Understand the Advantages and Disadvantages of Working with PEOs

Professional Employer Organizations are those organizations that enter into a joint-employment relationship with an employer by leasing employees to the employer, so as to allow themselves to share and manage many employee-related responsibilities. This helps the clients in outsourcing their various functions such as employee benefits, compensation and payroll administration, workers’ compensation, and employment taxes. 

PEO generally serve as professional employers for their clients. The clients can outsource all or a few of the HR functions, depending upon the PEO and the contract. The professional employer organization industry is growing at an incredible rate due to the various functions that PEOs handle that are very beneficial for the organizations.

 

Some of these functions include handling the comprehensive HR services for employers, like payroll processing, HR compliance, risk management, employee benefits, employment tax, time and attendance management; helping to reduce liability for payment of wages, payroll taxes, and state unemployment taxes; assisting with employee recruitment and reducing employee turnover and making your business more attractive to current as well as potential employees. When the PEO undertakes these responsibilities, it saves you time so that you can focus on the everyday operations that are essential for the growth of your business.

A PEO can offer remarkable advantages to companies, especially for small employers that do not have the scope of HR expertise or system capabilities for functions such as HRIS and payroll or those employers who do not have the time and resources required to focus on the transactional HR functions. 

Some of the benefits that the best professional employer organization will offer you include taking care of recruiting and hiring; payroll administration; unemployment administration; worker’s compensation administration; compliance assistance; drug testing programs; Family and Medical Leave Act administration. They also hugely benefit the company administration. 

Just like everything else, PEO will also come with its own drawbacks, some of them being a loss of control of essential processes and people; an outside company’s influence on your culture; a diminished value of the internal HR department; lack of control and security over employee paperwork; loss of institutional knowledge; security issues with the vendor’s system; and resistance from employees.

Final take

Although there are certain disadvantages associated with PEOs, you can create a list of some of the best PEO service providers of 2021, and hire anyone that will help to minimize the limitations and contribute to the efficient functioning of your organization by creating a smooth recruitment process.

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