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It’s Time to Talk PEOs: The Pros and Cons
When choosing a solution to help manage your payroll and HR processes, you have many moving parts to consider. And it’s important to understand the benefits you’ll receive with different solutions to make the right choice for your organization, depending on its size and future goals. Many small and mid-size businesses consider an option called a Professional Employer Organization (PEO). So let’s talk about PEOs to better understand what they can provide.
What is a PEO?
A PEO is a third-party payroll and HR outsourcing firm that acts as a co-employer with your company. In other words, while you still manage and run your business’s day-to-day operations, your workers have two employers: you and the PEO. Through contractual sharing of employer responsibilities, the PEO acts as the administrative employer and your organization acts as the work-site employer. This means the PEO provides and manages human resource services like your organization’s payroll processing, benefits, insurance, and workers’ compensation.
Why Might a Company Choose a PEO?
There are several reasons why this co-employment relationship might be beneficial for a company, but these benefits are oftentimes contingent upon the size of your business. Many small and mid-size businesses consider PEOs because they are over-stressed and under-staffed with managing HR tasks and compliance. But as your organization grows, it will make more sense (and save you some serious cents) to keep or transition your employee management in-house by using human capital management (HCM) technology.
If you’re considering a PEO, take the time to weigh the pros and cons and determine what best fits your needs:
Pro: Shared Liability
Con: Relinquishing Control
Something else to consider is the impact a PEO could have on your company culture. Think about how your employees might feel knowing they have been “leased” to a PEO. Employee morale could take a major hit. Remember, happy employees are more productive employees.
2. Employee Benefits
Pro: Lower Benefit Rates
Con: Lower Quality of Benefits
3. Payroll and taxes
Pro: Outsourced Payroll Processing
Con: Compliance Not Guaranteed
Pro: The Possibility to Lower Overhead
Con: Higher Price Tag
Pro: Access to HR Services
Con: No Access to Information
With this relationship, you must contact the third party, relay the message, and wait for them to fulfill the request. This “hands-off” approach actually makes things more complicated and time-consuming.
To PEO or Not to PEO
If you’re still undecided on whether a PEO is the right fit for your business, consider the following questions:
How APS can help
APS helps organizations of all sizes and industries with their payroll processing and tax compliance needs. With a unified platform and a team of tax compliance experts in your corner, we can help make payroll and tax errors a thing of the past.
Looking to make a mid-year switch to a new payroll provider? It’s easier than you think and APS can help you along every step of the way to ensure a successful transition. For the past four years, we have ranked as a High Performer, Best Customer Support, Ease of Use, Functionality, and Product Quality by G2 Crowd. We have also been ranked the #1 software company in Louisiana, a testament to the confidence our clients have in our work.
Check out more great articles from the APS Blog covering HR, payroll, and everything in between.
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