Should I hire a PEO?

Professional Employer Organizations (PEOs) offer several benefits and challenges for businesses:

Benefits:

1. Cost Savings: PEOs can provide cost savings by pooling employees from multiple clients to negotiate better rates for benefits like health insurance, workers' compensation, and retirement plans; however, there are a multitude of hidden fees. 

2. HR Expertise: Access to HR professionals who can handle basic HR functions like payroll processing, benefits administration, compliance with some employment laws, and HR best practices, freeing up time for business owners to focus on core operations. However, PEOs do not typically assist with workforce planning, strategic HR, hands on assistance, and in person events such as layoffs and terminations.

3. Risk Management: PEOs may assume certain HR-related liabilities, such as employment practices liability insurance (EPLI) coverage, reducing the business's exposure to legal risks and potential lawsuits.

4. Employee Benefits: Offering competitive benefits through a PEO can help attract and retain talent, as employees may gain access to a wider range of benefits (usually under 100 employees) typically available to larger companies.

5. Administrative Efficiency: Streamlined HR processes, including payroll, taxes, and compliance reporting, can improve efficiency and reduce administrative burdens for businesses.

Challenges:

1. Loss of Control: Businesses feel they lose control over several HR functions, as PEOs often handle payroll, benefits, and other HR tasks on behalf of their clients and block decisions being made by the organization.

2. Cost Considerations: While PEOs can offer cost savings, there are fees associated with their services, which businesses need to weigh against the benefits gained. Contracts can have many hidden fees and be difficult to understand.

3. Complex Contracts: PEO contracts can be complex, outlining responsibilities, fees, termination clauses, and other terms that require careful review and negotiation.

4. Cultural Fit: Businesses should consider whether the PEO's HR practices and culture align with their own values and company culture, as they will be representing the business to employees.

5. Transition Challenges: Moving HR functions to a PEO requires coordination and may involve transitioning employees to new benefit plans or systems, which can be disruptive if not managed effectively.

Ultimately, the decision to work with a PEO depends on the specific needs and priorities of the business, weighing the benefits of minimal HR expertise, cost savings, and risk management against the challenges of relinquishing some control and navigating contractual agreements. Often times companies end up hiring consultants to compliment their PEO relationship. Several of our clients are using PEOs and do not feel they are getting the level of HR service they need to successfully run their organization.