A PEO, or professional employer organization, is designed to help companies with their human resources needs, without adding the stress and overhead of having a dedicated human resources department. Businesses can partner with a PEO to handle employee benefits, payroll, hiring, worker’s compensation needs and similar tasks.
Working with a PEO has several benefits. The National Association of Professional Employer Organizations (NAPEO) indicates that businesses working with PEOs experience:
- Growth that is 7 to 9 percent faster
- Employee turnover rates 10 to 14 percent lower
- A 50 percent less risk of closing
Yet not all businesses benefit from a PEO. There comes a point when a company is large enough that it needs its own HR department and has the resources to handle these tasks completely in house. So what size company needs a PEO? Companies with about 10 to 500 employees can benefit from working with a PEO, and here’s a closer look at why.
Companies with Around 10 Employees
Companies with around 10 employees often think they are too small to need the services of a PEO, but this is not the case. One of the primary concerns of a small business is the need to attract and retain quality employees, and that requires the right benefits packages. Benefits that are attractive can also cost a significant amount, which hinders small businesses.
This is where a PEO can help. A PEO, like PRemployer, leverages the fact that it has hundreds, or even thousands, of employees among the different companies using its services. This allows the PEO to negotiate better rates for health insurance and other benefits, so small businesses can create attractive packages to catch the eye of top talent.
In addition, PRemployer and other PEOs offer training for management professionals. This helps companies improve their management team to help improve employee retention and increase overall business growth.
Companies with Around 50 Employees
As a small business grows and continues to hire employees, it will eventually get to the point when managing payroll and benefits is too cumbersome to do in house without and HR department, yet the need for an entire HR department, and the funds to fund it, are not yet there. Partnering with a PEO can allow the company to continue to grow and reward its employees well, even in the midst of growth.
With the help of a PEO, companies can create and continue to evaluate an HR plan that will help fuel their growth. They can have a proven hiring process and attractive benefits in place, without the need to dedicate time and energy to these programs. This allows the business’s leadership to continue focusing on growth while having confidence that employees’ needs are met well.
Companies with Around 100 or More Employees
As growth continues, employers eventually come to a point where they need the scalability that comes from an outsourced HR. With outsourced HR through a PEO, companies can pick and choose the services they need for their particular size and growth point. Even if the company has grown to the point that it has a small HR department of its own, some of the payroll, benefits administration, and even systems or software can be outsourced. In this way, the PEO becomes an extension of the HR team.
Outsourcing routine tasks, like payroll administration, or complex tasks, like compliance, helps businesses make the most out of their in-house employees. This structure allows the HR employees to focus on income-generating activities, so the business remains productive.
PEO services work best for small to medium businesses. If you’re wondering, “Is a PEO right for my company?” take a look at your size and your growth point. If you have 500 or fewer employees, then you are likely able to benefit from a PEO. Reach out to PRemployer today to learn more about our various HR services available to small and midsize businesses, and see if we can help fuel your growth by releasing some of the HR demands you face.
