What is a broker? A broker is a person or company that brings buyers and sellers together. A medical insurance broker has access to numerous insurance companies, plans, and prices, while a stockbroker specializes in stocks and securities. In both scenarios, the broker works with their clients to select the best product(s) that meet their needs and price point. Similarly, a PEO broker brings small and medium-sized businesses (SMBs) together with professional employer organizations (PEOs). Brokers like PEO Consultants are PEO experts who have intimate knowledge of the PEOs they represent and the specific needs of their SMB clients.
Why You Should Work with a PEO Broker
With more than 900 PEOs in the United States alone, the amount of time and effort it would take for you to narrow down the selection, interview those that made the short-list, complete forms that are many times complex and lengthy, compare their services and prices and finally on-board a PEO is overwhelming.
Because a PEO broker represents many PEOs, they are quick to narrow down the field to those that meet your specific requirements at the right cost for you. With insight into which PEOs would be best for your needs and which ones to avoid, you’re immediately on track to partner with the best PEO for your business. In addition, you’ll save precious time completing paperwork. By engaging with a PEO broker, you provide information only once. The PEO broker takes it from there and will shop their short-list to find you the best services that meet your specific needs at the very best price.
What to Expect
Although all PEO brokers don’t operate the same or provide the same services, you should select a PEO broker with you every step of the way, from initial analysis and selection to implementation and ongoing support. In addition, the PEO broker should have experience and readily provide you with statistics, such as the amount of money their clients have saved in PEO costs, the number or percentage of employees that are receiving better benefits, and the average savings per client.
When it comes to the process, you should expect your PEO broker to conduct a complete analysis. This should include a consultation of your needs, including health insurance, payroll, workers’ compensation, other benefits, and premium services. The broker will then use this information to obtain offers from their PEO partners. Once the PEO broker receives the offers, they should consolidate the quotes so that you can quickly and accurately make comparisons.
Digging a Bit Deeper
Since your PEO broker is an unbiased third-party, they should provide PEO selection advice, technology differences between the PEOs that made the short-list, and always be available to discuss any concerns you may have about your PEO. Remember, the PEO broker you select is your partner and trusted adviser throughout the lifetime of the engagement. And, the best news is that their services are free to you!
Is a one-stop shop to find the best PEO right for you? Learn everything you need to know about The Pros and Cons of Hiring a Professional Employer Organization (PEO) to determine if it’s the right choice for your business.
Without question, professional employer organizations (PEOs) are the lifeblood of many small and medium-sized businesses (SMBs). In fact, a National Association of Professional Employer Organizations (NAPEO) press release announced that in the first quarter of 2020, PEOs had its highest growth rate since 2018. What may not be as obvious are the benefits of hiring a PEO to help cope with workplace challenges resulting from Covid-19.
How Covid-19 has Affected SMBs
Although SMB closures aren’t a new phenomenon, the rate at which they are closing their doors certainly is. A report by McKinsey & Company states that as a result of the coronavirus 30 million small-business jobs are vulnerable. If we break down this figure further – SMBs with less than 100 employees are more vulnerable than their larger counterparts; and the hardest hit industries are accommodations, food services, construction, retail, healthcare, and social assistance.
As we brace for the second wave of the virus, it’s estimated that 36,000 franchise small businesses won’t be in business by spring 2021. This is in addition to the nearly 33,000 SMBs that have been driven out of business as a result of Covid-19. While the news of ongoing closures and displaced employees is alarming, there is a way for SMBs to gain a foothold during these unprecedented times.
The Significance of HR During COVID-19
At the onset of the pandemic, business owners had to rethink how they could continue to run their companies, as non-essential workers transitioned from the office to working from home. Although the move to work-from-home sounds easy, businesses needed to take into consideration tools such as laptops and virtual meeting software to ensure employee productivity. In addition, there were security risk issues to contend with, as well as a host of other complexities.
