A guide to proper management of your business

A PEO: your first step towards effective administration

A Professional Employer Organization (PEO) is a professional company that provides an outsourcing service through which an employer can contract out employee management responsibilities, such as employee benefits, payroll and workers' reimbursement, recruiting, risk handling, training and development. Thus a PEO is of great use to both employee as well as the employer. One of the basic functions of a PEO is to safeguard workers' compensation insurance coverage at a lower cost than customer companies can get per person. The PEO hires a client company's employees and becomes their employer of record for tax purposes and insurance purposes. This method is known as joint employment or co-employment.

In the practice of co-employment, the PEO becomes the manager of record for tax purposes, filing paperwork under its own tax identification numbers. The customer company is still the one who directs the employees in their day-to-day actions and routine. Fee charged by a PEO for their service for taking over the human resources and payroll functions of the client company varies from 3 to 15% of total gross payroll.

Want to increase your workforce?

The process of hiring temporary workers to increase the workforce of a company without putting much undue pressure of increased cost is also popularly known as employee leasing. A PEO plays a crucial role in this process. It acts as an interface between the employer and the employee. It benefits both the employer and the employee. On one hand where the employer gets more workforce at a much lower cost, as the PEO arranges insurance and other benefits at lower cost due to bulk negotiation. This increases the client company’s profit directly. On the other hand a worker enjoys better wages, superior job security and other benefits.

Thus one can easily use HR outsourcing services for to advantageously improve the quality of his personnel. Actually HR functions as a business partner and focuses on the basic and fundamental human resource activities that matter the most for business to flourish.

Advantages of hiring a PEO

Time and cost efficient

Outsourcing an administrative HR can help you reduce small scale paperwork for your company to maintain payroll. It not only provides a company much needed time for other administrative jobs, but also helps in reducing the cost to the company.

Reduces your legal responsibilities

A Professional Employer Organization reduces a lot of time and human resources that would be used to arrange payroll and manage benefits plans. It also helps you reduce legal liabilities of an employer but simultaneously insures safety and security of your employees.

Devises employee benefit strategies

A PEO provides better and lucrative employee benefit schemes at a price very reasonable and attractive for the employers.

Supervising the workforce

The outsourced employees work for the client company but still the client company need not take much of a headache to supervise them, as most of the PEOs can do this work for you.

Thus a PEO is therefore very useful not only for large MNCs but also for small and mid-sized businesses and helps them enhance their business drastically.