What a professional employer organization can do for your business, Pt. 1Article added by Eric Snethkamp on February 14, 2011

Eric Snethkamp

Austin , TX

Joined: November 28, 2005

My Company

Expert PEO

Over the last few years, tax, employment, safety and health insurance regulations affecting businesses have changed at an incredible pace. Regardless of whether these changes have been helpful or harmful to your business, they have had one similar effect on all business owners: uncertainty. Changes to tax laws, health care reform legislation, changes to federal safety requirements, and changes to the rules governing employee benefits are difficult, time consuming and in some cases expensive to keep up with. In fact, keeping up with the changes in any one of these areas, let alone all of them, can be a full-time job. Not keeping up with all of the changes can lead to costly mistakes. According to the IRS, one-third of all employers have been penalized for payroll tax mistakes. These penalties have totaled billions of dollars.

That being said, the increasing popularity of professional employer organizations (PEOs) should come as little surprise. But many small-to-medium sized companies have only a limited understanding of the benefits provided by working with a PEO. This six-part series of articles is designed to address many of the concerns and questions an employer may have when considering partnering with a PEO. These articles will cover the following topics:
    Part 1: PEO basics
    Part 2: Payroll and Tax Administration
    Part 3: Human Resources Services
    Part 4: Safety and Risk Management
    Part 5: Benefits Management
    Part 6: Summary and Additional Benefits
So, let’s begin with part one: PEO Basics.

A professional employer organization is a business designed to handle a majority of the human resource tasks involved in running a business with employees. For a business with, say, 10–200 employees, there may be only one or two HR staff members to manage and maintain an incredible amount of information and insure compliance with state and federal laws. A good PEO typically has a staff numbering in the hundreds, each one a professional in a specific area of human resources, safety, compliance, payroll, benefits, etc. The collective knowledge of these professionals effectively gives a business who partners with a PEO a very large and professional HR staff with years of experience.

Not only does the size and specialization of the PEO’s staff benefit its partners, the cumulative number of employees handled by a good PEO for small- and medium-sized businesses can number in the tens to hundreds of thousands. By combining hundreds of smaller companies together to make up a company totaling thousands of employees, a PEO can use this volume and buying power to buy down and/or reduce the costs of health insurance, workers’ compensation insurance, taxes, payroll services, HR services, benefits management, risk and safety management services, and a host of other services tailored to meet each client’s needs.

The goals of using a PEO boil down to increasing profitability, and reducing exposure to fines, risks and penalties. Doing so provides a well-rounded and efficient workplace, therefore saving a business money while providing its employees with the kind of offerings that attract and keep the best talent.
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