Small businesses usually have insufficient infrastructure for carrying out various administrative activities like salary payments, hiring employees, managing the onboarding process, filing taxes, and other allied activities necessary for legal and regulatory compliance. Therefore, most small and medium businesses outsource selected services from the PEOS that have the resource and expertise in handling all company and business-related administrative tasks. Besides handling routine HR-related tasks, the PEO companies can significantly help with compliance requirements, thus allowing business owners the time and space to focus on the core business areas like developing and implementing growth strategies to increase revenue and profitability. Outsourcing the administrative tasks is of great help to small business owners to build their business on a solid foundation and direct the efforts at the right places for growing the business fast.
Why PEOS are essential for small businesses?
The crucial support provided by the professional employee organization goes a long way to ensure sustainability and growth for small and medium businesses. The PEO services empower smaller companies to acquire similar administrative capabilities to more prominent companies and enjoy a more competitive position to pave the path for growth. Augmenting organizations’ existing human resource capabilities and expanding their capabilities are the most visible benefits of the PEO services that add considerable value to them.
The business arrangement
To understand the functioning of a professional employee organization, let us look at the business model. It’s a co-employment business model, meaning small business owners who hire the services will retain control over the employees. Still, their names appear in the books of the PEO for compliance and tax purposes. The benefit of the PEO extends to managing the administrative aspects of the employees while the operational control rests on the employer. From hiring to firing people, the business owner must execute the tasks through the PEO while retaining complete managerial control and shouldering the legal responsibilities associated with various HR activities.
Services provided by a PEO
Usually, the PEO companies offer various HR, payroll, risk, and compliance services and benefits. Companies that do not need the full-service package can customize the services to build a specific plan that suits the business needs. However, payroll services are a common feature in any PEO service.
Contracts
PEO contracts are seldom long-term because most PEO companies need a 30-day written intimation to cancel the services. Charging cancellation fees is optional and depends on the contract between the companies. It is advantageous to pick and choose the PEO services by identifying the gaps or weak areas is beneficial. Most companies prefer to outsource the service to professional organizations.
Although the kind of services might vary, small businesses can expect to receive services from PEOS in four main areas – human resources, payroll, benefits, and risk management mostly related to compliance with various statutory requirements.
But remember that hiring the services depends on your business needs.
