How a PEO (Professional Employer Organization) can help your business
Many companies, particularly small businesses, are increasingly using a PEO (Professional Employer Organization) to provide a total package of cost-effective benefits, payroll and HR services to their employees. This enables companies to focus on their core, revenue-creating business priorities and not get bogged down with the details and paperwork associated with delivering these necessary services. For many small companies, partnering with a PEO can even allow them to avoid having to establish an in-house HR department or at least reduce the number of critical personnel slots devoted to HR staff. What distinguishes the PEO model from other forms of outsourcing such as the ASO model is the unique “co-employment” model that PEOs utilize to provide these services. Oftentimes, the size of your company will determine whether the PEO or ASO model will work best for your company’s needs, and an experienced HR services company like TPG HR Services USA can help you decide which approach will work best for you.
The Co-Employment Partnership Explained
In a co-employment arrangement, your company continues to be in charge of your employees' day-to-day duties and responsibilities, but the PEO becomes the employer of record for tax purposes, including using its own tax identification numbers to file the necessary paperwork. This co-employment relationship has a number of advantages. One of these advantages is that the PEO, due to economies of scale, can often obtain workers' compensation insurance coverage for a much lower cost than individual small businesses can procure on their own.
These same economies of scale also apply to other services provided by the PEO as well. Many companies that use PEOs are able to offer their staff better benefits packages, greatly improving both their retention of skilled employees and their ability to recruit the best candidates to fill open positions. In this way, PEOs can help companies become “employers of choice” in the race for highly-skilled talent, which, in turn, will enhance their productivity and save them the time and expense required to hire and train new staff lost to attrition. 
Small Businesses Using PEO Services
According to a white paper produced by the National Association of Professional Employer Organizations, approximately 15 percent of small businesses (with 10 to 99 employees) were PEO clients in 2015. 
ASOs vs. PEOs
|Relationship with HR dept.:||Often supplements HR dept.||Often replaces HR dept.|
|Company size:||Better for mid to large firms||Better for small companies|
|Company age:||Typically established businesses||Often for new start-ups|
Tasks PEOs Can Handle
PEOs can handle a variety of tasks for your company, and the relationship is flexible enough that you can determine exactly which areas will be whose responsibility. The following list can be seen as a menu of options for companies that decide to enter into a partnership with a PEO.
Perhaps the most common service that PEOs provide to their clients is in the realm of payroll processing. A PEO can completely process payroll for your employees, freeing your staff up from what is always a time-consuming and tedious task. With a PEO involved, you can be confident that your employee compensation will be correct and on-time, required records such as PTO accrual will be maintained accurately, and all deductions, garnishments and payroll tax responsibilities will be handled appropriately.
Unless your company is very large in size, PEO-administered benefit plans typically give your employees access to a wider range of benefits than you could get on your own. This includes benefits of all types, such as:
- Life insurance
- Disability Insurance
- Retirement Plans
- And more
HR & Workers’ Compensation Administration
A PEO can help you manage all of your liabilities as an employer, create and distribute company manuals, oversee new hire onboarding, facilitate employee relations support, conduct employment verification, and even take care of specific services such as overseeing drug testing programs where necessary. In addition, collaborating with a PEO provides you with workers’ compensation insurance coverage and can even help you resolve individual employee compensation claims.
Employee Assessments & Evaluations
Conducting performance reviews, while often necessary, can be a truly unpleasant part of any supervisory employee’s job description. If they are handled incorrectly, they can also expose your company to potential liability. A PEO can take this task off your plate by designing and conducting regular employee performance reviews and evaluations. These assessments, because they are conducted by an independent outside organization, can also be helpful in identifying areas of concern within specific departments in your business that might otherwise remain undetected by internal reviews.
Recruiting & Training
A PEO can help you develop and implement a recruitment and training strategy that ensures that your company will always have a consistent supply of employees who are highly-trained in the skills that are critical for your company’s success. To improve your recruitment results, PEOs can:
- Review and revise your job descriptions to ensure they are up-to-date
- Analyze your salary structure and the current job market to make sure your wages and benefits are competitive
- Handle duties such as initial interviews and applicant screenings
To enhance your training and professional development opportunities, PEOs can give your staff access to extensive training resources from in-class options to on-site sessions to individualized, online training software.
Compliance & Oversight
PEOs hire professionals who are highly skilled in their areas of expertise and have the time to spend on remaining current with ever-changing federal and state laws and regulations concerning employment. This enables you to rest easy with the knowledge that no compliance issue will suddenly appear and threaten to destroy the business that you and your staff have spent so much time and energy building. The staff at a PEO will keep your investment safe from the hazards of noncompliance to the broad range of regulations and best practices.
A PEO (Professional Employer Organization) can take care of many of the details that eat up your precious time and resources. And if you are looking for a PEO you can count on, you don’t need to look any further than TPG HR Services USA. Call us today at 732-917-6000 to see how we can set your business free to grow and become more productive.
- Source: National Association of Professional Employer Organizations, https://www.napeo.org/docs/default-source/white-papers/white-paper-2016.pdf?sfvrsn=2
- Wikipedia, https://en.wikipedia.org/wiki/Professional_employer_organization
- G&A Partners, https://www.gnapartners.com/article/aso-vs-peo/
- Source: United States Government Accountability Office, https://www.gao.gov/assets/660/655889.pdf