Professional Employer Organizations (PEOs) and staffing companies both support employers with specialized services to relieve administrative burdens, solve business challenges and enhance success. They do this in different, yet complementary ways. How do you know whether and when it’s best to leverage the services of a PEO and/or staffing company? Here’s a quick look at both models to help you successfully blend these services.
PEO Defined
A PEO establishes a co-employment relationship and handles many of the HR responsibilities and administrative burdens of being an employer. Those responsibilities range from onboarding through COBRA administration. Business owners retain control plus direction and management of employees.
PEO Services Include:
- Payroll processing and unemployment taxes
- Workers’ compensation insurance
- Employment Practices Liability Insurance
- Human resources support
- Employee benefits consulting and management
- Risk management
PEOs offer guidance on human resource issues and compliance with employment-related laws and regulations. Additionally, PEOs can provide risk management services and safety program guidance. Working with a PEO is much like outsourcing HR or supplementing your existing practice, with a bonus. PEOs have the added benefits of more affordable insurance premiums for workers’ compensation and administration of employee benefit plans.
Because PEOs leverage master plans for workers’ compensation insurance, clients avoid annual audits, large premium deposits and heavy administrative burdens. This cost effective relationship saves both employers and their employees time and money.
Staffing Company Defined
Staffing companies provide a range of services which include:
- Consulting with employers on position strategies and salary-ranges
- Recruiting from an expansive talent network
- Screening candidates
- Assessing skills
- Interviewing candidates
- Completing hiring paperwork
Flexible Staffing Options:
- Contract hiring (also known as temporary hiring) allows employers to bring employees on short-term without a long-term commitment. In this type of placement, staffing companies assume the responsibility for paying the employees and covering them with workers’ compensation insurance.
- In a temporary-to-hire situation, employers can bring on employees without the guarantee of regular status employment. They are then able to gauge an employee’s performance, productivity and culture fit for a possible regular status job offer. In this placement scenario, the staffing company retains employer status until the company decides to hire the person. Depending on how many hours an employee works per year, some staffing companies offer employees a benefits package.
- Permanent placement is a model where employers can essentially outsource the hiring process to a staffing firm for long-term positions. Staffing companies maintain a network of strong, well-qualified candidates. Those candidates are screened and assessed to find the candidate that best meets the individual hiring needs of each employer.
Working with a staffing company saves employers the time it takes to create a hiring strategy, interview candidates and complete new-hire paperwork. It can also reduce turnover time and make the workforce more productive. Hiring a temporary employee saves money because it eliminates, for example, the costs associated with advertising positions or conducting skill assessments.
How PEOs and Staffing Companies are Similar
Both PEOs and Staffing companies:
- Provide deep expertise and specialization in various aspects of HR
- Offer strategic input to help drive policies and decisions
- Manage client employees’ needs for payroll and benefits
- Cover the individual for workers’ compensation benefits
- Utilize technology tools to provide added value to clients and their employees
There are many scenarios in which blending the services of a PEO and a staffing company can solve business challenges. The following are just a few examples:
1. Startups:
Challenge: Startup companies typically work on tight budgets and struggle to find affordable workers’ compensation insurance. Ramping up and maintaining staffing levels as they evolve is also a challenge.
Blended Solution: A PEO helps new business owners obtain affordable workers’ compensation insurance. With a PEO’s bundled services, employers gain access to a team of HR experts with deep knowledge of employment laws. Staffing companies ease the burden of expanding the workforce by absorbing some employee-related expenses like taxes and insurance. They also help staff quickly and efficiently.
2. Growing Companies:
Challenge: Growing companies sometimes expand into other states. Managing payroll and HR regulations across state lines, including ever-expanding local municipality regulations, can be a struggle.
Blended Solution: A PEO can manage the nuances of state-specific payroll and workers’ compensation laws, keeping business owners compliant. PEOs calculate all employment taxes, then remit and report the taxes. Staffing companies help fill a variety of positions across the country. That saves employers time and makes it easier to ramp up quickly in new locations.
3. Businesses Seeking to Attract and Retain Employees:
Challenge: Some small and medium-sized business owners may struggle to compete for talent in a tight labor market. Retaining talented employees is just as tough because of a lack of access to affordable employee benefit plans.
Blended Solution: Partnering with a PEO allows business clients to offer their employees a full benefits package at an affordable price. Retirement benefits like 401(k), wellness programs and other perks can make a company stand out. PEOs also administer the benefits, which means employers don’t have to handle enrollments, educate employees or field questions. Staffing companies work to find candidates who best fit employer needs based on skills and culture. This custom selection usually means employees are happier and stay longer.
At FrankCrum, our PEO, staffing company and insurance carrier are all under the same umbrella. That means we offer comprehensive HR and staffing services with flexible and affordable insurance programs. It’s what we refer to as “A Family of Employer Solutions.”
To learn more about how a PEO boosts productivity and fuels business growth, click here to read our free guide.
