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How Can a Professional Employer Organization (PEO) Help Your Business?

Human Resources
Article
07/03/2014

If your small or mid-sized company struggles to manage complex human resource tasks, you may want to consider joining forces with a Professional Employer Organization, or PEO. A PEO is a popular way to outsource human resource functions such as payroll, employee benefits, and workers’ compensation, allowing business owners to focus on running their company.

A PEO establishes a co-employer relationship with your staff and contractually assumes certain employer rights, responsibilities, and risk. PEOs pay wages and associated employment costs in exchange for a fee that covers expenses, plus a margin for handling benefits, payroll processing, tax remittance, risk management, and other human resource services. Business owners remain responsible for managing daily operations, including employee supervision and management.

One of the main draws of PEOs is their co-employment model that connects client companies’ workforces to a larger benefits and administrative employment group. With this model, PEOs can often negotiate better insurance rates and benefits for members. Whereas a small company might only be able to offer its workers a bare-bones health insurance plan, a PEO can provide them a choice of generous coverage options for medical, dental, and vision care, as well as life, disability and workers' compensation insurance. Employees may also gain a 401(k) savings plan and consumer-directed health plans such as flexible spending accounts and health savings accounts.

Other ways a PEO can benefit your organization include:

  • Providing assistance across the employment spectrum — hiring and firing, job descriptions, employee handbooks, worker retention tools, and staffing strategies.
  • Helping implement improved employment practices, compliance, and risk management to reduce liability.
  • Allowing access to comprehensive employee benefits, giving your company a competitive edge in the labor market.

PEO Market Strong and Growing

PEOs are increasing in popularity as U.S. employers, seeking to emphasize core functions and increase efficiency, turn to PEOs, foregoing internal HR departments and the personnel and administrative costs that come with them. The National Association of Professional Employer Organizations (NAPEO) estimates that 250,000 small and mid-sized businesses and their 2.5 million employees are part of PEO arrangements, and experts expect this number to grow as the nation's economy improves and employers recognize the advantages of outsourcing HR functions.

Would your company benefit by contracting with a PEO? Download this free whitepaper to determine if a PEO is right for you.

Professional employer organization (PEO) services are sold and provided by Paychex Business Solutions, LLC (PBS) and its affiliates, which are registered and licensed to sell and provide PEO services, including in Florida. PBS FL license numbers are Paychex Business Solutions, LLC, GL7, PBS of Central Florida, LLC, GM14, PBS of America, LLC, GM46, Paychex PEO I, LLC, GM455, Paychex PEO II, LLC, GM456, Paychex PEO III, LLC, GL193, Paychex PEO IV, LLC, GM519 and Paychex PEO V, LLC, GM 522.

 

This website contains articles posted for informational and educational value. Paychex is not responsible for information contained within any of these materials. Any opinions expressed within materials are not necessarily the opinion of, or supported by, Paychex. The information in these materials should not be considered legal or accounting advice, and it should not substitute for legal, accounting, and other professional advice where the facts and circumstances warrant.
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