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What Are the Benefits of a PEO?

For growing businesses, navigating the complexities of human resources (HR) responsibilities can be time-consuming and challenging. In addition to payroll processing, benefits administration, workplace compliance, and employee recruiting — businesses now recognize the importance of providing a workplace culture that engages and empowers their employees.

Some of the most common challenges small to mid-sized businesses face include:

  • Attracting and retaining top talent
  • Rising cost of employee benefits
  • Staying compliant with shifting regulations
  • Decreased employee engagement
  • Creating and maintaining an employee handbook

That’s quite a bit to manage. However, partnering with a PEO can help you unload a variety of HR tasks and responsibilities, so you can get back to focusing on revenue-generating initiatives.

This article will explore the benefits of a PEO for employees and employers. We will also cover the basic PEO pros and cons, as well as guidance for choosing the best PEO for your small business.

What is a PEO and what does a PEO do?

A PEO (full form: professional employer organization) allows business owners to outsource many of the administrative functions associated with HR, such as payroll, compliance, employee benefits administration, and more.

When you partner with a PEO, you enter into a “co-employment” relationship. Within this unique structure, the PEO becomes the employer of record for your workers, assuming much of the responsibilities (and sharing the risks) of your company’s complex employment matters. This co-employment arrangement gives the PEO the authority to handle back-office administrative tasks on your behalf. It’s important to note that, in this agreement, you retain full control of the day-to-day operations and management of your business and employees.

PEOs, such as G&A Partners, provide customizable and scalable HR management software, access to Fortune 500-level employee benefits, and a wide range of services, including:

  • HR management
  • Payroll administration
  • Benefits administration
  • Compliance support
  • Risk management & safety services
  • Recruitment
  • Performance management/training & development
  • And more

What is the difference between HR outsourcing and PEO?

Choosing to outsource HR provides companies with the ability to offload time-consuming, often confusing HR responsibilities. The difference between a PEO and other HR outsourcing options lies in the scope of services and expertise.

For example, a PEO might not be the best option if you’re in need of one specific service, such as payroll processing or benefits administration.

However, if you’re struggling with a variety of HR tasks and responsibilities, a PEO can provide comprehensive HR services and support.

    In many cases, choosing a PEO for a small business or a mid-sized organization can be very beneficial. Especially if your business is growing and HR tasks are taking over. Ultimately, it comes down to finding the right fit for your company.

    What is the benefit of a PEO?

    Partnering with a PEO gives your company the ability to spend more time on innovation and growth initiatives, support and retain top employees, and build a winning culture. This is especially meaningful if your business is a smaller or startup organization without much, or any, in-house HR expertise.

    By working with a PEO, you can:

    • Simplify and streamline HR functions, so your team can focus on more important matters.
    • Offer competitive benefits packages without undue strain on the budget.
    • Access expert advice and timely recommendations and support from experienced HR professionals.

    And that’s just scratching the surface of what a PEO can do for your business. Let’s dive in to more.

    Young people happily putting their fists together in solidarity

    What is the impact of a PEO?

    The impact of a PEO will be different for every company. Whether you require support for several HR tasks, all HR functions, or you’re not quite sure the level of support needed yet, a reputable PEO can help you evaluate your needs and consider the best solutions.

    At G&A Partners, we offer solutions tailored to your needs, including but not limited to:

    • HR Management: Get comprehensive, scalable HR insights and solutions that expand or contract with your organization’s evolving needs.
    • Health Insurance & Benefits: Gain access to Fortune 500-level employee benefits packages to help you hold on to your best employees and compete with large organizations for top talent. Plans include group health insurance, dental and vision insurance, 401(k) plans, accident and disability policies, a variety of ancillary benefits, and more.
    • Payroll Administration: It should go without saying that paying your employees in a timely and consistent manner is of the utmost importance. Working with a PEO means offloading the time-consuming tasks of payroll management and processing, giving you more time to focus on the bigger picture.
    • HR Consulting: Make informed decisions for your business by tapping into comprehensive HR expertise from a partner that puts your needs first. Whether you’re looking to improve your ability to attract and retain top talent, optimize benefits packages and compensation, or just enhance the workplace culture, we can help.
    • Recruitment and Employee Retention: Employees who feel valued and cared for are more likely to stay with their employer. Our HR experts provide strategic guidance – such as how to implement performance management, design a competitive benefits package, and offer professional development – that can boost employee engagement, increase retention, and ultimately help you recruit top talent.
    • HR Technology: With our integrated, user-friendly HR technology, we help our clients streamline day-to-day HR operations that increase productivity and efficiency and help avoid costly errors.
    • Compliance: Staying on top of existing (and constantly evolving) workplace laws can be challenging and overwhelming. On the federal level alone, you must be aware of, and stay compliant with, the Affordable Care Act (ACA), Family and Medical Leave Act (FMLA), Occupational Health and Safety Act (OSHA), and more. It’s a lot to keep up with—and if you don’t, violations can be costly.

