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Rick Bartholomew, CEO of Lindon-based A Plus Benefits, says hiring out key administrative tasks may be a good idea for some businesses.
What are Professional Employer Organizations?
They offer businesses the ability to outsource human resource, employee benefit, risk management, payroll, workers' compensation and other administrative tasks so owners can focus on core-competencies, which include running and growing their businesses. A PEO technically is the employer of its clients' workers for tax purposes, and then leases them back to the original company in a practice known as co-employment.
What are the benefits for a small business in contracting with a PEO instead of hiring full-time employees?
For entrepreneurs and small-business owners, finding one person who is an expert in HR, payroll, employee benefits and risk management can be difficult and expensive. Most companies don't have the budget for a position like this - --- and in this economy are less likely to want to hire more people. Hiring a PEO gives the company access to full-time experts in each of these fields with much less hassle and expense.
What should businesses consider when selecting a PEO?
It's important to choose one with a proven history of helping companies in good economic times and bad. Find one that you know will dedicate the same time and effort to your company that you do, and
What kind of costs are associated with contracting with a PEO?
Each PEO charges for its services differently. Typically, PEO's base their fees on a percentage of gross payrolls they administrate. That fee ranges from 3 percent to 15 percent of the total payroll. Other PEOs, like A Plus Benefits, charge a set per-check fee. This fee will vary, depending on the size of the client and the frequency of pay periods. Some PEOs collect additional fees to process quarterly taxes, run payroll reports or provide direct deposit for employees.
What types of liabilities do companies face when contracting with a PEO?
Companies that use a PEO actually have fewer liabilities than those that maintain administrative employees internally because the PEO assumes the responsibility and risks for these administrative areas.
Are these services outsourced?
PEOs do not generally outsource their customer service functions domestically or to foreign countries. In fact, I'm not aware of any PEOs that do. Some large PEOs rely on Human Resource Information Systems (HRIS) to save money on customer service issues and to manage customer service inquiries. In these cases, the technology is still managed in the states but requires the client to adapt to or conform to the HRIS, often making it difficult to speak to an actual person.
