PEO Evaluation

A PEO, or Professional Employer Organization, is an HR outsourcing solution for payroll, HR, employee benefits, workers’ comp, compliance and more. It allows you – the employer – to focus on growing your business while the PEO handles all of the back-end office matters. It sounds pretty good – and can be a great fit for some companies – but how do you know if it is the right fit for you?

TIA Group ran a successful PEO for many years and that experience has given us a unique perspective of both the pros and cons of outsourcing your HR needs. More importantly, we know the questions to ask to help you evaluate before signing, audit a current agreement, or develop an exit strategy. If a PEO is your best option, we can also assist you in finding one that is the right fit for you and your company.

Choosing to work with a PEO

The most important thing to understand about choosing to work with a PEO, is that you are agreeing to enter into a co-employment arrangement. Co-employment means that the PEO, and their EIN, becomes your employer of record for your employees. This agreement then allows for the PEO to handle:

  • Payroll processing and tax payments under the PEO’s tax ID
  • Employee liabilities
  • Employee benefits
  • Compliance
  • HR outsourcing

Partnering with a PEO simplifies your business’s HR duties, helps you adhere to federal regulations, and can provide you access to comprehensive employee benefit offerings. While there are a lot of benefits to partnering with a PEO company, there can be some downsides – so it is important to understand the pros and the cons.

What are some
advantages of a PEO?

Reduced HR-related Costs & Responsibilities

For small and midsize businesses, staffing and managing a human resources department, employee onboarding, payroll and benefits, can be a lot to handle, as it requires in-depth knowledge and a specific skill-set that can be difficult to come by. PEOs can relieve some of the stress and take on many of those HR responsibilities, making it easier for you to operate your business without having to add to your internal HR department

Risk Protection

A good PEO can protect you from the billions of dollars the IRS charges small businesses every year in payroll fines by guaranteeing the payrolls they process. So, if a problem should arise, the PEO would have to eat the cost instead of you. In the same way, PEOs reduce your risk with HR compliance, and ensure required notices are delivered and any HR matters are handled properly.

Employee Benefits

Another benefit of partnering with a PEO is access to employee benefits that typically would not be accessible and/or affordable for smaller business. By aggregating all of the PEO’s customers, a PEO can leverage their size to obtain lower benefit costs and access to benefit designs only offered to larger employers.

What are the
of a PEO?

Lack of Personalization

PEOs do not only manage your company, but many others as well, which cause a lot of the processes and the procedures to be more “cookie cutter” without the personal, in-depth attention you may desire.  Lack of personalization can also be a drawback when it comes to the benefits offered.  While gaining access to the employee benefits with a PEO can be a benefit, you are limited to the carrier and plans offered through that PEO – even if it is a carrier that you do not prefer.

Loss of Control

While it can sound nice to partner with a PEO to share in some risk and take some tasks off your plate, it is still a co-employment relationship that will require you to relinquish some control of your employees.  This means that if you have an employee issue arise, you will need to contact and consult with the PEO, which can be inefficient.

PEO Costs

PEOs can be a great option for smaller employers, as the fees are much less expensive than hiring employees to handle the task and risks that the PEO will handle for you, however a PEO can start to become the more expensive solution as your business grows.

We strongly advise you to thoroughly vet a PEO before signing on. Without a broker, agent, or advisor, you alone must be vigilant and keep an eye on your PEO. TIA Group can review PEO options and help you determine if joining a PEO is the best financial option for your business.