To PEO or Not To PEO

We were visiting with a client the other day whose business has been growing very rapidly. Last year his company went from 2 employees to 10 and this year he is adding another 5 to 7 more employees. When a small business grows this fast, they face all sorts of new challenges.

Large businesses usually hire a human resource person to make sure the company stays compliant with labor laws, the hiring and firing of new employees, payroll, employee benefits and more, but many small business owners are reluctant to hire a staff person that is not an immediate profit source to their bottom line. While a human resource professional is very vital to any growing or established organization, the small business owner sees this job position as an unnecessary expense.

Enter the PEO or Professional Employer Organization. A PEO is an organization the takes the entire responsibility of human resources, employee benefits, payroll and retirement plans off the shoulders of small business owners. For a reasonable monthly fee per employee, a PEO will become your human resource director or team. For a long time, I was reluctant to consider a PEO for my clients. I viewed them as our competition and I didn’t want anyone stepping on our toes. But as the employee benefits world has become much more complex recently with health care reform and many States are cracking down on compliance issues (looking to increase their coffers by imposing hefty fines), it seems that PEO’s are playing a vital role for the small business owner.

We recently partnered with Prestige Administrators to help our small business owners that might need this type of service. We brought in our rep last week to speak with our client about how a PEO can eliminate many of his growing pains and I was quite impressed by the depth of services that a PEO brings to the table. What was even more impressive to me was that buying a group health plan through a PEO is about 25% cheaper than what we can offer. A truly significant savings for the business owner that is tortured by the high cost of health insurance!

However, a PEO is not for everyone and most PEO’s won’t even speak with you unless you have at least 10 employees. If you have 10 employees or more and you are looking for creative options for your business, a PEO just might be a good fit.