Making the Impossible Possible: How PEOs Solve the Top Three Small Business Challenges
What if you could outsource your most challenging HR tasks so you could focus your attention where it is needed most? What if you could give your employees better benefits without the time-consuming process of benefits management? And what if you could do all of that while saving money?
That’s exactly what you’ll get when you partner with a PEO.
PEOs are very good for small businesses, and those who already work with a PEO provider know exactly how powerful those benefits are. A recent report by PrismHR found that more than half of HR service providers enjoy client retention rates of 95% or higher, and only 5% of providers reported a retention rate of less than 86%.
The report also asked about the top challenges facing small business owners. The responses probably won’t surprise you. If you’re like most business owners, you already know these are the most challenging parts of managing your HR function.
What you may not know is exactly how a PEO can help. To answer that question, let’s take a look at the top three challenges facing small business owners right now:
SMB Challenge: State and Federal Compliance
Small businesses must meet state and federal compliance guidelines in a number of areas including taxes, labor and wage laws, insurance requirements, safety regulations and more. It’s a labyrinth of potential legal pitfalls that constantly change, and it requires a significant investment of time to make sure you remain up to date.
How a PEO Can Help: Reduce Workload and Mitigate Risk
A PEO keeps you safely disentangled from regulatory red tape, removes the burden of compliance, and helps you avoid fines and penalties. Not only will you reduce your workload by outsourcing these tasks, but you can also rest assured that your business complies with all legal guidelines while you focus on growth.
SMB Challenge: Managing Employee Benefits
This is another area that experiences frequent change, and once again, failure to comply can result in hefty fines and penalties. Sorting through plan options, insurance options, and cost models can eat up time and may end up costing you more than it should if you choose the wrong plan.
How a PEO Can Help: Better Benefits and Lower Costs
Benefits administration is a major reason many small business owners opt for a PEO, and with good reason. While PEOs vary in their approach to insurance and benefits, they can often help you find the right plan for your employees at a reasonable cost. Some PEOs offer an insurance brokerage service in place of or in addition to a PEO-sponsored group plan, so be sure you understand what is offered and how it will apply in your specific situation.
There is one caveat to choosing a PEO for lower insurance costs: not every business will be able to get a better rate through the PEO. The number of people you employ, number of claims you have filed, and the demographics of your workforce may affect your ability to qualify for the PEO’s plan or the amount you will pay.
SMB Challenge: Managing Payroll
Wages, payroll taxes, and withholdings can get complicated quickly, and managing these responsibilities can also eat up a huge chunk of time. If you perform these tasks manually, it will require an even greater investment of resources. That leaves many small business owners with an impossible choice between neglecting other critical responsibilities or hiring an additional HR staff member they may not be able to afford.
How a PEO Can Help: Payroll Management and Payroll Tax Filing
A PEO will assume responsibility for paying wages, maintaining compliance, filing payroll taxes, and managing FICA, FUTA, SUTA, and any additional withholdings. Most PEOs provide a client portal where you can submit payroll online, which is a convenient perk for many businesses. However, if you handle payroll manually, be sure to ask whether you can call or email it in.
How PEOs Save You Money
The most important question for many small business owners considering a PEOmis: how much will it cost? Every PEO structures pricing differently, so it’s not easy to give a definitive answer to that question. The good news, though, is that outsourcing your HR responsibilities will almost always be less expensive than hiring additional staff members. It also frees you up to focus your attention on the growth and success of your business rather than slogging through HR paperwork.
As you consider your PEO options, ask each provider for an itemized, unbundled quote that shows any associated fees and extra costs. Because some PEOs include certain services in the monthly fee, while others price each service out separately, you’ll need to see an itemized quote before you can compare pricing across different providers.
Want to know more about how PEOs work? Download our FREE PEO Buyer’s Guide!
Ready to find a PEO partner? Our PEO Matching Tool helps you compare and contrast providers based on the specific needs of your business. When you’re finished, you’ll have a customized short list to help you find your perfect PEO match!
