The Advantages of Using a PEO for Outsourcing Administrative Services 

Running a business is a journey focused on short and long-term strategic growth.

In a time when many find themselves facing staffing challenges, entrusting administrative tasks to a Professional Employer Organization (PEO) can help businesses free up valuable bandwidth while ensuring compliance.

Key Factors for Choosing a PEO

Partnering with a Professional Employment Organization (PEO) is a strategic move to streamline operations and reduce costs. A PEO provides essential services such as health insurance, benefits, HR consulting, and financial planning, all through a single, cohesive team.

When you engage with a PEO, they become a co-employer of your workforce. This means that while you maintain control over your employees’ roles and responsibilities, the PEO handles critical administrative tasks like payroll and benefits management. This dual-employer model not only ensures compliance and efficiency but also leverages the PEO’s expertise to secure better rates on benefits and insurance, ultimately lowering your overall costs.

By collaborating with a PEO, you can focus on scaling your business, confident that your employees’ needs are managed to the highest standards and your operational expenses are optimized.

A quality PEO brings a wealth of experience in handling employee administration and offering sustainable long-term growth strategies through an extensive network of banking and insurance partners, enabling them to deliver a wide range of competitive offerings to their client companies.

Organizations that partner with PEOs can receive the following benefits:

Time Efficiency

According to Learnopoly, an employee spends 12% of their work week on administrative tasks. Professional Employer Organizations (PEOs) manage essential administrative duties such as payroll processing and tax reporting, allowing HR teams to focus on initiatives that promote employee well-being and engagement. Prioritizing strategic functions over administrative tasks enables HR departments to become powerful catalysts for a company's growth and longevity.

Onboarding and Recruitment Support

In addition to handling core administrative tasks, PEOs play a vital role in recruitment. Hiring the right talent is critical for the growth of any business, and with the help of a PEO, companies can access more efficient recruiting practices, reducing the time and effort needed to fill key positions.

Once new hires are brought onboard, a PEO can also manage the entire onboarding process. A PEO will take care of all the necessary paperwork, setting up new employees with their benefits, and making sure new hires are properly integrated into the company culture. By leveraging these PEO services, HR teams can focus on nurturing employee engagement from day one, leading to better retention and overall employee satisfaction.

Cost Optimization

Companies that opt for a PEO co-employment arrangement can experience significant short- and long-term cost savings. The National Association of Professional Employer Organizations (NAPEO) reports that companies utilizing PEO services can achieve an impressive return on investment (ROI) of 27.3% in cost savings alone.

A 27.3% ROI margin is remarkable, particularly for larger businesses that allocate substantial resources to HR functions. According to Gartner, companies' HR functions typically incur costs ranging from $1,350 to $3,800 per employee. For instance, envision a company with 300 workers spending $1,350 per employee, amounting to $405,000. With a 27.3% ROI, this business would realize total savings of $110,565 by leveraging PEO services. This presents a compelling case for companies to consider the significant financial benefits associated with PEO partnerships.

Legal and Financial Safeguards

Companies with a significant workforce tackle a substantial amount of tax, compliance, and payroll paperwork. Handling such a workload can sometimes lead to unintentional errors. Unfortunately, mistakes in payroll, such as misclassifying employees or missing tax deadlines, are common among companies, often resulting in significant penalties and fines. However, businesses gain valuable protection from legal and financial liabilities by entering a co-employment relationship with a PEO. In case of an error, the PEO assumes responsibility as outlined in the service agreement, providing peace of mind for the company. This legal safeguarding is a significant advantage for businesses, helping to secure their standing in the industry and maintain a positive reputation among customers.

Workers' Compensation Administration

Did you know that states regulate workers' compensation programs? Every U.S. state, except for Texas, mandates this. However, the specifics of these programs can differ from one state to another, presenting a challenge for businesses operating across multiple states.

States are strict when enforcing workers' compensation insurance, imposing hefty penalties on non-compliant companies. For example:

• California fines companies anywhere from $10,000 to $100,000. 
• Florida penalizes companies with double the insurance premiums for two years. 
• Illinois imposes a fine of $500 per day with a minimum of $10,000. 
• North Carolina charges $1 per employee daily, with a minimum of $50 and a maximum of $100 per day. 

However, companies can alleviate this burden by partnering with a Professional Employer Organization (PEO). By doing so, they can transfer the responsibility of obtaining and managing workers' compensation insurance to the PEO. This shields business owners from financial and reputational harm and ensures compliance with state regulations.

Family and Medical Leave Management

Major corporations with 50 or more employees are required to adhere to the Family and Medical Leave Act (FMLA). This act ensures that eligible employees are granted 12 weeks of unpaid leave annually to care for family members with health conditions, among other qualifying reasons.

While the FMLA aims to promote employee well-being, it can present challenges for employees and employers. Employee misuse of the policy can lead to significant costs for employers, while company violations of the FMLA can result in substantial settlement fines.

Professional Employer Organizations (PEOs) have extensive experience managing FMLA across various industries and business sizes. They are skilled at preventing employee misuse of FMLA and averting costly lawsuits while maintaining positive relationships between management and staff. This level of expertise makes it a safe and cost-effective decision for companies to entrust the management of FMLA to a PEO.

Enhance Employee Satisfaction

By managing the administrative aspects of human capital services, a PEO ensures that all employees receive the appropriate insurance coverage, compensation package, and benefits, including those offered by the FMLA.

While these points may not be the foremost concern for business owners focused on bigger issues, they significantly impact employees. PEOs handle all the essential details required to create exceptional employee experiences, enabling companies to pursue their growth objectives without compromising employee wellbeing.

PEOs typically provide their clients with wellness programs, medical insurance, and vision insurance, enhancing the employee experience without incurring high implementation costs. This comprehensive support contributes to a positive and supportive work environment, fostering employee satisfaction and company success.

PEOs Support Organizations of All Sizes

OneDigital Resourcing Edge focuses on empowering HR departments, which helps to avoid major disruptions and results in an overall better employee experience. Partnering with a PEO allows businesses to enhance operational efficiency and relieve their top talent from administrative duties, creating an environment where the whole team can thrive.

Connect with the OneDigital Resourcing Edge team for a customized PEO solution that caters to your current human capital needs and is adaptable to your company's growth.