee Yarborough was recently elected Chair of the National Association of Professional Employer Organizations (NAPEO) Board of Directors. She spoke with PEO Insider magazine to share where she thinks the industry is headed and how NAPEO can continue to grow. Download a pdf version of the full interview:  A Passion To Serve 

You Got This!  Lee was also featured on the podcast, TWO FEET IN.  In season 2 of the podcast, Coach Heather Macy highlights “inspiring women who are focused on empowering other women.”  In this short but in-depth conversation, Lee talks about changes in the workplace due to the pandemic, faith over fear, listening instead of giving advice, making smart business decisions, trusting her intuition, and her favorite version of herself. Available on Apple Podcasts, Spotify or wherever you listen to podcasts.

About Propel HR. An IRS-certified Professional Employer Organization (PEO), Propel HR has been a leading provider of Human Resources and payroll solutions for more than 25 years. We partner with small to mid-sized businesses to manage payroll, employee benefits, compliance, and other HR functions in a way that maximizes efficiency and reduces costs. Visit our new website at www.propelhr.com

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HR Division of Propel HR

The HR Division is made up of a team of professionals with a vast level of experience and HR expertise, assisting organizations of all sizes and within a wide variety of industries. They readily partner with clients to address strategic and compliance challenges surrounding the employment life-cycle and the ever-changing laws that regulate it. Inquire below about how they can help you!