Managing payroll, benefits, compliance, and other HR responsibilities is a common headache for small business owners. That’s why partnering with professional employer organizations, or PEOs, has become such a popular strategy for small to medium-sized businesses (SMBs) in recent years.
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PEOs specialize in helping business owners oversee the myriad of HR-related tasks that are part and parcel of owning a small business. Partnering with a PEO, therefore, is a strategy that can help your business potentially save huge amounts of time, money, and resources.
In this article, we’ll outline some of the major pros and cons of entering into a co-employment agreement, as well as some tips that can help you to decide whether or not teaming up with a PEO is the right next step for your business.
PEO Pros and Cons
Here are the most important pros and cons to consider before you decide to team up with a PEO:
Less worrying about your business’ HR-related tasks. The most notable benefit of working with a PEO is that they handle certain administrative HR tasks, including processing payroll and withholding, remitting, and reporting payroll taxes. This will ultimately leave you with much more time each week to focus on the day-to-day operations of running your business.
Expert compliance support. Complying with all the applicable federal, state, and local employment requirements is one of the biggest challenges that small business owners face. A PEO will help you manage employment-related compliance and stay updated on important changes in labor and employment regulations that may impact your business.
Strengthen your workforce. Delegating your HR responsibilities to a PEO can help your employees — and your business — to thrive over the long term. According to the National Association of Professional Employment Organizations (NAPEO), SMBs that partner with PEOs “grow 7-9% faster, have 10-14% lower employee turnover, and are 50% less likely to go out of business.”
Access to competitive insurance benefits. Entering into a co-employment agreement with a PEO means that your employees get access to health coverage at the same rates that large corporations enjoy.
Not all PEOs are built the same. When exploring your PEO options, keep an eye out for these potential downsides, and prioritize the services and features that are important to you.
A confusing pricing model. Some PEOs don't provide a straightforward and intuitive pricing model, which can lead to frustration and confusion for small business owners. Some may charge for each service or feature à la carte, while others may bundle things together into various tiers or packages. When shopping for a PEO, look for a transparent pricing model.
Customer service that doesn't stack up. Payroll, compliance, and HR topics can be complicated. Will your PEO be there to answer your questions, even if you need help on a Saturday? Some won't. If expert support is a priority for you, look for a PEO that offers personalized service around the clock, in multiple channels. Some, like Justworks, offer support for employees as well.
Frustrating software. A tool isn't very helpful if it's not easy to use. Unfortunately, some PEOs don't offer an intuitive user experience, which can lead to frustration for you and your team. It's always a good idea to get a demo of any software you're considering, and see whether it offers a tech-forward solution that will actually save you time, rather than bog you down.
How to Decide if a PEO is Right for You
If you’re managing a business with a small HR team (or if you're a one-person HR department) that’s struggling to streamline their recruiting and hiring processes, manage payroll, or distribute employee benefits, partnering with a PEO can be a lifesaver. Not only will it help you to manage many of your business’ administrative HR needs, but it will also allow you to commit more of your time and energy towards running your business. Similarly, if you’re a part of a growing business that’s struggling to find better benefits packages or navigate the complexities of remote hiring, PEOs can be a huge help.
Choosing the Right PEO for Your Business
If you’ve decided to partner with a PEO, your next step will be to find an organization that will be able to meet the specific needs of your business.
At Justworks, we offer an all-in-one PEO platform that’s designed to remove the friction from your business’ benefits, compliance, payroll, and other essential HR tasks. We also offer round-the-clock support and scheduled time with consultants to answer your HR questions and help you in creating a great place to work.
Check out Justworks online today to learn more about our PEO platform and how it can help your business grow confidently into the future!
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.