Professional Employer Organization (PEO) companies are advantageous for businesses of all sizes, from those that have only one employee to those that have hundreds. Small employers realize cost savings in outsourcing HR administration to a PEO because PEOs spread costs across a larger pool of employees. With a PEO’s purchasing power and bundled services, employers often find that partnering with a PEO costs less than doing it alone or hiring the staff needed to cover all the bases.
With a PEO partnership, employers gain the benefits of deep HR support to manage and mitigate risk, lower rates on workers’ compensation insurance and relief from many of the administrative burdens of benefits and payroll administration. That means less time spent on HR management, fewer HR challenges and more time to focus on growing the business. Here are four advantages of PEO companies for employers:
1. PEO Companies Mitigate HR Risk and Provide HR Support
PEO Companies mitigate HR risk by helping employers navigate wage and hour regulations and help ensure compliance with the full range of employment and tax laws. The PEO’s team of HR experts provides guidance on employment practices, compliance and procedures to help clients avoid costly lawsuits. EEOC complaints can be very expensive, and penalties include back pay and benefits the victim should have earned, compensatory damages, punitive damages and liquidated damages. Sometimes, the cost of the case can be enough to put a company out of business.
To further guard employers from HR risk, PEOs offer business owners a type of liability insurance called Employment Practices Liability Insurance (EPLI) which can help in situations such as wrongful termination, discrimination, sexual harassment and retaliation. The policy also provides protection for defamation, failure to promote, negligent evaluation and deprivation of a career opportunity.
In addition to helping protect employers from costly litigation, PEO companies lower the time employers spend on paperwork and policies by providing a wealth of resources, including forms, policy outlines, employee handbooks, performance review templates and guidance on HR best practices. Responses to everyday HR issues or questions are prompt so business owners can make decisions based on sound advice in a timely manner. The PEO also processes unemployment claims and any needed communications.
2. PEO Companies Cover Employees with Workers’ Compensation Insurance and Administer Claims
PEOs help businesses secure competitive rates for workers’ compensation insurance, which is sometimes challenging for start-up companies, companies with past losses or those with high-risk positions. PEOs have flexible workers’ compensation programs with more affordable rates than stand-alone policies and staff who help manage the cost of claims, coordinate return-to-work programs and recommend safety training.
Most workers’ compensation policies require an annual audit, which can take days if not weeks to complete. In a PEO partnership, business owners can avoid that audit which saves quite a bit of time and hassle. When there is a claim, the PEO takes care of all the details in compliance with federal and state rules and regulations. The PEO also prepares and submits OSHA reports annually on the client’s behalf.
When it comes to the injured worker, the PEO provides resources and support with a preferred provider network, case management and an established return-to-work program. If the PEO has a safety team, it can save employers time by reducing or eliminating worksite accidents and helping train employees.
3. PEO Companies Allow Clients to Offer Comprehensive Benefits and Handle Plan Administration
PEO clients are able to offer their employees a comprehensive employee benefits package that includes retirement savings options, which helps attract and retain employees. Because PEO master policies have many employees on them, a PEO is able to extend an affordable, flexible benefits package with options from top carriers that saves business owners time and money.
In addition to options like health insurance, voluntary benefits (dental, vision, disability) and supplemental plans (accident, cancer, hospital), employers can adopt a PEO’s 401(k) plan. Adopting the PEO’s retirement savings plan frees clients from worrying about fiduciary responsibility, investment committees, maintaining plan documents, ADP/ACP/top-heavy testing and plan audits. Employers can offer retirement savings with no out-of-pocket costs or elect to match a portion of employee contributions. This makes PEO-sponsored 401(k) plans very attractive for business owners from a cost and administrative perspective.
When clients take part in the master health policy, PEOs administer benefit plans by enrolling and removing employees when necessary and answering any questions they might have. Benefits management includes taking care of life change updates like marriages or new family members, assisting with tax and regulatory reporting and ensuring clients make the appropriate pre-tax deductions from employee paychecks.
Research shows employees are more likely to stay with a company when that company demonstrates a commitment to them as employees, has good hiring practices, has good HR policies and practices, has a comprehensive benefits package and provides them with training and development opportunities. A recent study by the National Association of Professional Employer Organizations (NAPEO) found employees affiliated with a PEO had higher overall job satisfaction and considered their companies stronger because of the partnership.
4. PEO Companies Process Payroll Accurately and On Time
Having payroll processed with a PEO means it will be accurate and on time. This can save business owners from expensive fees associated with payroll mistakes. A PEO also files federal and state taxes, which eliminates the risk of late fees or penalties. Employers realize further savings and convenience in flexible pay options like direct deposit or cash cards.
A PEO’s payroll services include processing even the most complex payrolls such as certified, multi-state and payrolls organized to track job costs. The PEO takes care of wage garnishments and tax withholdings and filing, so all clients have to do is complete the employee application process and track and enter employee hours. Technology tools make it easy for employers to onboard new employees and facilitate the approval of paid time off.
An online human resource information system (HRIS) provides easy access to employee records, time entry interfaces, benefits open enrollment sessions and reporting tools. Employers or administrators can enter payroll hours in the HRIS each pay period or rely on common integrations with time clock systems. Employees can use the system to view things like pay stubs or W-2s.
Partnering with FrankCrum
FrankCrum is a Florida-based PEO with flexible product and service delivery models to meet the unique needs of small, medium and large companies across the United States. We aim to reduce workloads, improve HR and lower costs for our clients. The experience of one of our clients illustrates the value of partnering with FrankCrum for PEO services.
Dean and DeWitt Property Management wanted to find a more efficient and less costly way to manage HR—specifically a company that would manage payroll processing, benefits administration and workers’ compensation insurance for its 12 employees. The annual workers’ compensation audit was a constant challenge, and the company wanted a “one-stop shop” that could provide needed services and a proactive approach to identifying and resolving HR issues.
FrankCrum’s bundled service solution that includes workers’ compensation insurance, HR risk management, payroll processing and reporting, employee benefits and HR support was the right fit. Dean and DeWitt says they get greater value at a lower cost, as well as immediate and accurate responses to questions. They’ve also saved substantially on workers’ compensation premiums and eliminated the annual audits that used to cause them so much trouble. FrankCrum helped research a claim that turned out to be false and saved the company stress and potentially a rate hike.
To see whether partnering with FrankCrum is the solution to your HR outsourcing needs, call 800-277-1620.