Professional Employer Organization Pros and Cons List

With the competition and demands of running a business, teaming up with a Professional Employer Organization (PEO) is the best alternative for some entrepreneurs. As of 2010, there have been more than 700 PEOs operating nationwide and continuing to gain popularity.

PEOs are firms that handle essential business operations, from filing employees’ taxes, insurances and training. In a nutshell, they execute Human Resource functions and are partners with company clients, for a fee. If you want to know if a PEO is good for your business, here are some advantages and disadvantages to consider.

List of Pros of Professional Employer Organizations

1. It takes away the risk of work-related litigations.
Business owners say that since they turned over their employee management services to PEOs, they need not worry about potential liabilities anymore. PEOs are the ones to handle Human Resource matters such as filing taxes and handling employees’ compensation. By doing so, they ensure companies are compliant with tax and labor laws. Additionally, some PEOs take care of liabilities for the company, depending on the package. When it comes to risk management and safety, employers can be assured these aspects are covered by PEOS.

2. Business owners can focus more on operations.
Teaming up with a PEO saves time and money especially if the business is just starting. It can be overwhelming to deal with all the aspects of running a company but with a PEO, hiring people to handle HR functions will not be needed anymore. The PEO also handles negotiations for health insurance packages for employees, oftentimes pooling employees from different clients. As a result, it can get great deals with insurance providers at lower costs. And with much of administrative work taken away from the hands of managers, they can focus on like sales and marketing.

3. It handles employee trainings.
A PEO is also responsible for training employees to become better and more competent in the workplace. It has a team of professionals who do not only know the ins and outs of compliance with government requirements but also capable of creating leadership and management training programs. Business owners are ensured they employ reliable and productive members of the team.

List of Cons of Professional Employer Organization

1. It is unnecessary for bigger companies.
Some critics say that PEOs vary in services and are ideal for small businesses with a maximum of 50 employees. If clients are not aware of this, they might end up paying for services they do not really need and spend more paying PEOs instead of hiring their own people to do the job. PEOs usually charge from $500 to $1,500 per employee annually. If there are more than 50, it can be unnecessarily expensive.

2. Not all PEO services are flexible.
Another concern of sceptics that makes them doubtful about hiring PEOs is that not all have flexible packages. This can result to higher rates and extra expense for companies. There are other firms that still charge for unused services because they come with the package.

3. It is still a business.
For those who do not find PEOs appealing, they claim that at the end of the day, these are businesses as well that exist to make a profit. As opposed to having own employees to handle the services offered by a PEO and have a say on the compensation and benefits the company can afford, partnering with a PEO might cost a company since they can charge higher if they deem fit.