The sleepless nights of a small business owner are often caused by the stress of the HR, or Human Resources, requirements and challenges of the business.  Recently, a great resource for collaboration in the Human Resources space has been the evolution of PEOs or Professional Employer Organizations.  PEOs exist to provide peace of mind for the small business owner minimizing those restless nights and any concern associated with the Human Resources aspects of the business. These organizations act as a strategic business partner to the company.  They provide the ability to automate mundane processes using technology and allow a small business to consolidate all of a company’s operational data and integrate it into one central location.  

Small businesses require the same level of strategy, the same level of leadership and the same level of talent as corporate business in order to be competitively successful.  While they may play in a smaller arena, their strategic game has to show up just as big, if not bigger than their larger competition.  To do that, their operational processes including those relative to Human Resources, expense management and talent strategy have to be even more efficient to protect flow through from the top line to the bottom line.  That’s where the advantage of a PEO comes in… 

 The PEO Advantage:

Convenience

  • PEOs can provide the companies they serve with an online human resource information system, or HRIS. This system allows convenient and simple access to employee time and attendance information, reporting tools, employee records, paid time off requests and approval, hiring and termination processes, performance reviews, and any pertinent benefits information.
  • PEOs offer convenience by providing services that alleviate the responsibilities of administrative tasks from Human Resources professionals. The PEO partnership is able to take on responsibility for payroll services including processing, withholdings, and wage garnishments. The PEO can print paychecks, handle direct deposit and offer pay cards for employees.  The partnership also gives the small business time back by eliminating the company’s need to create an employee benefits program by offering a diverse array of benefits packages for the company’s employees. It enables a small business to spend less time on the tedious necessities and spend more time on revenue generating aspects of the business. 

Corporate Sized Benefits at Small Business Rates

  • PEOs have the ability to pool together several businesses as a means to negotiate lower cost for benefits per employee across the companies they service.
  • 40% of businesses that partner with a PEO are able to upgrade their benefits package.
  • Competitive benefit packages may include health, dental, vision, employee assistance programs, flexible spending accounts, dependent spending accounts, short and long-term disability, life insurance, 401(k) retirement plans, tuition reimbursement, etc.

Improved Employee Attraction and Retention of Top Talent

  • When a potential employee is looking for the next place to call home, professionally speaking, they are most often looking for a company with financial stability, health insurance and high demand benefits, the provision of retirement security, and a safe working environment.
  • PEOs allow a small business to offer better benefit packages with more option. These options enable small organizations to compete with larger organizations for higher quality talent and provides additional incentive relative to retention.  An employee may be less likely to leave a smaller organization to work for a Fortune 500 company if the benefits are not a differentiator.
  • In some cases, a PEO can also offer employee and management training programs. Investment in an employee’s development increases their loyalty and commitment towards the company with which they work.  

Cost Savings and Minimized Risk

  • Improved acquisition of talent and less turnover usually suggests a decrease in costs overall including cost of hire and background checks, cost of training, and costs associated with the level of execution of a less experienced hire versus a more qualified one.
  • A PEO has the purchasing power of a multitude of businesses which gives it the ability to provide its services at a reasonable cost. Depending on the PEO a company partners with, they may have the option to provide discounts on insurance, airfare, and hotel for any travel needs of the company.
  • One of the ways PEOs enable cost savings is by keeping the business compliant with constantly changing Human Resource and Employment Law to minimize risk of lawsuits and the cost of non-compliance. Performance management and subsequently terminations require practices that are fair, consistent, considerate of precedent, and abide by company policies and state laws.  PEOs can function as a check and balance to ensure that the practices meet legal requirements and would stand up in a court of law if challenged.  On hand compliance specialists provide expertise for small businesses in any location with varying degrees of strictness within the law.  This includes support in a more lenient state like Texas with “employment-at-will” laws that allow an employee or employer to end the employment relationship without notice or reason, to support in a state like California with strict employment laws with significant protection being provided to the employee.   They can partner with a small business in a mitigation process if necessary as well. 

The moral of the story is that PEO partnership can provide several great advantages to any small business owner and should not be perceived as a threat to job security for HR professionals, as a relinquishment of power, or as a cause of those restless nights.  For clarity, what a PEO doesn’t do is control your business, replace your current HR team, cause disruption, or create a distraction to your workplace.

 The PEO’s priority it to provide collaboration, minimize legal risk, reduce costs, and make talent acquisition and retention more effective and simplified.  These provisions give a small business owner the confidence and the permission to shift his/her focus to additional strategies.  As a bonus, the provisions also help small business owners to maximize their competitive edge.  PEO partnership should be viewed as something that empowers a small company to both drive additional engagement with potential and current employees, and to be directly engaged with top line revenue and margin producing activities in efforts to improve net operating profit and growth of their business.  

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