For businesses that were not faring well, they were faced with laying off employees, and the HR tasks that accompany the decision to furlough employees. Decisions such as which employees to make redundant, the benefits open to the laid-off employee such as unemployment and COBRA, and assistance with outplacement services became commonplace. While necessary, these events can take a significant amount of time. For SMBs that have just a couple of HR representatives or no HR assistance, many began turning to PEOs to handle the increase in HR-related activities. As we continue to make our way through the pandemic, PEOs are continuing to make a significant impact on the sustainability of SMBs.
The Positive Impact of Hiring a PEO
Did you know that SMBs that use PEO assistance are faring better than their counterparts? A recent report published by NAPEO highlights the findings of an analysis that compared the impact that PEOs have had on SMBs since the start of the pandemic. The analysis looked at key criteria and the outcomes of PEO clients.
- Paycheck Protection Program (PPP) loans: This criterion is split into two groups – percent of SMBs receiving PPP loans and percent receiving PPP loans earlier in the process.
- At the start of the pandemic, PEOs played a vital role in assisting SMBs with PPP applications. As a result, SMBs that worked with a PEO was 119% more likely to have received PPP loans.
- In comparison, 65.9% of those that are PEO clients, received the PPP loan, while only 30.1% of those without a PEO, were approved for their loans.
- Additionally, during the first phase of PPP funding, 49.7% of PEO clients received PPP loans, over 115,000 SMBs approved; while only 28.9% of SMBs, without a PEO, secured their loans on the initial round.
- While many SMBs were forced to temporarily close during the shutdown, an impressive 91% of SMBs that are PEO clients are less likely to still be closed. In fact, nearly all PEO clients are now open for business, while a significant percentage of SMBs that do not use PEO assistance remain closed.
- When it comes to survival rates, once again PEO SMB clients fared much better – with 60% less likely to have permanently closed due to the pandemic.
The benefits of hiring a PEO during Covid-19 are clear – pandemic assistance, payroll, benefits, retirement plans, workers’ compensation, lawsuits, recruiting, unemployment, regulatory compliance, and much more.
Are you considering a PEO for your HR tasks? Learn everything you need to know about the pros and cons of hiring a Professional Employer Organization to determine if it’s the right choice for your organization.
You’ve done your research on Professional Employer Organizations (PEOs), and are seriously considering partnering with one. One that can help you provide better benefits – at a lower cost, remain compliant with HR and labor regulations, handle payroll and taxes, and give you back the time you so desperately need to grow the business. But, one question remains – how much will a PEO cost you?
To get the biggest bang for your buck, you should on-board the best PEO you can. One that offers the services you need at a price you can afford. Just as not all PEOs are created equal, nor are their prices or pricing models.
Taking the Mystery Out of PEO Pricing Models
PEOs typically offer one of two pricing structures, however, some may offer both options:
- Flat per-employee rate: It is probably the most popular choice for small business owners because of its cost predictability. You are charged a set rate per employee and employee benefit fees. You’re typically charged monthly, and the cost per employee varies depending on the PEO selected and the services you choose.
- Percentage of the total payroll: In this scenario, you’re charged a percentage of your total payroll for each pay period. Depending on the size of your business and whether you employ hourly or salaried employees, the percentage charged will vary.
How do you know which one will be the most cost-effective for your business? Both are equal when it comes to value-added services, and you’ll be charged additional fees for services such as recruitment, employee on-boarding, premium employee benefits, employee training, safety training, etc.
PEO costs vary depending on whether you employ hourly or salaried workers. If you hire hourly employees, you can expect to pay more than your counterparts that do not. The reason is that it is expected that with hourly workers you will incur higher turnover rates, unemployment claims, workers’ compensation claims, etc. Salaried workers typically have a longer employment tenure and don’t file as many claims.
The size of your business also matters. Because PEOs spread their fixed costs across the employees they serve, the more workers you have, the lower your cost. However, if you own a small business with few employees, a PEO is still within your financial reach since many offer packages specifically designed for smaller companies.
