How Professional Employer Organizations Help Make Businesses More Profitable
How Professional Employer Organizations Help Make Businesses More Profitable
If you are like most small business owners, you have a vision. That vision usually includes creating value in the market place by serving client needs. In order to make this vision become a reality, your business needs to sell its products and services in a manner that simultaneously pleases consumers and increases profitability. Nevertheless, if you are like most entrepreneurs, your vision doesn't include all of the fine details and costs related to essential business concerns such as payroll, taxes, and government compliance. Nonetheless, most small businesses owners will be faced with these concerns at some point.
What are Professional Employer Organizations (PEO)?
Professional Employer Organizations act as a single source provider of HR integrated services for small businesses. Each state has it's own regulations for worker's compensation and employment insurance. Therefore, the PEOs services are applied according to the laws of a specific state. The purpose of PEO companies is to create solutions for businesses that allow them to effectively outsource business services and create a means for business owners to concentrate on the core competencies related to their particular organization. By assuming the administrative tasks for your business, PEOs are able to offset much of the risks associated with running your organization.
How Professional Employment Services Work
PEOs are similar to employee leasing services being that they provide outsourced human resource services. However, Professional Employer Organization services go far beyond simply staffing employees. Rather, they offer vital services that ensure your company is operating in keeping with COBRA laws, handling payroll services, and taking care of any workers' compensation issues. PEOs go the extra mile by actually hiring employees on behalf of your business and then become the actual employer of record. This benefits small businesses greatly when it comes to taxes and insurance. PEOs streamline the practice of employment by assuming the burdens relating to compliance and risk management.
How PEOs Create Value for Business Owners
Professional Employer Organizations assume the responsibility and liability for payment of wages. Although the money used to pay employees comes from the small business owner, it's a huge benefit for them not to be held liable in case there are any mix ups. Moreover, PEOs are able to offer this service at a relatively low price since payroll services are typically included among the many other services provided by PEO organizations.
Another substantial benefit of a Professional Employer Organization is that they take on the responsibility for worker's compensation and risk management. If workers are hurt on the job in the State of California, business owners are potentially responsible for paying that employee up to 66% of their gross employee earnings. Employers may also be on the hook for medical expenses or even be forced to pay damages as part of a legal settlement.
Payroll tax processing is another way in which PEOs create value for small businesses. PEO companies take on the accountability of ensuring that payroll taxes are paid in the correct amount and in a timely fashion. Taxes are filed in a bundle under the PEO's FEIN, relieving business owners from all of the tax liabilities.
How it all boils down
Outsourcing Human Resource services can be a huge benefit to small businesses. Professional Employer Organizations provide relief from regulatory and compliance burdens and offer a sophisticated array of services at a low fixed cost to business owners. By taking advantage of the services provided by Professional Employer Organizations, business owners are able to focus more of their resources on the essential elements of their particular business and potentially increase their overall profitability.
About the Author
Carolyn Sokol is a frequent contributor to PEOcompare and writes about issues that may affect small businesses such as outsourcing HR. She is a founder of PEOcompare.com which helps match small businesses with PEOs for their particular needs. PEOcompare provides unbiased information on Regional and National PEOs.
