Small business owners may be new to the world of PEOs, or professional employer organizations, but these companies have been around now for several years and changing the face of human resources management.
A PEO provides comprehensive outsourcing for all tasks and functions typically performed by an in-house human resources department. This may include employee job descriptions, benefits, payroll, insurance, and regulatory requirements.
PEOs act as a ‘co-employer’ with your company so that they share contractual obligations with your employees. Management decisions, however, remain with your company. You continue to guide the daily job duties and responsibilities of your employees while the PEO manages their benefits administration and related tasks.
According to the National Association of Professional Employer Organizations (NAPEO), small businesses that work with a PEO grow 70 to 9 percent faster, experience 10 to 14 percent less employee turnover, and are 50 percent less likely to go out of business. Although these sounds like terrific benefits for any small business owner, there are also some drawbacks to working with a PEO. Here, we discuss both the pros and cons of working with a PEO so that as a small business owner, you can make an informed choice before taking the next step and contacting PEOs.
The Benefits of Working with a PEO
There are many benefits of working with a PEO for a small business.
- Saving Time: Working with a PEO can save you considerable time. SCORE reports that 25 to 35% of a small business owner’s time is spent handling HR-related tasks, with 7 to 25% of that time alone spent on paperwork. A business owner’s time is precious and the more time that can be spent on tasks to grow a business and increase revenues, the better. Every minute spent on paperwork decreases the amount of time you can spend growing and running your business.