Supercharging Your HR: How PEOs Can Help SMBs Grow
Glen Wilson
Chief People Officer & Co-Founder, Kustom HR | Fractional HR Consultant | Driving value for companies through human interaction, operational excellence & customized solutions
HR is one of the most important functions in any business, but not every company has the resources necessary to handle all of their HR needs. In situations like this, companies can be well-served by forming a partnership with a professional employer organization, or PEO. These specialized outsourcing firms can act as co-employers, managing a wide array of HR responsibilities while helping clients grow their businesses and save money.
But what exactly does a PEO do, and how do they help companies succeed?
What is a PEO?
A professional employer organization (PEO) is a form of full-service human resource outsourcing. Their primary role is managing various HR services for businesses via a co-employment relationship. In this arrangement, the PEO acts as the employer of record and can relieve businesses of various HR and administrative tasks . PEOs often help with the following:
Working with a PEO enables companies to direct their focus on core business operations instead of on time-consuming HR functions. However, while PEOs are recognized as employers of record and can handle HR administration, they aren’t granted complete control over an organization . A PEO cannot make independent decisions regarding a business they are working with, nor can they handle other functions like marketing, sales, or product distribution. Additionally, while they manage many HR-related functions, they cannot dictate pay rates, hours, or schedules.
Who Uses PEOs?
There are no limits to what types of businesses can hire a PEO, regardless of their industry or size. That said, small- and medium-sized businesses (SMBs) with roughly 5-150 people benefit most from a PEO’s services . These businesses are big enough that they have time-consuming HR functions that must be tended to but they also lack the resources and expertise necessary to manage everything themselves. SMBs often turn to PEOs for support with critical and strategic HR management so they can focus on their core competencies. This, in turn, can position smaller businesses for future growth.
Why a PEO?
Depending on an organization’s demographics and location, PEOs can offer access to affordable employee benefits compared to what is available on the open market. The open market refers to purchasing benefits directly from an insurance carrier such as UnitedHealthcare, Horizon, Cigna, etc.
More importantly, a PEO provides access to tools that help streamline and automate processes unavailable to some companies. For example, it can be difficult for small employers to get access to online enrollment. However, working with a PEO can provide benefits to help businesses grow.
How PEOs Can Help Businesses Grow
A PEO offers a wide range of HR functions and a variety of other benefits as well. The most obvious benefits stem from the PEO’s HR expertise: these firms are run by HR specialists, so you can rest assured that all HR duties are handled correctly. They can also help organizations navigate complicated employment laws and regulations, addressing potential legal risks. By handling these complex HR functions, PEOs also save businesses valuable time by reducing administrative workloads, allowing top leadership to focus on tasks more directly related to the company’s business and services.
Another major area where PEOs are beneficial is that they can grant companies various opportunities to save money. By their nature as co-employers, PEOs offer several cost-saving advantages that might not otherwise be available. For one, PEOs don’t just have one client business, but several. This allows PEOs to offer competitive pricing for HR services and lower hiring overhead costs. PEOs can even pool their total number of workers to access more robust employee benefits, including Fortune 500-level benefits.
Partnering with a PEO is an important decision that shouldn’t be taken lightly. That said, a partnership with a good PEO can be highly beneficial if you’re a small—or medium-sized business looking to save money and expand your horizons. At Kustom HR , we offer fractional HR services, helping SMBs secure the employee benefits that best match their needs. So, if you’re interested in forming a partnership with a PEO, contact us today!