What’s a PEO, and why should I use one?

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What’s a PEO, and why should I use one?

A Professional Employer Organisation (PEO) is one of the best-kept secrets of many successful small businesses. Essentially, these bodies handle all your HR needs, including payroll and administration, employee health and retirement benefits, employers’ liability insurance, HMRC compliance issues and even employee training.

All you’re left to do is hire, supervise and promote (or fire) your employees as needed. Of course, there is a cost for contracting out your HR department, but consider this list of positives:.

  • PEOs manage thousands of employees and can therefore purchase insurance and benefit plans at a significant savings or allow you to offer higher-quality plans to attract and retain skilled employees.
  • Experienced professionals in HR, benefits, payroll, risk management and other aspects of employee administration are on the job. Want to institute a pension plan or flexible spending account? A PEO will do it. No need for you to figure it out yourself.
  • A PEO will provide HR manuals for your employees, and the policies and procedures will be maintained in compliance with ever-changing state and laws and regulations.
  • A PEO will help with employment-related regulatory compliance – a huge advantage that can be worth more to your business than the money saved on benefits costs.
  • A PEO can provide effective management and access to payroll records, benefits, personnel data, holiday and sick-time accruals and specialised reports.
  • If you have an HR-related employee claim, such as a discrimination allegation, a PEO will know what to do and will take the lead on managing the claim process.

Ordinarily the savings on group health and benefit plans alone will more or less outweigh the cost of hiring a PEO to tackle these duties. But don’t forget the peace of mind that a PEO offers.

As for knowing when your business could use a PEO, it’s the moment your accounting department asks for a dedicated HR person (even a part-time one) to handle all the paperwork. The sooner they can offload that work to someone who really knows what they’re doing and return to managing your balance sheet, the better.

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