It's estimated that two to three million Americans are currently co-employed in a PEO arrangement. And PEOs have an 88 percent client retention rate due to widespread client satisfaction. These frequently asked questions provide some compelling reasons why the popularity of PEOs is growing. (With thanks to the National Association of Professional Employer Organization.)
What is a PEO?
Professional employer organizations (PEOs) enable clients to cost-effectively outsource the management of human resources, employee benefits, payroll and workers' compensation.
How does a PEO arrangement work?
The PEO and client company share and allocate responsibilities and liabilities. The PEO assumes much of the responsibility and liability for the business of employment, such as risk management, human resource management, payroll and employee tax compliance. The client company retains responsibility for and manages product development and production, business operations, marketing, sales and service. The PEO and the client will share certain responsibilities for employment law compliance. As a co-employer, the PEO will often provide a complete human resource and benefit package for worksite employees.
Why would a business use a PEO?
Business owners want to focus their time and energy on the business of their business and not on the business of employment. As businesses grow, most owners do not have the necessary human resource training; payroll and accounting skills; the knowledge of regulatory compliance; or the backgrounds in risk management, insurance and employee benefit programs to meet the demands of being an employer.
Do workers receive comprehensive benefits?
Because PEOs are able to obtain benefits at negotiated group rates, a PEO arrangement may be the only opportunity for a worker in a small business to receive Fortune-500-quality employee benefits, such as health insurance, dental and vision care, life insurance, retirement saving plans, job counseling, adoption assistance and educational benefits.