Outsourcing HR - Advantages of PEOs For Employers

Size does Matter:Companies that benefit most from using a PEO have anywhere from 10-100 employees. There are a few reasons why.· When a company has less than 100 employees, hiring a full-time, competent HR professional can be too costly to justify. Most PEOs employ HR professionals who are certified by the society for Human Resource management, and many with a Master's Degree. The cost: $60-$110k per year.· When a company has more than 100 employees, they begin entering the range where economies of sale(savings achieved by producing or buying large quantities of an item)work in their favor when purchasing health and worker's comp insurance.· When a company has less than 10 employees, they will struggle finding a PEO that will accept them into their medical plan.· If a company has less than 10 employees, and they DO get accepted into a PEO's medical plan, the cost savings provided via medical insurance doesn't have a profound effect on offsetting the PEO's fees.· When a company has less than 10 employees, Human Resources is not a large burden to deal with.White Collar Companies:White collar industries such as IT, professional services, and financial services usually must attract highly skilled employees, to do this they must compete with huge corporations that provide structured career paths, and great benefit packages.Professional Employer Organizations provide a great solution for this challenge; they will provide a benefit package comparable to that of a Fortune-500 firm, and they provide HR support that allows a small business to organize its employees' career paths in the same manner.We also find that with high-growth companies, they are simply moving too fast to sidetrack themselves with the administrative burden of managing HR issues in a manner that keeps them in compliance, and also allows them to attract top talent.Blue Collar Companies:In low-skill orientated blue collar businesses, attracting top talent is not the same priority it is in white collar companies. However, semi to high-skill blue collar companies have to compete for talent with unions, especially if part of the work force is already unionized. For this reason again, PEO benefit packages provide a great solution.Workers Compensation Insurance is usually a high cost item in blue collar industries that have riskier occupations, more important is how costly an accident in the workplace will be for the company's workers comp experience rating, which determines future premium amounts. Through coemploymenta PEO provides insulation against future premium increases should an accident happen. More importantly, the PEO will provide risk management solutions to safeguard the company from having a worker's comp claim in the first place. If an accident does happen they will fight all workers comp claims in court to prevent fraudulent claims, which are more prevalent in high risk occupations.Seasonal Companies:Seasonal industries with large fluctuations in the workforce benefit greatly from Professional Employer Organizations. This is largely due to the stability PEOs provide as far as state unemployment taxes.PEOs make periods with voluminous new hires or terminations very easy. They offer new hire support; including services such as job posting discounts, employee enrollment kits, background checks, drug screens, etc. For terminations, the most important facet is that PEOs will help companies do it in a manner which is in compliance with all regulations.Multi-State Employers: Small companies that operate with employees in multiple states or of those that can benefits the most from using a Professional Employer Organization. PEO's allow a company to seamlessly hire employees in various states without additional administrative burden. Here are a few reasons additional reasons why:· Each state has their own set of employment laws to comply with (example for CA, example for NY)· You must file for a state unemployment ID in each state· You must find worker's comp insurance in each state· Setting up a benefit package, complete with supplemental benefits, across state borders created tremendous administrative burdenA multi-state structure may limit the amount of PEOs you should consider in the shopping process; as many regionally based PEOs are not competitive with multi-state benefit plans, additionally they may not be accustomed to various state regulations.LLC's: Limited Liability Corporation is a popular structure in law firms, medical practices, or other companies with multiple owners/partners. This structure yields various advantages; however one of the drawbacks is that LLC partners can't be W-2 employees of the LLC.If partners are not employees, they're not entitled to unemployment benefits, nor can they participate in company medical insurance plans. Often LLC partners purchase health insurance individually, which is normally more expensive.Professional Employer Organizations offer a unique solution. Through coemployment, an LLC member can be a W-2 employee of the PEO without being an employee of the LLC. Often partners take a minimal salary from the PEO, enough so that they qualify to participate in company benefits, but the smaller the better in order to keep tax burdens low.