In today’s business world, companies are outsourcing their payroll and associated administrative tasks to PEO organizations that specialize in these time-consuming and complicated processes. With the increasing complexity of these functions, many small business owners see the obvious benefit of allowing a specialty organization handle this area of their business. What may not be as clear to them are the differences between a PEO company (Professional Employer Organization) and a payroll company.
On the surface, PEO and payroll companies have many similarities. However, there is one very simple way to describe their differences: payroll companies only manage the various processes of employee payment, while a PEO company becomes more of a business partner that offers a variety of human resource and administrative services.
PEO Services for Small Businesses
Most entrepreneurs want to focus on their core business. They neither have the time nor the expertise to handle benefits administration, retirement plans, workers’ compensation and other complex human resource functions. That’s where PEO services come in. PEO companies can either provide support to your human resource department as needed, or you can outsource such responsibilities altogether.
Most established PEO companies provide training to the management staff of any small company as well. Seemingly simple administrative duties such as hiring and termination practices, setting expectations for workers, and using specific words to communicate on-the-job needs can cause lawsuits and other unwanted hassles if handled incorrectly. PEO companies have the experience and know-how to help small businesses avoid such pitfalls, whereas a payroll company has no such functionality.
Reduce the Cost of Labor by Outsourcing to a PEO Company
PEO companies can help reduce labor costs for small and medium size businesses in the following areas:
- Employment Taxes – State Unemployment Tax Act (SUTA) rates are based on the employer’s specific claims history. For example, one employee that is let go and collects unemployment for several months could cause a small business to have the maximum SUTA rate in that state. It will take at least 3 years with no claims to bring the rate back down. A PEO has a wider base of employees paying into the system and therefore has the ability to manage and challenge fraudulent or questionable claims.
- Workers’ Comp – Due to economies of scale, the inclusion of risk and safety management and the ability to have more creative workers’ comp insurance programs, PEO companies can provide workers’ comp coverage at rates that are more advantageous than a small business could get directly on its own.
- Employee Benefits – Economies of scale and business size, PEO companies can offer more comprehensive plan designs at more attractive prices than the typical company could secure on its own.
PEO Companies Can Help Minimize Risk and Liabilities
PEO companies will work with employers to provide detailed job descriptions and employee handbooks, which will keep unforeseen details from creating workplace conflicts. When new circumstances and tasks present themselves, the PEO can amend existing company policies to help keep the organization in compliance while minimizing risk and liabilities.
Then there is the issue of workplace safety. Depending on the type of business, there may be dozens of potential hazards. PEO companies can identify and provide solutions for these hazards. They can also handle administrative tasks associated with workplace safety, such as providing employee training and Material Data Safety Sheets.
These are but some of the many services a PEO company can provide. Whether in South Florida (Miami, Fort Lauderdale, or Palm Beach) or in the surrounding areas of New Jersey, Pennsylvania and New York schedule a free PEO or payroll analysis today. If your business is at the point where it needs more support and better processes, it’s time to contact SourceOne Partners by emailing us or calling 561-674-0748 to speak with a PEO expert today.