And last, how many of your workers take advantage of the benefits you offer? For instance, some of your workers may be on a spouse’s benefits plan, which will ultimately help you to reduce PEO costs
Get the Best PEO the First Time
There’s a lot of time and effort that goes into finding the right PEO and finding the best PEO that provides the services you need at an affordable cost. Aside from the price, you need to ensure that the PEO you bring onboard is reliable and trustworthy.
Fortunately, there are PEO brokers like PEO Consultants to help you find the PEO that’s right for you – the very first time. From the moment you engage with us, we are with you every step of the way – from signing the contract to implementation and beyond – we have your best interests at heart. And, because our PEO partners pay us a finder’s fee, there’s no cost to you for our services.
Are you still in the consideration phase of partnering with a PEO?
Learn everything you need to know about the pros and cons of hiring a Professional Employer Organization to determine if it’s the right choice for your company.
If ever the PEO model could prove its value to an organization, it’s now, during the Coronavirus Pandemic.
Finding and engaging the right PEO partner for your company will help your human resources executives guide your company’s executives in many ways, not the least of which will be helping them identify key business functions, roles and processes, as well as helping them determine what areas – including which type of employees – should be cut, if necessary.
What’s more – and perhaps most importantly for an HR department – the right PEO services partner can help show a company’s top brass how critical HR roles are to not only the survival of the enterprise, how HR will help it thrive once the crisis has passed. (This can be particularly so for small companies in which owners wear many different hats – including the HR function. A PEO can help company owners do what they do best – focus on growing their business.
Transitioning to Work-From-Home
Possibly the first task of your PEO partner at this time will be helping your company get those employees who can work from home the tools they will need to work remotely.
We’re several weeks into “stay-at-home” guidelines in many states across the country, so your company already may be managing remote team members. Still, chances are good even now that you’re still putting Band-Aids on different issues or dealing with ones you never saw coming.
Identifying Key Business Functions
Many experts believe the U.S. already is in a recession. It’s, therefore, not far-fetched that your company may need to make cutbacks at some point in the near future.
Now’s the time – before these cutbacks become needed – to figure out which functions and employee roles, skill sets, and even activities will be critical moving forward.
You and your PEO services partner can identify necessary business functions by determining how they affect the priorities you’ve designated as critical (such as sales and customer relations)
You can then work together to identify which employees – or roles and positions filled by your employees – could be suspended for a time or cut completely without hurting your prioritized business activities.
Transitioning Laid Off Employees Properly
One of the most important HR roles is helping a company furlough or lay off employees. Working with a PEO partner, your company can help workers:
- File for unemployment
- Sign up for COBRA
- Connect with an outplacement service for help in resume writing, as well as job search and interviewing skills
- Keep your remaining and former employees informed regarding additional layoffs/furloughs
- Provide information on job openings
- Announce when employees will be called back to work
Long-term: Preparing for Business After the Pandemic
The right PEO can help your company’s business functions grow quickly once the crisis passes because while the pandemic continues it can work with those in HR roles of leadership – as well as with company executives – in important tasks such as:
Business-Continuity Planning
Delineating how your company will recoup its business functions deemed not critical during the crisis (and whether such functions should even be recovered).
Determining which Employee Roles to Re-Hire or Even Modify
Not all roles may be needed once the crisis passes. Or many may be changed or modified. For example, some positions at your company that you believed prior to the pandemic could never be performed remotely, may have worked well as a telecommuting position. (Customer-service representatives, for example.)
Ensuring that Hiring Remains a Priority
Hiring no doubt will move far to the back of company executives’ minds for the near future. But many positions will still be hard to find post-crisis and if you’ve allowed your talent pipeline to deflate during the pandemic, you could be hurt once you need to hire again. Your PEO services partner can help you with confidentiality agreements, employee orientation, retirement plan enrollment, etc. so that you and your recruiters can get up to hiring speed quickly
This pandemic WILL pass; a PEO services partner helps you now… and when you grow again.
If your company doesn’t have a separate HR department, or, if your company is growing – and you’re now overwhelmed with administrative tasks related to the pandemic – the right PEO can help your company operate as best as possible during this difficult time. And, then thrive once it’s behind us.
