There are many misconceptions about professional employer organizations (PEOs). Often, one of them is that PEOs only deliver value for smaller businesses. But what about PEOs for midsize businesses with operational challenges? These business owners may ask:
- What value does a PEO bring to midsize businesses?
- How can a PEO serve as a strategic partner for growing businesses?
How can midsize businesses benefit from PEOs?
Once businesses reach the 50-employee threshold, expand into other states and municipalities or hire remote employees who reside elsewhere, they can be subject to more legal and regulatory complexities. Other challenges of growing organizations can also impede, such as business owners’ focus on serving customers and not having sufficient time to allocate toward HR responsibilities.
Often, when a business scales up, HR leaders and business owners tend to respond reactively in dealing with the introduction or increase of more complicated benefits questions, employee issues and compliance concerns. This can lead to more problems, including unintentional exposure to liability.
Research firm 3Sixty Insights took a comprehensive look at the power of PEOs in overcoming these HR challenges and becoming a strategic business partner for midsize organizations.
“HR leaders can quickly become consumed with new complexities in compliance, benefits administration and employee relations issues stemming from a larger workforce. In addition, challenges around leadership development, recruitment, retention of top talent and employee engagement become increasingly complex as the business grows and evolves.”
The Professional Employer Organization: Operational Solution and Strategic Partner for HR Departments in the Midmarket
5 strategic solutions provided by PEOs for growing businesses
1. Help mitigate risk
To aid in minimizing risk, and of course depending on the level of service outlined in the PEO-employer contract, PEOs can help:
- Provide guidance on everything from best practices, policies and procedures, to employee onboarding, training and development
- Simplify and oversee payroll administration
- Handle payment of federal employment taxes on employees’ wages
- Administer employee benefits
- Manage compliance with federal, state and local laws
As companies scale up to the middle market and navigate new challenges, this PEO support can be critical.
2. Provide better benefits
Benefits costs are continually on the rise, particularly health insurance – and businesses can struggle to contain these costs, especially as the size of the organization increases and regulatory requirements mount.
As a PEO client, your employees can gain access to broader benefits plans that often offer a broader array of benefits and features at a less costly price.
As the plan sponsor, PEOs are responsible for its administration and management, taking on:
- Vendor selection
- Price negotiation (including for multi-year agreements with fee caps)
- Enrollment
- Regulatory compliance across relevant jurisdictions
3. Offer advanced HR technology
PEOs take the time to understand their clients’ unique human capital requirements and compliance concerns — and are equipped to support businesses in achieving sustainable growth by leveraging HR technology.
Often, PEOs have their own technology platforms. Or, they can assist clients in selecting and implementing the right technology for their business. With this service, clients can:
- Automate and streamline formerly manual and tedious processes, thus enhancing efficiency
- Centralize employee information
- Enable deeper analysis of the workforce
- Empower proactive workforce planning
- Deliver a better, smoother employee experience with fewer hassles
4. Increase capacity for strategic initiatives
As companies grow, so must HR functions. PEOs can assist with the creation of a scalable HR infrastructure. This can involve the immediate deployment of proven HR processes, procedures and policies, especially around recruiting, hiring, training and development, and delivering a better employee experience.
As remote and long-distance work continues, it’s also important for a PEO’s infrastructure to be national in scope to best manage remote hiring and onboarding, benefits administration and compensation while adhering to local law.
“According to Gallup, businesses experience losses of $1 trillion annually in voluntary turnover. That’s a distraction for companies that don’t have a national infrastructure for talent that can flow from applicant tracking to touchpoints in the interview process and staying with them throughout their lifecycle.”
The Professional Employer Organization: Operational Solution and Strategic Partner for HR Departments in the Midmarket
5. Receive training and development
Building in-house expertise takes time, and a PEO can accelerate the process through knowledge sharing and training.
PEOs often provide HR teams with training and development on topics such as:
- Employee certification tracking
- Leadership development
- Ethics programs
- Performance management support (supervisor coaching, recognition program design, job description development and implementation of recruiting strategies)
“It’s a big relief for business executives to know that their PEOs have real coaches who are experienced HR professionals, because they don’t want to leave behind the people who helped them get where they are. They want to grow their HR teams’ skills and help their teams develop as managers to promote productivity and reduce liability.”
The Professional Employer Organization: Operational Solution and Strategic Partner for HR Departments in the Midmarket
Summing it all up
With PEO support, middle market HR departments can proactively manage liabilities and risks, take on more strategic initiatives and leverage the technology and infrastructure needed to scale efficiently. All of this helps growing businesses overcome the unique challenges of operating at the middle market level with an increased, perhaps more distributed workforce.
To learn more about the value of PEOs for growing businesses, download The professional employer organization: Operational solution and strategic partner for HR departments in the midmarket.