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What Is a PEO (Professional Employer Organization)?

If you own a small- or medium-sized business, a professional employer organization (PEO) may be able to help you achieve your growth potential. Read further to learn more about PEOs, what they do and responsibilities, benefits and criteria for hiring one to help your business.

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What is a PEO?

A PEO is a type of organization that provides staffing or HR management solutions to small- and medium-sized businesses.

The role and purpose of a PEO

Some of the roles and responsibilities of a PEO may include the following:

HR services

PEOs typically offer a range of HR services relating to staffing and recruiting, employee benefits, compensation and retirement plans. Depending on your needs, you could enlist a PEO to help you navigate one or more of these areas.

Payroll services

A PEO can take on the role of payroll services for your employees. They can set up pay periods or payment methods (like direct deposit or paper checks) and even make sure that your payment methods and amounts comply with state and federal employment laws.

Employee benefits

If you own a small- or medium-sized business, you might not know exactly how to set up a benefits program for your employees or what types of benefits you qualify for. A PEO can pair your company with insurance providers and create a benefits program equipped with PTO, sick leave, maternity/paternity leave or healthcare benefits.

Taxation services

PEOs can complete tax-related tasks to help make sure your company complies with taxation laws. This could include duties like filing company taxes and employee tax returns.

Safety/risk and legal services

PEOs might offer a wide range of risk and compliance services to ensure that your company complies with worker compensation laws. They can also ensure that your company adheres to state laws and regulations to prevent legal action and provide representation in the event of a lawsuit.

International employment services

If you plan to hire contracted, temporary or permanent positions with professionals from other countries, PEOs can help provide visa consulting and immigration information to those individuals. They can help your company understand and comply with state and federal immigration laws while also maintaining top-tier talent.

Business planning and research

Some PEOs offer market analysis and business growth services to help you achieve your business goals. They do this by completing research for you about market trends and industry competitors. This could be helpful if you don’t have an in-house marketing department.

Benefits of hiring a PEO

Some benefits of hiring a PEO for your business include the following:

  • Gives you more time to focus on other business aspects:By allowing a professional organization to handle specific aspects of your business relating to HR and employment services, you can focus on other areas of your business like product launches, community outreach or financial planning.
  • Helps ensure your business acts in accordance with laws and regulations:As a business owner, it might be difficult to understand certain laws and regulations and how they apply to you. PEOs can help make sure your business complies with any applicable laws.
  • Provides access to quality HR expertise:If you operate a sole proprietorship or a small business, you may not have the budget to hire HR professionals on a permanent basis. PEOs can provide you with the HR services you need for however long you need them.
  • Helps reduce business costs:Because PEOs are knowledgeable about laws and regulations, and understand how to evaluate and hire top-tier talent, you can potentially save on operational costs relating to legal matters and employee turnover rates.

How to know if a PEO is right for your business

Consider following these steps to help you determine whether to hire a PEO:

1. Determine if you have the budget to hire an on-site HR department

According toClear Employment Services, the cost of hiring a PEO is often less expensive than hiring staff for your own HR department. This could be because you don’t have to pay the individual salaries, taxes and employee benefits for the HR professionals since a PEO is its own entity. Therefore, if you have limited resources to put toward employment for HR operations, hiring a PEO service could be a cost-effective way to maintain essential business operations.

2. Think about the types of benefits you’d like to offer

If you want to give your employees a diverse package of benefits that include healthcare, paid leave and other perks, then hiring a PEO could be beneficial because they may have access to a wide variety of packages and could provide your company with benefits that you otherwise might not be eligible for.

3. Project growth plans and expansion opportunities

If you plan to expand the size of your company, products and services or business locations, PEOs can provide you with consistent HR services as your company evolves, which can help ensure that you hire talented individuals and offer the best benefits to keep them at your company.

4. Consider state and federal tax burdens

If you’re a small business owner with limited knowledge of state and federal taxation, a PEO could be a helpful asset to your company. PEOs can even complete tax documents and other tax-related services for you so you don’t have to use your time or resources to work on them.

5. Estimate employment needs to operate your business

PEOs can help you hire talented employees for any job position. They can recruit, interview and onboard new employees for you to help ensure that any new employees are qualified and ready to contribute to your company’s success.

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