PEO Consultants can help your company find the best PEO for you. At no charge. Contact us to learn more and to speak with one of our expert advisors.
Considering a PEO? Learn everything you need to know about the pros and cons of hiring a Professional Employer Organization (PEO) to determine if it’s the right choice for your organization.
Let’s begin by answering a few questions that are typically top of mind when a company begins thinking about onboarding a PEO Broker.
What is a PEO?
According to the National Association of Professional Employer Organizations (NAPEO), a professional employer organization (PEO) provides comprehensive HR solutions for small and mid-size businesses (SMBs). Payroll, benefits, HR, tax administration, and regulatory compliance assistance are some of the many services PEOs provide to growing businesses across the country.
What is a PEO Broker?
Simply put, a PEO broker is a company that specializes in understanding the differences between the various types of PEOs and the needs of the SMB clients they serve. They represent a variety of PEOs and collect a finder’s fee when they match the right PEO with one of their clients.
Why are PEO Brokers Needed?
With more than 900 PEOs in the U.S. alone, the task of finding a PEO that meets the specific needs of a company has the right experience, and can provide services at the right price can be overwhelming, not to mention time-consuming.
Finding the right PEO is a complex process, and comparing the offerings of PEOs that make your shortlist requires the right comparison tools. In addition, you need to have a thorough understanding of the pros and cons of each potential PEO.
This is where a PEO broker will simplify the process and enable you to get back to doing what you do best – growing the business. Let’s take a closer look at the benefits the right PEO can provide to you, your employees, and your bottom line.
Get the Right PEO the First Time & Start Reaping the Benefits Faster
Because a PEO broker has a vested interest in a positive outcome, they are dedicated to pairing SMBs, like yours, with a PEO that’s a good fit on services, value, and price. With the help of a PEO broker, you increase your chances of hiring the right PEO the first time, putting you on the fast track to offer better benefits, work smarter and grow your business faster.
Offer Better Benefits
Because PEOs use economies of scale, they’re able to offer you premium benefits packages at a fraction of the cost. Depending on your specific needs, these benefits could include health plans, dental, vision, retirement, life insurance, short-term and long-term disability insurance, flexible spending accounts, AD&D, educational benefits, and more.
Now more than ever employees seek companies that offer competitive benefits. In fact, over 15% of employees that are actively looking for new positions rate benefits as a driving factor when making a job change. And because PEOs pool the employees from many businesses, you can save up to 40% on your benefits package. By offering top-notch benefits, you’ll be better positioned to attract desired talent, which will ultimately positively affect your business — a winning situation for you and your employees.
Work Smarter
A PEO is a co-employer in the best possible way. They share the liability for employment management, income tax reporting, payroll, regulatory compliance, etc. In essence, they manage your backroom HR functions and not your everyday business. As the business owner, you remain in complete control of managing the company and its employees.
To illustrate co-employment, think of it as a way to gain the extra headcount you need at a lower cost than if you employed HR, payroll, etc. employees. In this arrangement, they handle burdensome administrative tasks. This provides you with the freedom to actually run your business, instead of being buried under time-consuming paperwork
Grow Faster
Did you know that, on average, companies that partner with a PEO grow up to 9% faster than those that don’t? In addition, also according to NAPEO, they have between a 10% – 14% lower employee turnover rate and are 50% less likely to go out of business. The reason for these impressive figures is that when you partner with a PEO, you get back the gift of time to focus on what you know best – your business.
Even with these benefits, PEOs are not right for every company. Learn everything you need to know about the pros and cons of hiring a Professional Employer Organization (PEO) to determine if it’s the right choice for your organization.
Over the last 10 years, Professional Employer Organizations (PEOs) have grown in popularity as ‘virtual’ HR assistants for small- to medium-size businesses (SMBs) across the U.S. In fact, the National Association of Professional Employer Organizations (NAPEO) announced that the industry is vibrant and growth statistics continue to climb. Recent findings include:
- More than 900 PEOs in the U.S. alone.