    In a co-employment agreement with a PEO, compliance with workplace requirements remains your responsibility, but our HR experts can provide valuable guidance to help you understand federal, state, and local labor laws and workplace regulations, as well as how they apply to your business. This might sound like a minor detail or afterthought, but access to G&A’s expert advice can help you mitigate compliance risks and avoid potential penalties or fines. Schedule a consultation with our team below to learn more.

    Why would a company use a PEO?

    Every company has its own unique HR needs. When you work with a PEO like G&A that is committed to best-in-class client service and focuses on helping our clients identify and prioritize what’s most important, you can:

    Are PEOs good for employees?

    Yes, the best PEO companies are committed to helping their clients free up time to focus on their core business and elevate the employee experience.

    In fact, PEOs and employee benefits – or more specifically – PEOs and better employee benefits, often go hand in hand. And when it comes to what employees want, a great benefits package is second only to competitive pay.

    So, let’s focus some more on benefits. How does a PEO improve employee benefits?

    Here are a few ways working with a PEO can help you attract and retain talent with a competitive benefits offerings:

    • Better, more affordable benefits. Partnering with a PEO (like G&A Partners) makes it much easier for small and mid-sized organizations to provide Fortune 500-level benefits—including medical, dental, vision, life insurance, and more—at an affordable price point. Note, however, that when it comes to providing a more robust employee benefits package, working with the right PEO is key. Some smaller PEOs may not be able to offer comprehensive benefits at a price point that works for your bottom line. Because G&A works with a significant number of clients, we have greater purchasing power. This translates to a top-tier benefits offering at a price you can afford.
    • The right retirement offering. Setting up and managing retirement plans can be time-consuming, confusing, and costly. With a PEO-administered 401(k) plan, you can avoid taking on additional risk and administrative burdens, and you can offer your employees an opportunity to plan for a more secure future. At G&A, we leverage our buying power to bring our clients top retirement plans with some of the lowest fees in the market.

    • Voluntary benefits. Employees today are looking for employers to supplement group healthcare insurance and 401(k) retirement plans with affordable voluntary benefits. When you partner with a PEO, you have the ability to add voluntary, low cost benefits to your plan, such as disability, life, accident, and critical illness insurance.
    • Quality-of-life benefits. No one can be healthy all the time, and it’s important for organizations to have plans and policies in place that help employees feel supported – even when they’re not at 100%. By partnering with a PEO, you can demonstrate a commitment to your employees’ well-being by offering quality-of-life benefits, like an Employee Assistance Program (EAP) that can connect them with mental-health support, as well as other wellness services like health incentive programs or access to a wellness coordinator.
    • PTO insights and guidance. Due to complex federal, state, and local laws regarding paid medical leave and/or sick leave, setting PTO policies can be a difficult process. Enlisting the help of a PEO helps to ensure compliance while providing your organization with the flexibility to fine-tune PTO policies for holidays, time off for volunteering, and more.
    • Benefits administration, including online benefits enrollment. The more employees understand their benefits, the more likely they are to take advantage of them (in a good way). A PEO can help by making enrollment easier through seamlessly integrated technology while providing employees with the resources they need to make the best decisions for themselves and their families.

    Can PEOs save businesses money?

    One of the most compelling benefits of working with a PEO is the ability to manage costs while optimizing HR functions and services. In fact, the cost of working with a PEO (and all the comprehensive services and expertise you get with it) is typically equal to the cost of hiring one, full-time employee – and the payoff can be exponential.

