When you are in the middle of running a business, it’s tough to step back and see the big picture. Expert advice is needed to prepare for what's ahead and help with things like controlling costs and maximizing productivity. That’s where a Professional Employer Organization (PEO) can prove to be a valuable business partner.
PEO entered the market to help with some of the most time-consuming HR-related tasks related to running and growing a business, such as payroll, compliance, and benefits. In a PEO arrangement, the PEO becomes a partner through a co-employer arrangement. Both companies, the employer and the PEO, have rights and share responsibilities for employees. The employer maintains control over business decisions and operations, day-to-day activities, and core job functions of its workers. The PEO takes care of specific HR-related responsibilities, such as payroll processing and benefits administration.
A few facts about the PEO Industry:
PEOs Protect Your Most Important Resource: Your Time. It's easy for employers to get behind when the majority of their time is consumed with chasing paperwork, keeping up with filing deadlines, and addressing internal issues instead of attending to their customers. In fact, studies show that the average time small business owners spend on HR-related administrative is about 16 hours a week, or two full days. By taking over these time-consuming tasks, PEOs help small businesses get back more time to focus on productivity and growth.
PEO's Bargaining Power Means Access to Better Benefits. A great employee benefits package is one way to keep great employees and also gives employers a competitive edge in attracting top talent. Studies have shown that businesses that have enhanced their benefits packages reported higher employee performance, a more engaged workforce, lower turnover rates, and fewer missed workdays.
Because of costs, providing high-quality benefits is often out of reach for most small businesses. This is where PEO's can add big value. By grouping small businesses into one large pool, PEOs have more bargaining power to secure lower rates, partner with top-rated insurance providers, and assemble the type of top-rated health insurance plans that better fit the needs of their employees.
In addition, another benefit to working with a PEO is access to a Master Health Plan, a type of comprehensive group health insurance plan that’s specifically created to help employers – large and small -- improve the quality of healthcare to eligible employees. These high-quality, comprehensive health plans offer more benefits at lower prices and are an attractive option to businesses looking to control costs.
The majority of small employers that take advantage of a Master Health Plan have experienced:
➡️ ➡️ Read More: 4 Reasons to Hire a PEO for Risk Management
PEOs Help to Identify Cost-saving Strategies. In addition, PEOs help small businesses identify cost-saving strategies, such as managing administrative costs. A PEO can save small businesses time and money by helping to identify inefficiencies, streamline HR processes, and help make critical cost-cutting decisions.
The proof speaks for itself. Studies show:
IRS Certification. Because the employer reports wages under the PEO's Federal Employer Identification Number (FEIN), PEOs are trusted with sensitive information, such as employee data, Social Security numbers, and financial information. That’s why it’s important that the PEO is certified by the IRS. If something goes wrong, the liability shifts to the certified PEO (CPEO), not the employer.
In 2014, new legislation required the IRS to develop a certification program for PEOs. Only PEOs that meet the IRS’s strict requirements receive the certified designation. This includes providing documentation of positive working capital, completing a thorough background check, and agreeing to a series of follow-up audits. Once certified, the PEO has the authority to collect and pay federal employment taxes.
By raising the bar, the certification brings employers and PEOs closer together in a relationship based on trust. For businesses, it helps with making more informed decisions about the PEOs. For PEOs, it’s an opportunity to demonstrate exceptional business practices. In 2017, Propel HR was one of the first PEOs in the country to receive certification. We believe in transparency and are proud to be part of a distinguished group of respected and trustworthy industry leaders.
Note: The IRS does not endorse any particular PEO. You can find more information about certification at www.irs.gov.
Compliance Guidance in Multiple States. PEOs help to identify all types of potential risks and develop a plan to mitigate those risks, helping businesses avoid situations that can cost time and money.
Most employers have in common the need for guidance from a trusted advisor. From access to better benefits, compliance protection, and reducing costs to a higher ROI, the advantages of adding a certified PEO, like Propel HR, to your team of advisors increase the odds for success and growth.