- From 2008 to 2017, the number of work-site employees (WSEs) employed by PEOs grew at a compounded annual rate of 8.3%, which is approximately 14% higher than the compounded annual growth rate of U.S. employment during the same period.
- PEOs provide services to more than 175,000 SMBs, employing about 3.7 million people (end of 2017 figures).
- In the last 3 decades, the industry has added roughly 100,000 WSEs and 6,000 net new clients.
Let’s take a closer look at PEO employment growth and what it really means. The figure is staggering when you look at the sheer number of people employed with PEOs. The number of employees in this industry alone is about the same as the number of Amazon, Apple, AT&T, FedEx, Google, IBM, Starbucks, Walmart (U.S. only), and Wells Fargo employees combined!
This industry’s growth rate is nothing short of remarkable. But, what does it mean for you and why should you care?
If Time is the Question, What is the Answer?
As a business owner, your goal is to grow the business. And part of this equation is to ensure that you’re taking advantage of every possible efficiency. However, if you’re like many of your counterparts, a great deal of your time is spent handling HR issues. From payroll and health insurance to workers’ comp and HR regulations compliance, you’re probably spending countless hours each day buried under piles of paperwork. One has to wonder, is this the most efficient use of your time? And even more pressing, how can you recoup the time you need to focus on your business?
As HR activities become increasingly challenging, many SMBs have found the answer to these questions by partnering with a PEO.
PEOs: The Value Prop
PEOs drive value to their clients by delivering economies of scale, sharing liability, and providing industry-specific expertise. When you partner with a PEO, they will streamline your operations, providing efficiencies, operational structure, and accountability.
PEOs work under a hybrid model that combines outsourcing and consultancy to provide SMBs with numerous HR services, including:
Payroll Processing
Not just about cutting paychecks, the best PEOs provide more than a typical payroll services company. For example, some PEOs may offer services like comprehensive cost structures for employee benefits and workers’ comp.
Human Resources
Whether you have HR employees or not, PEOs can eliminate the burden and save you money. For instance, the multiple vendors needed for medical and dental plans, retirement plans, workers’ comp, etc., are handled by the PEO. Since they have a pool of employees from multiple companies, they can obtain these benefits at a lower cost. A savings that is ultimately passed on to you.
Regulatory Compliance
In a constantly changing area, PEOs are on top of new regulations and changes to existing ones, ensuring that your business is always compliant. Having experts in your corner gives you peace of mind, and should a mistake happen, they share the liability.
Some PEOs go beyond traditional services and offer safety and risk management services, consulting employee recruiting and retention services, and HR technology such as human resources information systems (HRIS). State-of-the-art systems allow for a single source of all your information for easier and more accurate reporting. In addition, some systems include an employee side, which gives employees access to their information.
In essence, the services PEOs enable businesses to work more efficiently and improve productivity. And when PEOs take on HR administrative tasks, business owners can focus on the company, which ultimately can lead to improved profitability. NAPEO reported that about 70% of PEO clients see an increase in revenue.
Reducing costs, growing revenue, and building better employee relationships make excellent business sense, don’t they? If you consider hiring a PEO, learn everything you need to know about the pros and cons to determine if it’s the right choice for your organization.
As a business owner, are you spending the majority of your day doing the revenue-generating activities that you love? If you’re like many of your entrepreneurial counterparts you’re spending countless hours a week juggling many balls, leaving you little time to focus on building your business. In fact, ADP research found that the ad hoc HR management style used by many small businesses takes 20% of the owner’s time and costs approximately $27 billion a year. Are you ready to put an end to time-consuming and costly HR administrative tasks and get back the time you need to focus on the big picture? If so, partnering with a Professional Employer Organization (PEO) may be what your business needs.
Read on for the four signs that the time might be right for your business to outsource HR functions to a PEO.
Is it Time to Onboard a PEO?
