Often times, business owners or HR managers are hesitant to consider a PEO because they wonder if their company is even large enough to benefit from PEO services.
While a PEO can benefit most companies, the average company using a PEO has anywhere between 10 and 75 employees. Since that is a pretty large range that encompasses many types of unique businesses, employee size is not always the best indicator of whether or not a company could benefit from a PEO relationship.
Many different factors can determine if working with a PEO is a good idea for your company. Below are a few indicators that can help you determine whether it would be a good idea for your company to explore using a PEO.
Is Your Company Growing? Or Would You Like Your Company to Grow?
As companies grow, they begin to experience new hurdles as they hire more employees and are required to comply with more laws. Employee handbooks, policies and procedures manuals, and new hire paperwork are just some of the struggles of growing companies. In addition, responding to unemployment claims can be very confusing, time consuming, and often end up with a phone call to an attorney to figure out how to respond properly. Growth leads to opportunities for small businesses but can also mean a lot of behind the scenes work for owners and key managers.
A PEO can help with some or all of the transactional human resources activities with which growing businesses struggle. From providing employee handbooks, to assisting in the hiring and firing process, and then responding to claims that may be filed against the company by former employees, a PEO can remove the burden of all that paperwork and worry which then allows companies to continue to grow at their desired pace.
Is Cash Flow Important to Your Company?
Workers’ compensation insurance can seem extremely confusing and expensive, and is usually required depending on how many employees a company has. Typically, when you purchase a workers’ compensation policy through an insurance agent, you are asked to estimate your payroll at the beginning of the policy year, pay a down payment along with monthly installments, go through an audit process, and then pay an audit premium at the end of your policy year (which usually coincides with next year’s down payment). In that arrangement, there are certain times of year when companies have to write large checks that can hamper cash flow.
Some PEOs have a master workers’ compensation plan. If your company is eligible to participate, you may be able to find that purchasing your workers’ compensation coverage from the PEO helps increase your cash flow. A PEO will bill your workers’ compensation premiums in real-time, based on your payroll cycle, without having to make a down payment or go through an audit, which should help keep your cash flowing throughout the year.
Do Your Employees Have a Risk of Injury On the Job?
The riskier the job, the higher the workers’ compensation premium. You can help lower those premiums by developing safety programs, hiring a safety manager, offering training opportunities to your employees and managers and always having an up-to-date safety manual. If your insurance agency or carrier does not offer assistance in those areas, then you might have to hire a third party safety trainer or consultant to help keep your employees and job sites safe.
Some PEOs have Certified Risk Managers on staff to help clients keep employees safe on the job and take more control of their workers’ compensation premiums. Those risk managers can help with safety procedures and manuals, develop a Drug Free Workplace Program as well as handle claims when they arise.
Do You Have An Employee Benefits Program? Or Would You Like One In The Future?
Identifying, hiring and retaining talented employees is tough for every company. One of the biggest drivers for hiring and retaining sought-after employees is an employee benefits program. Employee benefits can include a wide variety of components such as health insurance, 401(k) retirement plan, an Employee Assistance Program, or even discounted movie tickets! One of the toughest puzzles for business owners and managers is trying to piece together a benefits package that is affordable for the company, attractive to employees and as hassle-free as possible.
Working with a PEO may solve that puzzle by providing some, or all, of those services at more affordable rates than might be available on the open market. In addition, if a company procures employee benefits through a PEO, the PEO will handle the administration of those benefits, which removes the burden and liability from their clients.
Do You Process Your Own Payroll?
Processing your own payroll can eat up large chunks of time and energy each payroll period and carries its own fiduciary liabilities. If you have additional payroll complications such as pre-tax benefits deductions, wage garnishments, commissions, or tax filings in multiple states, processing payroll in-house can be a full-time job in and of itself.
Much like using a third party payroll processor, a PEO will handle all aspects of payroll while removing the burden of time, energy and liability from clients. In addition, PEOs typically have time and attendance software and a Human Resource Information System (HRIS) for their clients to use.
If you read the questions above and answered “No” to all of them, a PEO might not be an immediate need for your company. Odds are that in the future, some of those answers will change and, at that time, it may be beneficial for you to talk with a PEO that you trust about the services they can provide.
However, if you answered “Yes” to any of the questions above, then no matter how many employees your company has, it may be a good idea to engage with a PEO that you feel comfortable with to find out if their services can help your company.
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