In order to minimize costs, small business owners the world over often find themselves filling a variety of roles to support important operational functions like marketing, sales, product, and fulfillment. Often times, employers also add human resource (HR) management to their repertoire; however, time spend managing HR tasks is time spent away from other, more financially fruitful efforts. In fact, business owners who take up this burden on their own can expect to spend at least 35% of their time navigating everything from health care to employee paperwork, and as a company matures, that time becomes more significant.
Staffing an in-house HR department may seem like a sure bet, but for employers faced with a stiff budget, the average national salary for a HR manager, which peeks just above $63k a year, can make that an expensive solution.
Enter professional employer organizations (PEOs). These firms offer an outsourced solution for business owners that need the benefits of a fully functioning HR department without the added salary. Employers working with PEOs enter into a co-employment relationship in which the PEO is responsible for things like payroll, benefits, etc, and the employer maintains authority over their employees and the day-to-day activities.
How much can you expect to pay for a PEO?
In exchange for their services, PEOs typically charge anywhere from $500 to $1500 a year per employee, though some will charge a flat fee for small companies. Though those numbers may seem high to some, even at the top rate, a small business with 25 employees would see a savings of almost $30k (based on HR management salary averages) if they chose to outsource their HR tasks instead of placing an HR professional on full-time staff. As one would assume, the rates vary based on the level of support and company size, and it’s best to review the rates and services of several PEOs before making your decision.
What can a PEO provide?
Let’s take a quick look at some of the roles and tasks a PEO can take on.
In this role, the PEO will be responsible for all typical compensation provided to your employees as well as maintaining payroll records, sending paystubs and W-2s , PTO time, and even garnishment and deductions when necessary.
Employee Benefits: Today, health care can be a tough subject to wrap your brain around, and PEOs can help employers adhere to requirements in place due to the Affordable Care Act. Additionally, because the PEO works with a variety of providers, it’s likely that they can offer employees of a small business with more aggressive medical, vision, and dental coverage options as well as retirement, disability, and even educational assistance programs.
Hiring, Training, and Employee Development
As your HR administrative arm, PEOs will help you find top talent by lending a hand to find and identify top candidates, review resumes, and vet applicants before they move to the next round of interviews. Additionally, once a candidate becomes an employee, the PEO is responsible for onboarding new hires, handling all paperwork, providing employment information (handbooks, videos, etc), and training the employee.
In addition to immediate employee development, the PEO also takes responsibility for any additional interaction an employee may require (performance reviews, workers compensation, conflict resolution, substance abuse services, etc)
Workplace Regulations & Risk Mitigation
One of the most important yet often under looked HR piece is the fundamental rights and responsibilities associated with the employer and employee relationship. PEOs can manage complex items like I-9 requirements, EEO regulations and claims, and even employee liability insurance. Additionally, as a purveyor of HR functions, they can ensure that you adhere to federal and state laws that govern employment standards such as those associated with the Fair Labor Standard Act.