What is a PEO?
A Professional Employer Organization (PEO) provides an integrated and cost effective approach to the administration of human resources and other employee-related duties. The PEO and the client partner enter into a co-employment agreement where they share the duties and liabilities of the human resource and administrative tasks. The PEO assumes responsibility for payroll, tax administration, risk management, legal compliance, and in most situations worker’s compensation. The business maintains control of its day-to-day operations, establishing pay rates, determining policies, the hiring and terminating of employees, and just about everything else related to running the business.
Statistics about the PEO industry, according to studies by NAPEO (National Association of Professional Employer Organizations):
- 14-16% of small businesses (with 10-99 employees) use a PEO.
- There are an estimated 3.7 million American workers currently employed in a PEO arrangement.
- Compared to other businesses, PEO clients grow 7-9% faster
- Companies that use a PEO are 50% less likely to go out of business
- Companies that use a PEO have 23-32% lower turnover
Most common reasons why businesses use a PEO:
- Cost Savings: save money on insurance benefits (workers compensation and health benefits)
- Recruiting/staffing: find the talent you need to be successful
- Necessity: for businesses who seek relief from time consuming, back office tasks
- Security: for compliance with the ever-changing ACA (Affordable Care Act) Laws regarding employment
- Ability: to offer a full array of “Fortune 500 type” benefits to their employees
- Proficiency: in all HR, Benefit, and Payroll tasks and regulations