A PEO is more commonly known as a Professional Employment Organization. A PEO manages all the administrative aspects of Human Resources through an outsourced business model. Professional Employer Organizations are a full-size, full-service, Fortune 500 style HR department for small and medium sized businesses. PEO’s manage the administrative burden of all HR related functions including payroll, tax management, employee benefits and retirement plans, labor law compliance, and safety & risk management. These functions can be very expensive and time consuming for small to mid-size businesses, and certainly a distraction from the core business and competencies of the organization’s leadership.
A PEO allows business owners and managers to be the expert in their line of business, rather than being in the business of human resource management. As one of our client’s describes it, ‘we are able to focus on the goals and operations of our business, and the relationship with the employee while deferring all of the messy administrative tasks to the HR experts”.
The PEO model allows for larger market buying power through economies of scale for items such as employee benefits and workers’ compensation insurance. By being a large sized business made up of many small and medium sized businesses, PEO’s allow their clients to lower their labor costs through these savings. The National Association of Professional Employment Organizations research indicates that business that use a PEO experience an average savings of $450 per employee verses managing HR in-house, a 21% savings. Companies using a PEO also experience 9% faster company growth and 12% lower employee turnover. Even more staggering, companies who use a PEO are 50% less likely to go out of business.
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By reducing corporate costs and liabilities and putting the time and effort you save back into your core competencies, your firm can concentrate on revenue generating activities and your bottom line. Let’s face it, Human Resources is a necessary part of every business, but you don’t have to handle it internally. By outsourcing this critical but non-revenue-producing aspect of your company, you can get back to doing what you do best, growing your business.