1. Government Compliance and Regulatory Laws
With the possibility of non-compliance fines or even lawsuits, this is one area in that you need to have your finger on the pulse. New rules and regulations are passed regularly, and current ones are constantly updated, making it difficult to comply. And if you have employees in different states, the amount of time you need to spend to ensure compliance is compounded. Is this an area where you are spending countless hours buried under a pile of paperwork?
2. Payroll and Compensation
Payroll is another big-ticket item when it comes to time and accuracy. Your staff counts on you for timely and correct paychecks. On the flip side of the coin is payroll tax reporting. A misstep here can result in inaccurate or missed reporting, resulting in even more time spent on making corrections. Is payroll and compensation administrative work monopolizing your time?
3. Benefits Packages
Do you struggle to attract top talent because the benefits you’re able to offer are less attractive than your competitors? Offering the same quality of medical benefits and retention perks as larger companies can make a significant difference in the quality of candidates you attract.
4. Workers’ Comp
Depending on the type of company you own, you may be paying high workers’ comp premiums. If you could lower your rates and eliminate the paperwork, would you?
- Did you answer yes to one or more of the above questions? If so, now’s the time to think about onboarding a PEO to help relieve you of these time-consuming tasks.
From HR management and payroll to benefits and workers’ comp, a PEO can relieve you of mountains of paperwork and ensure your business stays on track for success. With the right PEO, your company receives best-in-class HR expertise and benefits – and as the business owner, you get back the time you need to focus on your business.
Are you considering a PEO? Learn everything you need to know about the Pros and Cons of Hiring a Professional Employer Organization (PEO) to determine if it’s the right choice for your organization.
Your entrepreneurial spirit has led you to pursue your dream and start your very own business. At the start, you focused on setting the company up for success… and success you achieved. But, with that success came an increase in employees. As your staff grew so did the amount of time you spent on logistical and administrative HR tasks. Tasks that have you so buried under a mountain of paperwork that strategies to take the business to the next level are figuratively sitting on a shelf collecting dust.
What if you could ditch the paperwork and recoup the time you need to actually run the business the way you envisioned? And, in the process lessen business costs? Many small business owners are doing just that with the help of a professional employer organization (PEO).
The Top Four Ways a PEO Can Save You Money
1. Health Insurance
With no end in sight, health insurance premiums continue to rise, putting small businesses with limited budgets at a distinct disadvantage. In fact, a recent eHealth study found that 41% of small business owners are “very concerned” about their ability to continue to offer health benefits to employees.
The same research drives this point home by illustrating how staffing figures can make a significant difference in premium cost. In 2018, the premium for businesses with fewer than six employees was $419 per covered employee. By increasing staff by just one employee, the monthly cost per covered employee was 13% less, or $364. Just think about how much you could save if you were able to obtain quality health insurance based on the cost of covering hundreds, if not thousands of employees.
PEOs provide economies of scale, enabling you to cost-effectively purchase insurance plans that are comparable to those offered by Fortune 500 companies. Your costs are lower because PEOs have the purchasing power gained from providing insurance coverage to employees from many companies. These savings are then passed on to you.
2. Retirement Plans
Plan setup, record keeping, administration, investment and advisory, miscellaneous administration fees, etc.; establishing and maintaining a 401 (k) for your business is not only costly but can be a logistical nightmare. At the start, your pool of 401 (k) investment money will most likely be minimal. Not only does this affect the quality and number of providers that you’ll be able to work with, it has a direct impact on fees. Let’s assume your company’s investment assets total $300K, your fees will most likely be between $5K – $10K per year. As your business’ investment builds, your cost decreases. ShareBuilder demonstrates this with the following example: If your company’s 401 (k) program has grown to over $500K or $1M in total assets, you can expect to pay at least 25% less.
As a small business, it may take you years to build up the 401 (k) assets needed to make a dent in fees. This is where a PEO can get you there almost immediately. Since they leverage the combined investments from the company’s they serve, they’re able to pass these savings on to you, and in some cases even provide additional discounts.
3. HR Compliance
Made up of an overwhelming number of rules and regulations, employment law is complex and constantly changing , which makes keeping your finger on the pulse nearly impossible. But to avoid mistakes, where even the smallest error can be costly and large infractions can result in massive fines, you need to be on top of rule and regulation changes.
