Professional Employer Organizations: Pros and Cons

Professional employer organizations (PEOs) operate as an extension of your business and are often referred to as a co-employment or joint employment. Professional employer organizations can execute all your HR responsibilities without the cost of hiring a full-time person. Below are some pros and cons to consider if you are thinking of hiring a PEO.

Professional employer organizations (PEOs) operate as an extension of your business and are often referred to as a co-employment or joint employment. Professional employer organizations can execute all your HR responsibilities without the cost of hiring a full-time person. Below are some pros and cons to consider if you are thinking of hiring a PEO.

Pros:

  • Focus on Your Core Business. Payroll is a top administrative burden for small businesses who waste hours on payroll processing. These hours should be dedicated to managing employees, clients, or other essential business operations. Companies who hire PEOs free up much needed time.
  • Better Oversight. The rules and laws on payroll, benefits, tax and HR compliance can be overwhelming. This is especially true for small businesses who cannot possibly keep up with every compliance detail. PEOs specialize in these areas and stay up to date on every change in payroll and HR rules.
  • Liability Protection. Most PEOs have employment liability insurance in case a former employee sues the company for discrimination or wrongful termination, so you don’t have to tap your insurance and risk higher premiums.
  • Cost savings, better benefits. Since PEOs represent a wide network of business, they can often negotiate better benefits packages and lower insurance costs than businesses who try to go it alone.

Cons:

  • Internal Controls. As burdensome as HR administration can be, small business owners may have difficulty letting go of these duties if they are used to being deeply involved in every aspect of their business.
  • Change. PEOs are always negotiating better healthcare plans. PEOs may change health care providers regularly and cause frustration among employees. While businesses can always opt to seek health care plans outside of the PEO, StaffScapes balances costs with consistency to minimize inconveniences to our clients when considering plan changes.
  • Impersonal. Companies that use a PEO can’t always provide the same level of personalized service to their employees. StaffScapes works hard to be responsive and treats your employees as our own.

Considering PEO Services?

Small businesses with less than 75 employees tend to benefit most from PEOs. Larger companies rely on PEOs to supplement their internal HR staff. Contact us to learn more about how StaffScapes can alleviate the HR administration for your business.

Written By: Jim Thibodeau