In today’s competitive business world,owners must utilize every availableadvantage. The businesses that thrive instrong and weak economies work smarter,not harder to achieve sustained growthwithin the organization.
Many savvy business owners use a PEOor professional employer organization tostreamline their costs and handle backoffice and human resources operations.Every business must accomplishseveral crucial non–revenue producingactivities in an efficient manner, orrisk squandering the valuable time ofexpensive office employees. We canobserve a direct relationship between theefficiency of your time spent as a businessowner and the health of your bottom line.
My organization provides consultingservices to a large portion of businessowners who start out with greatintentions and a great plan. Many ownerspossess considerable capital and skillsin their specific trade, skills they oftenacquire while working for previousemployers.
Unfortunately when an ownerestablishes a business in modern times,he effectively establish two businesses,one that includes the revenue generatingactivities the owner started out toaccomplish, and the other which includesthe non–revenue producing activitiesthat the government forces employers toperform through federal employment,safety and labor law.
When using a PEO, an owneroutsources several key areas of that“second” business to the PEO, therebyreducing company liability andstreamlining operations. A PEO will allowyou the business owner, and your keyemployees to focus on revenue producingactivities instead of wasting valuable timeon non–revenue producing clerical work.
THE CO–EMPLOYMENT RELATIONSHIP
Small to mid–sized businesses often findthat human resources tasks, paperwork, andgovernmental filing can pile up swift and deep.Commonly the person responsible for humanresources (usually the owner or a generalmanager for the company) wears too many hatsreducing their overall productivity. Furthermore,administering human resources requires asubstantial knowledge of tax law, worker’scompensation law and many other areas thatmost business owners and managers simply donot possess. This reason alone prevents manybusiness owners from managing their realworkload, i.e. revenue producing activities; sothey can deal with mountains of complicatedhuman resources paperwork. A PEO eliminatesthese headaches in a professional and costeffective manner.
When a company enters into an agreementwith a PEO it establishes a three–wayrelationship between the owner, employees andthe PEO. Utilizing a PEO allows the owner andthe PEO to become co–employers, instead of thetraditional employer/employee relationship.
This beneficial relationship allows thePEO to provide the owner with employmentadministration relief in such areas as payroll,taxes, HR, worker's compensation insurance,safety and employee benefits management. PEOservices allow owners/management to enhancethe total quality of the organization, whichresults in greater efficiency and productivity.
The PEO charges a service fee to takeresponsibility for the non revenue–producingareas of a business. This service fee includesthe cost of payroll taxes, workers compensationinsurance and overhead costs. In most caseswhen you analyze the internal cost of providingthese services in–house, the PEO delivers aremarkably better solution by using economiesof scale through large numbers of employeesto drive down costs. PEOs can also eliminateitems, such as down payment on worker’scompensation insurance, fees associated withsetting up and maintaining a 401k, payrollservices and outsourcing of human resourcesand safety.
You will find that you attain better controlof your company with proper time and moneymanagement. In addition your employees willgain from access to a quality employee benefitprogram that helps motivate workers andincrease employee loyalty.
In a nutshell, the goal of the PEO is to relieveyou of the many time consuming and non–corebusiness functions, so that you can do what youdo best, run your company.
