Professional Employer Organizations (PEOs) are a trending topic in the employee benefit arena. PEOs can bring efficiency and ease to some businesses, but partnering with a PEO is not a blanket solution for all organizations. It’s important to analyze all aspects of a PEO before making a transition.
In simple terms, a PEO is a co-employer that assumes responsibility for many of a business's functions, like HR tasks, payroll, benefit administration, and more. After entering a PEO partnership, a businesses’ employees are “leased” back, and the employee and PEO share employment-related liability. If an ex-employee sues, both the PEO and the individual business will be named in the lawsuit.
Outsourcing traditionally time-consuming operational tasks grants businesses more time to focus on their core operations. Some companies find utilizing a PEO partnership financially advantageous over building an in-house HR team. However, a PEO relationship is not a complete dismissal of all HR duties. Many HR tasks can be handled by a PEO, but companies still need to appoint a liaison to work with the PEO. When it comes to financial analysis, it’s important to pay attention to the fee structure. Fees vary depending on the PEO. Perceived savings on health insurance and workers’ compensation rates may be offset or even outweighed by fees and lost tax advantages.
The transition to a PEO can be bumpy if upfront planning is not done. Laying the groundwork for a seamless switchover will require action on the employer’s part. This includes gathering all necessary information, forms and HR data, thoroughly reviewing contract agreements and educating employees on the changes that will impact them. Attention should also be given to the liabilities that can come with data migration, and how data integrity will be upheld from both parties. Employers should also ensure their PEO partner upholds stringent data security practices, as their employees’ data could be at risk if not.
If you’re considering a move to or from a PEO refer to an expert you can trust. Bukaty Companies can conduct the unbiased analysis you need to identify which solutions fit your business needs.