Taking a look at just one aspect, payroll, revealed that the IRS penalizes small businesses billions of dollars each year for payroll errors. When it comes to HR compliance, this is one area that you don’t want to risk making any mistakes. By partnering with a PEO you get peace of mind that you’re always in compliance, which ultimately saves you money on potential fines, not to mention the time you’ll now have to grow your business.
4. Workers’ Compensation
Nobody wants to think about it, but workers’ comp claims can and do get filed regularly. What makes a claim so costly and time-consuming? Two things – insurance premiums and claims management. As a small business, you don’t have access to the same workers’ comp rates as larger organizations.
PEO’s have the ability to provide workers’ comp coverage through its own workers’ comp insurance program, which ultimately saves you countless dollars in premiums. In addition, they’re on-hand to lessen possible future claims by providing safety services such as OSHA training. With a PEO you gain affordable rates and knowledgeable personnel to manage compliance, audits, paperwork, and certifications.
The cost savings above are just the tip of the iceberg. Think about the cost you incur to recruit top talent and what it takes to keep them in your employment. Or your ability to provide the learning and development programs Millennials, Gen X’ers and now Gen Z’ers, who are just entering the workforce, value when making employment decisions. Many PEO’s offer these types of services and more, giving you a competitive edge.
Are you considering a PEO? Learn everything you need to know about the pros and cons of hiring a Professional Employer Organization (PEO) to determine if it’s the right choice for your organization.
Deciding to outsource some of your HR responsibilities can be an enlightening experience. It can give business owners more time to focus on growth and customer acquisition instead of complex HR regulations and employee management. But, not all HR outsourcing solutions are built the same. The two most popular forms of HR outsourcing — PEOs and ASOs — both have unique properties that make them ideal for specific business needs.
So, what’s the difference between an ASO and a PEO?
Defining a PEO:
A Professional Employer Organization (PEO) is a co-employment outsourcing service that provides comprehensive HR solutions to businesses. These services typically include payroll, benefits, workers’ compensation, HR compliance, and other HR needs that can often be time-consuming and complex for small businesses to handle. A big component of PEO value is that they can handle your employee responsibilities directly through co-employment.
What is Co-Employment?
Co-employment is a legal tool that allows PEOs to become your employer of record. This allows PEOs to have a direct impact on your payroll and benefits AND it frees you from some of your HR liability. Your business will still be in control of day-to-day hiring and firing. But, your payroll will be run under the PEOs tax ID number.
What Are the Benefits of a PEO?
- PEOs can save your business money on benefits by providing economy of scale. Since PEOs handle many businesses, they have a large pool of workers to leverage against benefits providers. This can help them secure discounts and rates that are typically only available to massive corporations.
- PEOs handle your day-to-day HR needs — freeing you up to focus on business growth.
- PEOs will keep you HR compliant and shelter you from some of your HR liability.
- PEOs can help remove burdens associated with workers’ compensation such as evidence gathering and claims help outside of court.
Defining an ASO:
An Administrative Service Organization (ASO) is also an outsourcing service that provides HR services to businesses but without the co-employment model. This means that ASOs can also help you with benefits, payroll, and compliance. But, they do not share any liability with your business, and they don’t fall under the co-employment model.
What Are the Benefits of an ASO?
- ASOs can handle some of your day-to-day HR operations — though not as many as PEOs due to the co-employment relationship.
ASO Vs. PEO: What’s the Difference?
The primary difference between ASOs and PEOs is the co-employment model. ASOs operate similar to any other outsourcing solution or vendor; they help where you tell them to help. PEOs, on the other hand, leverage co-employment to help make an HR impact at every layer of your business. This means handling mundane day-to-day payroll tasks and ensuring that you have robust compliance procedures.
Let’s go over a few of the critical differences.
