PEOs may not be a fit for every business under the sun. But, for growing businesses, they can provide welcome solutions to the new, more complex challenges that come with growth.
Employers with 50 or more full-time employees generally find themselves subject to regulations they likely didn’t have to deal with before they hit that milestone. There are additional requirements to comply with, such as those related to health care reform, once you cross that threshold.
So, if you’ve been led to believe that, after hiring “Employee No. 50,” you’re better off just building your own, fully staffed HR department rather than seeking the help of a professional employer organization – think again.
In reality, the co-employment relationship can help your business achieve success before you have 50 employees and then also help you remain successful after 50 employees, especially as you move forward in uncharted territory.
Growing pains are to be expected as you chart your course into an exciting (and sometimes frightening) future. However, there’s often more opportunity for continued success with a PEO by your side than without one.
Here are some compelling reasons why it makes sense to work with a professional employer organization long after your 50th employee has joined the ranks.
1. Cost containment
At first glance, the cost of a PEO for a 50-person company may appear about equal to that of hiring a capable, senior-level HR professional.
But what about the cost of providing benefits to that HR professional? And how much of your combined time will it take to build an internal infrastructure and get it running smoothly once you hire them? What about the cost of ongoing training and development year after year to keep their skillset current?
With a PEO, you get access to an entire team of HR specialists. These individuals bring diverse backgrounds in specific areas to answer questions for you and your employees. As a co-employer, a PEO takes on many of the tactical, repetitive HR tasks that bog you down each month or quarter. Think: payroll, employer taxes, benefits enrollment and management, etc.
This gives you and your team more time to focus on activities that generate revenue.
The right PEO can not only help you become more efficient – it can also help you stay up to date on ever-changing employment laws and trends. Co-employers share in certain risks associated with hiring and processing payroll for employees, which can help you avoid costly claims or legal consequences, while you remain in control of your business.
And when you have a multi-year client service agreement with a PEO in place, you can typically count on a chunk of your operating costs to remain static.
Note: Not all PEOs are created equal. Some charge a la carte fees for things like printing W-2s and additional payrolls. When shopping for a PEO, be sure to ask any co-employer you consider if their fees are all-inclusive – before you sign on the dotted line.
2. Balance of technology and human touch
It’s true – PEOs haven’t always been known for their state-of-the-art technology.
In the past, many of them focused almost exclusively on providing hands-on HR support from a real, live person. As a result, the technology was sometimes a step behind and not the most user-friendly.
Now, it’s different.
The best PEOs have retained their high-touch prowess and upgraded their tech game to match. All-in-one HR platforms, where employers and employees can access interactive tools across all topics, have replaced disjointed technology solutions that often led to a phone call with customer service.
From an analytical standpoint, a good PEO offers the metrics you need as well as the seasoned HR veteran to interpret what those metrics mean. Data is only as good as the people behind it, who evaluate it and then act on it.
For example, if the tenures at your company are low, you can lean on your PEO’s HR specialists and rely on their experience to help you fix it.
If technology is a priority for your business, make sure any PEO you work with has the right technology and service to support your business needs.
3. Different services become useful with growth
As your business grows, perhaps the biggest benefit of working with a PEO is simple: Partnerships can strengthen over time.
In a long-term PEO relationship, your HR service team truly becomes part of your organization. The more you work together on strategy and HR challenges, the more you understand each other. In return, they can make insightful recommendations based on history.
For example, strategic consulting and succession planning are two areas that take on greater importance with a company that has more than 50 employees.
What happens if you lose your key strategist or director of operations? How do you replace them and groom others for larger roles in the organization? How do you develop your company’s future leaders?
There will always be risks associated with building and growing a business. However, a PEO can offer the insight and guidance to help you minimize risks and overcome obstacles. There’s no reason to leave yourself open to HR-related compliance issues when there’s help readily available.
4. Strategic, proactive HR
Is trusting your HR in one person’s hands the smartest move? Even if you’re able to hire two or three people to develop your own HR team, there are some things you’ll need to consider first. Ask yourself the following questions:
- How long is it going to take to implement all the programs you’ll need for success?
- Will they have time to answer employee questions and build your HR infrastructure?
- How much time will be dedicated to proactive, strategic HR initiatives that impact your business?
A PEO can take care of many things you would have to pay a premium for with individual vendors or providers. For example, PEOs can provide salary surveys on demand for you.
In-house HR professionals may lack the experience or the resources to provide you with this same level of service.
If you have an all-inclusive type of PEO deal, make sure you’re aware of everything they offer and get the most out of what you’re paying for before considering doing it yourself.
5. Tailored, scalable solutions
The most reputable PEOs offer a range of services and solutions that can scale to adapt to your company’s needs as they evolve.
Maybe you’d like to give your existing HR department a boost and expand its capabilities. A professional co-employer organization can equip you with the scalable HR infrastructure to help make that possible now – and as your organization continues to grow.
And if, in the future, you find it necessary to downsize your workforce for whatever reason, a PEO can help with that, too.
That’s why it’s wise to choose your PEO carefully and consider those that offer scalable products and services. This will allow your co-employer to serve your business throughout its life cycle, greatly improving your odds of long-term success.
Want to learn more ways a PEO can benefit your business as it grows? Download our free e-book: HR Outsourcing: A step-by-step guide to professional employer organizations (PEOs).