Professional Employer Organizations: Aiding Small Business Owners

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HR Nearshoring via a Professional Employer Organization (PEO)


One of the more interesting aspects of my move to Florida was the discovery of the concept of the PEO or Professional Employer Organization. This is a great opportunity for small business owners to "nearshore" or do HRO for their human resources functions and payroll.

Professional Employer Organizations can offer great efficiency by eliminating the transactional side of Human Resources for small and medium size business owners. While there are a number of companies in this field, both big and small, it is a concept that is not well understood by a lot of small business owners that I talk with about the concept. Reasons given for not using are often, expense, complexity, "don't need that". What many of these people don't realize is that for a very affordable fee, they gain access to Workers Compensation and Unemployment Compensation insurance, a total Human Resources support function, a payroll function, and if desired, an array of benefits to offer their employees that they would not otherwise be able to afford, including health care.

In this case, I am not just touting a concept. My spouse owns a business that has used Gevity Inc out of Bradenton, Florida for two years. It has let her spend her time doing work that makes her money, and eliminated the need for her to do non-value added work, or carry someone on staff to do it for her.

Gevity and Administaff are two of the largest players in the field. There are many others. This is a business strategy you may want to look into! For more information, please see the article below from www.hrworld.com (link attached)


What Is a PEO, and Does Your Company Need One?

By Alexandra Krasne on October 25, 2007
Rather than train someone at your office to take over the HR role or hire someone to specifically administer benefits and track payroll, why not enlist a PEO (professional employer organization) to help?

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PEOs are outside companies that businesses hire to handle administrative HR duties so you can concentrate what you do best: your job. These firms are also commonly referred to as HR outsourcers.Small- to medium-sized companies hire PEOs to handle tasks like workers'-compensation administration, payroll, tax filing, paperwork, developing employee handbooks, compliance and other related tasks typically assigned to an HR department.

What a PEO Does (and Doesn’t) Do

In smaller businesses especially, HR tasks can pile up, because the person responsible for HR is usually wearing many hats. What’s more, administering HR requires an understanding of tax law, workers'-compensation law and other areas not in most people’s repertoire. So if you’re trying to juggle your own workload, manage employees and deal with mountains of HR paperwork, a PEO can be a good way to take some work off your plate.

Instead of being hired as an employee of your company, the PEO acts a co-employer. This means that the PEO assumes responsibility for legal regulations, insurance details and tax laws while you remain in charge of your company's products or services. What’s even better is that the Internal Revenue Service (IRS) recognizes the PEO as the employer of record for federal and state taxes, as well as for workers' compensation.

In Search of a PEO

To find a PEO that’s right for your company, you should interview a few different firms, ask a lot of questions and be sure to get a list of references. There are many companies (sometimes called PEO networks) that can help you narrow down a list of potential PEOs or assist with the search. These networks also help your company ensure that the PEO it selects is legitimate and reliable.As part of your PEO search, you may need to create an RFP (request for proposal) that includes your list of requirements, benefits information and workers'- compensation history. Many of the aforementioned networks will send your RFP out to their recommended list of PEOs and return the proposals to you so you can decide which company fits your needs.

Pricing depends on a number of factors but mostly hinges on what sort of services your business requires. You can expect to pay an initial setup fee (typically a few thousand dollars), and the ongoing fee will usually be a percentage of your gross payroll. Most PEOs will perform standard services such as payroll, workers' compensation and benefits administration, but expect additional fees as you add services.