Professional Employer Organizations: 4 Reasons You Need One

With endless tasks popping up on any average day, entrepreneurial company leaders simply don’t have time to do everything. That’s why a professional employer organization, or PEO, may help you grow and stay complaint as you grow.

A PEO is an outsourcing firm that provides comprehensive human resource and compliance  services to small- and medium-sized employers. Think payroll, benefits, employer risk and employee management. In a previous article, I covered how a professional employer organization can help your startup. If you’re still unsure whether your company could benefit from a PEO, keep reading.

Here are the top reasons why it might be time for your business to use a professional employer organization:

Reduce recurring costs

As a startup, you’re likely looking to cut costs wherever possible, and a PEO can help lower the cost of doing business. PEOs consolidate the cost and compliance responsibilities of many employers into a large professionally managed pool, achieving greater efficiency and effectiveness.

Partnering with a PEO provides you with a dedicated HR (Human Resources) team that can help you secure better employee benefits for reduced costs, typically better workers’ compensation options, and take responsibility for tax and payroll processing compliance.

According to a recent study, the average cost savings from using a PEO is 30%-40% or roughly $350-$500 per employee per year. In addition to the resulting peace of mind, think of how you could use that cost savings to grow your business and improve your bottom line.

Relieve pressure from complicated HR needs

Capital is typically limited for most startup and early-stage employers – it is rare to have an in-house HR team. A PEO eliminates the need to hire an in-house HR expert, with the added benefit of access to a diverse collection of experts. Working with a PEO will help you handle performance management, employee investigations, recruiting technology, and employee policies and procedures.

Is your business reworking its current policies to create a hybrid workplace in a post-pandemic world? A PEO can help with that, too. The average company could save around $11,000 per employee if it moved to a hybrid work plan, according to a recent study by Global Workplace Analytics.

Eliminate navigating or learning rapidly changing regulations

Regulations for business owners change rapidly at both a local and federal level. While it’s always best to stay up-to-date on rules and regulations related to your business, working with a PEO can take some of this burden off your shoulders. COVID-19 has made the rate of change in the workplace accelerate dramatically. Working with experts focused on thousands of employees and hundreds of worksites adds value for a smaller growing employer.

A PEO has access to compliance experts as well, helping you create strategies for your business to address changing requirements. At the end of the day, this expertise can help you avoid labor- or tax-based lawsuits, which can be incredibly costly: The average employment lawsuit could cost your company up to $200,000.

Mitigate any claims issues

A PEO can help protect your business and prevent any claims from being made. If, for any reason, a claim is filed against your company, a PEO can help mitigate the process for you. Many PEOs provide much more cost-effective access to Employment Practices Liability Insurance then independent alternatives. This access is a result of the fact that carriers recognize the risk management expertise a PEO provides, along with the pooling value.

Making sure your company is compliant on the workplace safety front, managing any claims and employing professional training, and reducing the likelihood of claims are all within the scope of work of a professional employer organization. The average cost of a workers’ comp claim is $40,000, according to the National Safety Council.



Key takeaways

A PEO can help your business in many ways. It is paramount that you have a well-rounded team of experts focused on employee-related compliance, so you can keep your focus on growing your business. Studies show that companies using PEOs grow faster, have less EE turnover, and a significantly lower failure rate than their competitors that don’t. Make the investment today to protect your business tomorrow.

AccessPoint provides a single, go-to system for managing all of your human resource-related needs. It’s simple to start, affordable and streamlines your infrastructure to a point where you don’t even notice that all those pesky administrative tasks exist. Our team of experts can handle all required compliance, tax filing and reporting for you, making it easier to focus on the things that matter to you.

Photo credit: Career Employer

Originally published Sept. 9, 2021.

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