    Think about it this way: as a small-to-medium size business owner, you’re probably handling most of the HR functions yourself or dividing them amongst employees with other primary roles. By streamlining and offloading HR functions to a PEO, you and your employees are freed up to focus on taking your company to the next level. A PEO also provides industry expertise and recommendations, meaning even more value.

    PEO cost savings don’t stop there. A PEO with comprehensive expertise, can also help you prevent avoidable expenses, like:

    • Potential penalties, fines, or lawsuits for violating local, state, or federal workplace laws and regulations.
    • The high cost of employee turnover, including recruiting, hiring, and training costs and the loss of institutional knowledge.

    The ROI of partnering with a PEO can often be significant. A recent NAPEO study found that businesses that use a PEO have an average ROI of 27.2%. The study also stated that for every $1,000 spent on PEO services, an average business would save $1,272. And that’s just the average. Businesses with above-average in-house HR costs are likely to have above-average ROI with a PEO partnership. It’s also important to note – the study does not take into account the ROI from improved recruitment and retention and the time gained that you and your team can now shift back to revenue-generating tasks.

    To learn more about PEO cost savings, schedule a consultation with our experts!

    What companies can benefit from a PEO?

    Small and mid-sized companies tend to benefit most from the advantages of a PEO partnership. In fact, recent data shows that over 200,000 small and mid-sized businesses currently use the services of a PEO, with approximately 4.5 million workers currently co-employed.

    While small and mid-sized businesses arguably benefit the most, any company that is looking to simplify their HR processes, empower their employees, and improve efficiencies can partner with a PEO.

    How does a PEO help with risk management?

    A PEO can help you manage risk by providing guidance with navigating regulations and creating initiatives, policies, or processes to fulfill compliance needs. For example, a PEO can help you mitigate your risk related to workplace safety.

    Imagine you’ve partnered with G&A, and while reviewing policies and procedures, you find that your workplace safety program hasn’t been updated since 2005. Our team of workplace health and safety experts will help you design a program focused on accident prevention and employee training, and ensure your program is compliant with current OSHA and other federal and state safety regulations.

    Workplace safety is just one aspect of risk management, but not playing by the rules can lead to a major loss of time and money. Effective risk management requires you to quickly understand, identify, and mitigate various forms of risk — including potential or future risks. At G&A, we can help our clients create policies that minimize risk in a variety of areas, and we offer expertise to help develop business continuity plans that prepare for unanticipated scenarios, like major weather events or the loss of an executive.

    Working with a PEO for risk management provides assurance that your bases are covered, and you can move from a reactive to proactive mindset – enabling your organization to be prepared for just about anything.

    Two construction workers review a document with worksite policies.

    What are the disadvantages of a PEO?

    If you’ve never worked with one before, it’s understandable that you may wonder about the potential disadvantages of a PEO. In truth, virtually every perceived disadvantage really just comes down to a mindset shift.

    For example, you may worry about “handing over control” when you partner with a PEO. The reality is, you’re not relinquishing control, rather you retain full control of the day-to-day operations and management of your business and employees. A PEO, then, is more of an administrative employer that handles HR-related administrative tasks, such as onboarding new hires, processing payroll, managing benefits, assisting with compliance, and more.

    You might also be concerned that a co-employment relationship will negatively impact the company culture you’ve worked so hard to develop. But working with the right PEO partner brings vast HR expertise and resources into the equation, resulting in more time for you to focus on strategic initiatives (like your positive company culture).

    Developing a positive and productive relationship with the right PEO can unlock a new level of organizational productivity and employee empowerment. And embracing a new dynamic, one in which you and your employees are no longer bogged down by daily HR functions, can be liberating.

    How do you pick a PEO?

    Not all PEOs are created equally, so doing research to find the best fit for your organization is important. When doing so, it’s a good idea to look beyond a list of services, so you can find, if you prefer, a collaborative partner who will listen to your needs, deliver unique solutions, and be accessible and accountable. To narrow in on the type of PEO that makes the most sense for your company, ask yourself if you would prefer a partner with comprehensive expertise that is focused on client service or one that offers only HR technology with online support.

    Why G&A

    G&A Partners offers access to HR experts with years of experience helping businesses develop their employees, improve their workplace cultures, implement new HR processes and procedures, and more. Schedule a consultation with one of our trusted business advisors to learn more.