SMBs across every industry are seeing value in outsourcing their payroll administration to third-party services. With organization-wide benefits like cost reduction, accuracy, reduced risk of compliance violations, and more time for internal employees to focus on revenue growth – the reason is clear. But when your organization works with a PEO, those benefits extend far beyond your payroll options. PEOs can be your organization’s partner for managing HR requirements, administrative demands, and onboarding and training efforts.

Tapping into all the cost-saving and time-saving opportunities beyond just payroll administration requires businesses to take a closer look at all the services PEOs offer and how they actually operate. Then, you can target specific benefits and measure your organization’s improvements over time.

What does PEO stand for? A professional employer organization, or PEO, is different from a third-party payroll administration service. Instead, PEOs provide full-service HR outsourcing across functions ranging from benefits administration to employee law compliance. The nature of the arrangement between PEOs and their clients also differs from a standard outsourcing arrangement. When you use a PEO, you enter into a co-employment arrangement: the PEO shoulders some of the employer responsibilities for your organization and some of the liabilities of failing to perform regulated operations correctly. That protects your organization and can give your leadership team far more peace of mind about compliance.

Rather than viewing a PEO as simply another service provider, your organization can think of them as a strategic partner—one that proactively strengthens your organization, ensures administrative tasks are handled smoothly, and even provides comprehensive HR management so your in-house teams can focus solely on operations.

Payroll Administration

Payroll is one of the most fundamental aspects of HR management for any business. Payroll administration involves all the steps in ensuring employees receive prompt and accurate payment for their work. But it also includes filing payroll taxes, ensuring the appropriate withholdings are taken from each check (for both income taxes and benefits), and sending the money through the right direct deposit or paper check channels. Payroll administration also involves several compliance requirements that can be difficult for SMBs to handle alone. These include ensuring proper overtime documentation and payment, correct compensation of exempt and non-exempt employees, and that your organization complies with state and federal payroll requirements. This task requires a lot of expertise and specialized knowledge, and there’s no room for error. PEOs have specially trained payroll experts who can efficiently manage payroll without the costs of hiring a full-time payroll team.

Benefits Administration

While payroll administration is the main function company leaders may think of when they picture outsourcing HR functions, benefits administration follows on its heels. Payroll is the mechanism by which employees contribute to healthcare plans and retirement accounts, so benefits and payroll tasks naturally slot together.

However, PEOs can provide far more than the daily administration of benefits plans. So, what is PEO in insurance?

The organization can:

• Allow membership access to a wider network of businesses, which gives you access to better plans at more competitive rates through better bargaining power.
• Provide support and resources to new hires and established employees who want to learn more about the benefits.
• Administer the use of health care plans, retirement plan contributions, FSA and HSA options, and so on. By having robust and accessible benefits, your organization can retain happier and more engaged employees and a stronger offering for new hires.

HR Management

HR management is a broad and strategic category of services that can be tailored to your business’s unique needs. It encompasses employee management and hiring strategies, including:

• Recruiting and organizing recruitment, from creating compliant job description postings to managing the background checks and first-round interviews
• Employee onboarding, including getting employees correctly signed up for payroll and benefits within the system
• Employee performance management, including helping employees set goals, analyzing KPIs, and organizing performance reviews
• Disciplinary action management to ensure the workplace is safe for all participants

Regulatory Compliance

Compliance is one of the biggest responsibilities that internal HR teams and third-party PEOs handle. All organizations must comply with state and federal employment laws. However, failing to account for law changes, missing small but significant details, and even minor data errors can put your business’s compliance at risk. PEOs offer fully trained specialists whose jobs include staying up-to-date on legal changes and best practices, so your business can navigate these requirements.

Risk Management

Alongside compliance demands, SMBs also benefit from robust risk management. Appropriate workplace insurance, comprehensive safety programs, and internal audits to guarantee compliance with OSHA regulations are essential to managing risks. You can access standard or personalized workplace safety initiatives by partnering with a PEO. They will also help you implement more competitive employment practices liability insurance (EPLI) to protect your organization and have your PEO manage all workers’ comp claims.

Recruitment and Onboarding

Recruitment and turnover are significant inefficiencies for most businesses. But a PEO can help you forecast what staff you need, prepare a recruitment strategy, streamline the hiring phase, and more. PEOs can even handle onboarding so your new hires are fast-tracked to their training and first days of work.

That makes recruitment far less disruptive, as your in-house employees can continue to focus on their core responsibilities with minimal new tasks or interruptions.

Employee Training and Development

Finally, full-service PEOs also provide ongoing training and development for your employees. They can build standard or personalized training programs for your staff, give you access to cutting-edge LMS platforms and learning resources, and make ongoing development a standard part of your business operations.

PEOs do more than simply shift HR management and administration responsibilities from your in-house staff to an external team. They can provide cost savings and more expertise by working through economies of scale:

PEOs work by creating a co-employment arrangement with their clients. The PEO becomes the employer of record, which allows them to provide complete services and act on behalf of your company for HR management and administration tasks. However, they don’t become the exclusive employer—your organization still retains full decision-making power over operations, revenue, business strategies, and all other aspects of business.

There are many different benefits that organizations can access by partnering with a PEO instead of hiring separate services or trying to manage every element of HR in-house. PEOs can help your organization stay more compliant through all the different lenses of HR while simultaneously making your operations more efficient and cost- effective.

The three biggest reasons why organizations should work with PEOs are:

Cost-Effective Access Quality Benefits
Give your employees access to better plans for the same or lower rates through more effective bargaining.

Develop Better Recruitment and Onboarding Processes
Make a strong first impression with qualified job candidates, and streamline the entire recruitment and hiring process so there is less disruption, business slowdown, and burnout.

Maintain a Positive and Conducive Work Culture
Training, better benefits, and a constantly evolving company culture are critical elements for improving retention, engagement, and productivity. PEOs provide that through training, more competitive benefits, and HR management.