PEO stands for Professional Employer Organization. A PEO is a company that provides HR services to small and medium-sized businesses. The PEO companies enter into a contractual co-employment agreement with the client company, becoming the employer of record for tax purposes and HR purposes. This allows small businesses to outsource payroll, benefits, workers’ compensation, recruiting, risk/safety management, and more. Using a PEO provides many benefits for companies looking to focus on their core business.
Professional Employer Organisation (PEO)
A Professional Employer Organisation (PEO) provides vital HR services to companies. PEOs handle payroll, benefits, compliance, workers’ compensation, recruiting, training, and more. This allows businesses to offload these administrative tasks. A PEO becomes the employer of record for tax and insurance purposes. However, the client company maintains control over day-to-day operations and management of their employees.
Some key benefits of using a PEO include:
- Access to Fortune 500-level benefits – PEOs can provide health insurance, 401(k) plans, dental, vision, disability, life insurance, and more competitive benefits. This helps attract and retain top talent.
- Reduced administrative workload – By offloading payroll, compliance, recruiting, risk management, etc. companies free up internal resources.
- Cost savings – PEOs can leverage economies of scale to get better rates on HR services and insurance plans. These savings get passed onto clients.
- Compliance expertise – PEOs stay current on ever-changing labour laws, regulations, and HR best practices. This reduces compliance risk/liability.
- Broader HR support – PEOs provide HR guidance and training in areas like compensation, organizational development, employee relations, diversity, and inclusion initiatives.
- Access to talent – PEOs maintain networks and resources for recruiting hard-to-find talent. They can expand a client’s candidate pool.
Reduced Liability
Using a PEO reduces HR-related risks and liabilities for companies. The PEO becomes the employer of record, assuming responsibility for compliance with labour regulations, employment laws, health and safety regulations, and more. This liability transfer protects client businesses.
Specific ways a PEO reduces liability include:
- Handling payroll taxes – PEOs properly calculate, deposit, and file payroll taxes on behalf of clients. This prevents tax penalty risks.
- Managing workers’ compensation – PEOs obtain workers’ comp policies and handle claims processing and case management. This reduces premium costs.
- Complying with labour laws – PEOs track and comply with federal, state, and local employment laws regarding hiring, pay, benefits, discrimination, leave, terminations, etc.
- Implementing safety programs – PEOs establish safety policies, deliver training, and supply posters/materials to reduce workplace incident risks.
- Managing unemployment claims – PEOs represent employers during unemployment claim proceedings, saving clients time.
- Providing HR guidance – PEOs supply employee handbooks, offer HR training, conduct audits, and update policies to minimize litigation risks.
- Screening candidates – PEOs handle background checks, reference checks, and drug testing to avoid negligent hiring lawsuits.
So using a PEO significantly reduces HR-related risks and liabilities. Companies can focus on growing their business instead of managing employment compliance duties.
Access to Fortune 500 Benefits
A major advantage of partnering with a PEO is gaining access to big-company benefits. PEOs can leverage their size and collective purchasing power to obtain affordable, competitive benefits packages for client employees. These Fortune 500-level benefits help attract, motivate and retain top talent.
Benefits provided by PEOs include:
- Health insurance – PEOs negotiate group rates on comprehensive major medical plans far better than what small businesses could obtain alone. Multiple plan options with low deductibles are available.
- Dental & vision – Many PEOs offer group dental plans with no waiting periods and vision plans with reduced rates for exams/hardware.
- 401(k) plans – PEO 401(k) plans provide diverse investment options, company matching, and fiduciary oversight at an affordable cost.
- Life insurance – Low-cost group life/AD&D policies pay beneficiaries in the event of an employee’s death. Disability insurance provides income if injured off the job.
- Wellness programs – Some PEOs provide telemedicine, discounted gym memberships, smoking cessation plans, mental health resources, and more.
- Pet insurance – Optional group pet insurance helps employees manage vet bills for their furry family members.
- Product discounts – PEO partners may offer reduced rates on products/services like cell phone plans, identity theft protection, home & auto insurance, etc.
So partnering with a PEO is an easy way for any size company to offer the type of benefits packages that employees at large corporations enjoy. This is a huge perk for recruitment and retention.
Better Safety & Risk Management
Workplace safety and risk management are two critical areas where PEOs protect client companies. PEOs have entire teams dedicated exclusively to safety compliance and risk reduction. They supply a comprehensive suite of services to limit workers comp claims, OSHA violations, lawsuits, and other liabilities.
Specific risk management services PEOs provide include:
- Safety manual development – Custom safety policies, procedures, and training programs specific to a client’s industry and worksites. This promotes a culture of safety.
- Injury claims administration – PEOs use economies of scale to get lower workers’ comp premiums and have skilled teams to handle incident reports, investigations, and claims.
- OSHA compliance – PEO experts track OSHA regulations and ensure client worksites meet all requirements for safety gear, equipment, posters, training, reporting, etc. This prevents costly OSHA fines.
- Drug testing programs – PEOs handle drug/alcohol testing of candidates during hiring and employees after on-the-job incidents. This reduces liability from impaired workers.
- Regular safety audits – Consultants conduct periodic worksite audits checking for hazards, proper safety gear use, regulatory compliance, and process improvements.
- 24/7 safety hotline – Employees can easily report hazards, ask questions or submit suggestions to a PEO’s safety hotline for quick resolution.
- Training resources – PEOs provide training videos, webinars, posters, newsletters, meetings and more to reinforce a strong safety culture.
Partnering with a PEO provides complete risk management and safety support that most small companies cannot match on their own. This protects employees while also protecting the client’s bottom line.
Conclusion
Partnering with a PEO provides invaluable benefits for small and mid-sized companies. It allows them to streamline administrative burdens, reduce risks and liabilities, attract/retain talent, leverage HR expertise, and more. With PEO payroll services handling critical back-office tasks, companies can focus their limited resources on building their business. The PEO model makes Fortune 500-level benefits and support accessible to any size organization. For companies looking to scale smarter, boost productivity and protect their bottom line, partnering with a PEO is an ideal solution.