Advantages of Starting PEO Services in the New Year

Posted December 15, 2014 by Layne Davlin
advantages of starting PEO Service

How do the advantages of starting PEO service contracts compare to the alternatives?

The advantages of starting PEO service contracts can be hard to see if you don’t fully understand the alternatives. Outsourcing, obviously, saves time on equipment, training and employee retention, but if you don’t play your cards right, you won’t save as much as you’re expecting. Here are the ways a professional employer organization, or PEO, differs from an administrative services organization, or ASO, and the impact those differences have on your bottom line.

Beef-up Your Bottom Line

According to the Society for Human Resource Management, companies who hired out to a PEO were able to open up more productive hours for business owners and top-rated managers while improving compliance. This improved overall profits on two fronts. First, more time was dedicated to money-earning tasks. Second, less money was lost through senseless violations. However, ASOs largely had the same benefits. What benefits were exclusive to PEOs?

Rid Yourself of Regulatory Risk

When you work with a PEO, you “co-employ” workers. The PEO runs all of the HR tasks necessary, including cutting checks, in their own name. When it comes to issues of practicality—what your team is working on during the day, who is hired and who is fired and other essential employer tasks—you make the decisions. However, if there’s ever a matter of HR compliance, the PEO carries the responsibility for it.

This is a major contrast to the way ASOs operate. While they also take over your HR tasks, with ASOs you’re held responsible if important filing dates are missed or if someone was passed over for a job based on a protected characteristic. Your business is the one with the black eye, and the big fine. In this way, a PEO can save a company significant amounts of money, because they not only have the experience needed to do these jobs right, they’re also confident enough to stand behind their work with their own money.

Buy Benefits in Bulk

As your co-employer, a PEO is able to access healthcare, life insurance and workman’s compensation coverage at much lower rates than most small and medium-sized businesses can secure on their own. ASOs may consult a business on affordable or high-quality policies, but because a PEO is representing so many potential policy holders, they can often negotiate lower rates. It’s not just an issue of cost, either. Larger companies operate by different rules, as well, which leaves more of their capital available for money earning opportunities throughout the year.

One good example is the payment of workman’s compensation. Many small businesses are expected to estimate their yearly premiums and pay them all upfront at the start of the year. At the end of the year, policy costs and payments are tallied. If you’ve hired extra people through the year, you could wind up owing money. In contrast, with the right PEO, you can enroll in coverage that charges actual expenses on a monthly or quarterly basis.

Start off the New Year on the right foot by outsourcing complex HR tasks to the experts. Click to get all the latest and most reliable information on the advantages of starting PEO service contracts by subscribing to our free newsletter.