One of the immediate advantages of PEO or employee leasing is that management’s time that was previously spent on personnel management and accounting can now be directed toward activities that effect earnings and profit.
In addition, a company that arranges with a PEO will find immediate economies of scale in providing benefits, especially healthcare. Other benefits, such as cafeteria plans, life insurance, disability insurance and 401k plans, are not often offered by smaller companies, but through a PEO, they are all available at no additional costs.
Lastly, a PEO or employee leasing firm provides assistance in defining personnel policies and compiling employee handbooks as well as compiling and recording employee files.
Very frustrating to have Certified Public Accountants (CPA’s) attempt to scare the business out of clients.
Recently, we had a local CPA, who lost the payroll business on a 4 man company (I estimate they were charging $200/week to process payroll…PAYROLL!!!) call the State Department of Employment Securities to let them know that they were closing their account with the State.
The DES sends a letter to the client to let them know that they no longer have an account and could face fines if they do not re-open their account ASAP.
Some CPA’s do not understand, nor do they want to take the time to understand how PEO (professional employer organizations) work.
Some CPA’s do understand, they see the overall cost and time savings their clients will receive via PEO and recommend going forward.
Anyone else have any scary CPA stories? Don’t get me going on lawyers…
The Department of Labor (DOL) has submitted its fiscal year 2011 budget to Congress. One of its main objectives is to penalize employers who misclassify employees as independent contractors.
Another reason for small businesses to outsource their human resources to a solution like PEO (professional employer organization). Once the DOL finds a company that has classification errors, the liability for back wages and overtime pay, as well as to DOL penalties, will start adding up and potentially put them out of business.
Here is a link to an article in Entrepreneur Magazine that is at the heart of why small and mid-sized businesses should be outsourcing their HR, in particular, PEO is mentioned as a more cost-effective way of doing business.
I have found another, third-party, website that talks about the true cost of labor. This link below will take you there. It delves a little deeper into the issue of unproductive work time, but you’ll get the drift.
With a PEO or other HR outsourcing model, you can expect your labor costs to be drastically lower than the 44% that this site highlights.
With all the labor regulation that is a major cost and time loss to business, especially in the restaurant and hospitality, PEO is a great way to cost-effectively remain compliant.
Here is an article in Fast Casual by the president of NAPEO (National Association of PEO), that outlines some key points and considerations for businesses in the restaurant industry considering hr outsourcing in general, and PEO in particular.
For small businesses, outsource HR to a professional employer organization (PEO) or other HR outsourcing solution. Leave the strategic HR to upper management and the day-to-day, time-loss stuff to your provider.