The acronym PEO stands for “professional employer organization.” These organizations help business reduce costs by allowing them to outsource the management of important company functions, such as workers’ compensation, payroll, employee benefits and human resources. By partnering with a PEO, a company can grow its bottom line and focus on its core tasks, such as marketing, production and customer service, which inconspicuously but effectively contribute directly to the quality of customer engagement of the company.
The Function of a PEO
When a company begins working with a PEO, the PEO takes over many of the company’s most cumbersome human resource responsibilities. In addition to handling everyday human resource tasks, the PEO also assumes some of the employer’s legal responsibility for human resource issues, such as unemployment and healthcare, thus reducing the employer’s level of risk.
Once the employer establishes his relationship with the PEO, the PEO begins functioning as a second employer for its clients employees. Instead of coming to their legal employer with human resource concerns, employees will go to the PEO. The PEO manages all of the company’s human resource dealings on a daily basis, and the company no longer needs to worry about the accuracy of its payroll or whether its healthcare plan complies with federal regulations. Many PEOs even offer a comprehensive benefits package for employees that allows the PEO’s clients to become more competitive within the industry.
Benefits of a PEO
The business industry is always evolving. Congress enacts new laws, such as the recent change to healthcare regulation, and businesses must alter their procedures to comply with the new guidelines. When a company is small, keeping up with the constant changes can be nearly impossible. Instead of focusing on their most important tasks, employees are forced to spread themselves too thin. Furthermore, because employees are inexperienced in these areas, tasks are not completed as accurately and efficiently as they should be.
When a company hires a PEO, most of these problems disappear. Instead of relying on its own overworked and under-prepared employees to handle unemployment insurance claims, payroll tax compliance, workers’ compensation claims and issues with employee healthcare, companies can rely on a PEO’s experts to take care of all of these obligations. Not only are these facets of the company’s operations dealt with more effectively, but employees also find themselves with more time to concentrate on activities that produce revenue for the company. Furthermore, all human resource management tasks are completed with efficiency, and the company’s bottom line improves.
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