What is a PEO?

What is a PEO?

by Andrew Sowell, on July 01, 2020
As HR becomes ever more complex, and covers a broader scope of responsibilities, you may be hearing more buzz about PEOs.

If you’re unfamiliar with PEOs and the services they provide, you’re not alone. A recent industry survey showed that about half of those surveyed were aware of PEOs, but only about 20 percent of decision makers could accurately describe what a PEO does.

PEO stands for Professional Employer Organization

A PEO provides comprehensive HR solutions for small and mid-size businesses.

As organizations grow, most business owners spend less and less time on the revenue producing aspects of the business and more and more time “running the business.” The problem is that they lack the time, resources, or expertise to effectively manage things like:
  • Transactional HR tasks and strategic HR initiatives
  • Payroll & Tax Compliance
  • Risk Management & Workers’ Comp
  • Benefits & Benefits Administration
These are all things that can be handled more efficiently and more cost effectively by a PEO.

Essentially, it is outsourcing your HR responsibilities to experts who focus solely on HR. PEO firms provide business owners with a scalable HR infrastructure that leverages HR expertise and HR technology to help protect and insulate business owners from the risks that come with owning and running a business. Simultaneously, they help businesses grow and increase productivity by streamlining operations and consolidating vendors. Protect and grow…it is that simple!

PEO benefits for business

PEOs help organizations save money and make money - that’s the bottom line. Here are a few stats that show savings and growth from the National Association of Professional Employment Organizations (NAPEO):
  • The annual return on investment from using a PEO is conservatively estimated at 27.2%
  • Expected annual median revenue growth for PEO clients is 40% greater than that of comparable non-PEO firms
  • PEOs provide an estimated 21% cost savings of HR administration
  • PEO clients save about $450 a year per employee in administrative costs
  • PEO clients were 16% more likely to report an increase in profitability compared to businesses not using a PEO
  • PEO clients grow 7-9% faster than other comparable businesses
  • 98% of PEO clients would recommend a PEO to colleagues
PEO benefits for employees

PEOs give businesses and their employees access to Fortune 500 level benefits packages and employment amenities they would not have otherwise. A PEO can offer benefits such as 401(k) plans; health, dental, life, ancillary insurance products, employee assistance programs (EAP), travel and entertainment discounts, and much more. This directly translates to much higher job satisfaction, employee retention, and productivity. Also, having a non-biased, third party handling employee relations issues has proven to drastically reduce liability and positively impact the culture of the organization.

If you have questions about what a PEO can do for your business, give LandrumHR a call! We’re happy to talk about the impact a PEO relationship could have on your profitability and compliance. 

Sources:
2019 NAPEO business owner survey report
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Andrew Sowell

Andrew Sowell currently serves as the Regional Director of Business Development for LandrumHR. He received his degree in Business Marketing from Florida State University and has an extensive background helping business owners solve problems that impact the bottom line.  His passion is consulting with business owners and highlighting areas where the company can save money, increase profits, improve employee engagement, and protect the business from compliance issues.

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