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.
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.
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.
Time Magazine’s cover story gives a light overview of the impact of the new healthcare bill and its impact for small businesses. Still waiting for more word from the PEO industry on how this will effect their top and bottom lines.
Here is a good article that starts the dialogue. Be ware that there is still a lot of time, and possible amendments to the plan, before any of this takes place. We are still unsure of how it will effect PEO’s as not definitive costs of plans have been discussed.