Sometimes companies have trouble meeting their human resources needs, especially while also trying to increase profits. To assist in this area, many companies hire professional employer organizations (PEOs). When hiring one of these organizations, the company and its employees become employees of the PEO, and the company delegates many of its HR responsibilities to the PEO. Though the company still officially hires its employees, the PEO handles payroll, benefits administration, workers’ compensation, medical insurance and retirement accounts. Then, the company pays the PEO for its services (often a percentage of total salaries), along with an amount to cover the payroll for the employees.

Construction Workers

Advantages of Hiring a PEO

The following are the benefits of hiring a PEO:

  • Employers do not need to spend time and resources on HR tasks. Instead, they can focus on their core business and growing their bottom line.

  • PEOs can provide consistent administration for larger companies, and often improved technology resources.

  • Employers do not have to handle as many legal intricacies regarding HR tasks.

  • PEOs can negotiate better insurance coverage because of the volume of business that they cover.

  • Employers do not have to hire as many HR professionals in-house.

  • When the PEO assumes its client’s payroll into its own accounts, it also assumes the liability for clients’ employees because it is technically now the legal employer.

  • PEO assumes the liability of adhering to the legal tax and workplace standards. The PEO will ensure that its clients are knowledgeable concerning relevant standards in accordance with local, state and federal laws.