- PEOs choose your benefits vendors for you. ASOs simply help you manage the ones you choose. This means that PEOs can give you economy-of-scale with insurance companies, but ASOs cannot. Since ASOs are typically treated as small businesses by insurance providers, you will likely get similar rates to your current benefits package with an ASO. PEOs will often secure incredibly low rates due to volume pricing.
- PEOs have a liability investment in your business. ASOs don’t. So, compliance is front-of-mind for PEOs who want to protect both your business and their own.
- PEOs can handle some of the more nuanced payroll activities. Unlike ASOs, PEOs have additional payroll capabilities due to co-employment. This means they can fully manage your entire HR operation.
Final Thoughts
Both PEOs and ASOs can help businesses run their HR departments. But, there are some key differences you should be aware of. For most small businesses, PEOs will help them save more money and be capable of handling more significant HR responsibilities. Are you looking for a PEO that’s the right fit for your business?
Check out our Free PEO Comparison Report!
Small and medium companies using professional employer organizations (PEOs) often find that their current PEO isn’t a great fit. If you find yourself becoming increasingly frustrated with your PEO’s performance and support, it may be time to consider a new option. As you prepare for this change, there are a number of things you can do to ensure a smooth transition.
Here are some helpful tips for a painless transition when ending a PEO relationship.
What is a PEO?
A PEO is a service company that’s function is to provide businesses with comprehensive HR solutions. These include:
- Payroll
- Benefits
- Human Resources Support
- Tax Administration
- Regulatory Compliance Assistance
You may not have the resources or infrastructure to support these functions in-house, so PEO benefits can serve a critical roles in the functioning of your business. Partnering with a PEO can result in cost and time savings. In fact, companies that use a PEO have reported seeing 14% higher overall company growth.
How to Prepare For Leaving a PEO
While PEOs can provide significant benefits to businesses, they must be providing quality services for you to realize these benefits as their client. At the same time, moving away from an existing PEO has the potential to cause serious disruption to critical business functions. For this reason, you need to thoughtfully prepare for transitioning away from this partnership.
There are several things you can do to ensure minimal business disruption as you leave your PEO:
- Collect All Employee Information. Your PEO is likely handling important payroll and other information for your employees. Take time to secure all relevant data from the PEO before termination of any contract, including:
- The company’s Employer Identification Number
- Employee direct deposit information
- Names, addresses, marital statuses, and dates of birth for employees
- Employee tax information, including filing status, deductions, and federal and state tax filing numbers.
- Tax Implications. If you are terminating your PEO relationship mid-year, the PEO will need to handle taxes through that point and issue W2s for that time period. Your business or your new PEO or payroll service will need to pick up where they left off, which will likely result in employees receiving two W2s for the year.
- Plan for Payroll. If you are not transitioning directly to a new PEO, you will need to have a plan in place for handling payroll for employees. Getting paid on a time is obviously a priority for employees, so it is critical to have a plan for this determined before you officially depart from your existing PEO. Any new service will likely require time to get setup, so plan accordingly.
- Benefits Administration. If your PEO has been handling employee benefits, this is another area you’ll need to assume responsibility once more. You will need to research and understand various carriers and their benefits packages. Additionally, be aware of any pending claims prior to termination of the PEO as you may still need to pay administration fees until these claims are resolved. Also be cautious that deductibles may reset under a new benefits package. You’ll need to communicate this to your employees so they can plan for additional medical and dental expenses.
- Retirement Plans. Employees may need to transfer their 401(k) plans either into an IRA or the new 401(k) offering. Make sure you have resources prepared to assist them in this process.
- Honoring Employee Leaves. Be sure you are familiar with the existing policy on leaves of absence, including parental leave and disability leave, as you may be required to honor the leaves granted under the existing PEO. To avoid any confusion after the termination, be sure to have your own plan established and communicated.
You might at the above list of to-dos and find it overwhelming. This should not, however, stop you from ending a relationship with a sub-par PEO.
If you’d like an expert guide during this process, we provide the level of experience needed to ensure that your company will be matched with a PEO that will solve the problems you are facing. Use our free PEO Comparison Tool to start finding a better fit for your company today.