Over the past few years, many business leaders have decided to outsource their HR responsibilities to a Professional Employer Organization or PEO.

According to the National Association of Professional Employer Organization, businesses using PEOs grow 7-9% faster and are 50% less likely to fail compared with businesses overall.

For larger businesses, working with a PEO is more cost-effective than hiring a full-time HR staff. For small businesses, a PEO helps to keep up with the demands of managing all the HR-related activities of a growing business.

As an organization that offers both PEO and HRO services, business leaders often ask our team at LBMC Employment Partners which model works best for their organization. Below are a few helpful insights we typically share with them.

Is a PEO the Right Model for Your Business?

Trying to decide if PEO is the right model for your business can seem like an overwhelming decision. But, it doesn’t have to be. Here are a few specific areas to consider if you’re thinking about going with a PEO to handle HR needs:

1. The number of employees or contractors you employ.

One of the biggest misconceptions about PEO providers is that they only work with large businesses. And, while large businesses use them, there are numerous ways a PEO can provide benefits to small businesses.

So, what’s the best distinction for small businesses? Many consider 20-75 employees to be the PEO sweet spot, as it frees up employers to focus on the business side of the business.

2. The type of benefits you want to provide your employees.

PEO’s have thousands of employees, so they can generally secure better, more cost-efficient benefits packages that are usually reserved for larger companies. Later on in this post, we’ll highlight some of the additional benefits your employees can get by partnering with a PEO.

3. The complexity of your state’s tax regulations.

When it comes to abiding by the State Unemployment Tax Act (SUTA), most employers dread the costs and burden of filing these tax returns and managing the claims process. A PEO can handle all the administrative burdens of payroll tax regulations.

4. The growth potential of your business.

If you own or operate a business, especially one that’s growing, you can definitely attest to the ever-evolving complexity of managing employees. With the daily human resources tasks involving payroll, healthcare, training, and benefits (just to name a few), making the decision to work with a PEO as you grow will ensure the HR-related needs of your team are getting the attention they deserve.

5. Your desire to attract and hire top talent.

For large and small businesses alike, attracting the best possible talent is key to long-term success. Even more, preventing high turnover rates is something every company wants to avoid. A PEO can help any business compete for the top candidates in their industry.

How to Choose the Right PEO Partner

Once you’ve made the decision to partner with a PEO provider, the next question becomes: Which PEO provider is the best option for us?

Here are four questions that will help you choose the right PEO partner for your organization:

1. Is the PEO certified?

A Certified Professional Employer Organization, or CPEO, is a PEO that has received ‘certified’ status by the IRS. As one of the only Certified Professional Employer Organizations (CPEO) in Tennessee, we’ve worked hard to meet the latest industry standards and provide our clients with the best experience possible.

2. What type of employee benefits do they provide?

A PEO gives businesses the ability to offer competitive 401(k) and insurance plans. Even more, PEOs can offer several added values for employers to make available to employees, including telehealth services and Social Security and Medicare assistance, as well as home, renters, and auto insurance at preferred rates to employees.

3. What kind of ongoing support do they provide?

To ensure your company’s benefits are cost-effective, a good PEO provides ongoing counsel to business leaders so that they can provide employees with the best possible packages. PEOs can also handle and offer wisdom for billing reconciliation from providers.

4. How is the cost of services calculated?

A PEO can relieve the stress involved with negotiating contract variables and rates. Through up-to-date analysis of industry trends, a PEO can make sure you are properly positioned with the best possible variables and rates.

Looking for a Certified PEO? LBMC Employment Partners Can Help

If you’re considering the possibility of partnering with a PEO for your business, connect with our team to learn more.  If you’re interested in doing a little more research, you can download our free resource, A Guide to Understanding Professional Employer Organizations.