For most entrepreneurs, there comes a time when managing employees, keeping up with government regulations and searching for benefits plans begins to overshadow the joy of running their own business. Rather than focusing on what they do best, business owners often find themselves tied up in human resources (HR) related administrative tasks.

To help them get back to the basics of business, many owners have turned to professional employer organizations (PEOs) for relief from HR headaches.

According to the National Association of Professional Employer Organizations, 2 million to 3 million Americans are co-employed with a PEO, and the industry is growing at a rate of 20 to 30 percent annually.

For many small and medium-sized businesses it is more cost effective to turn to a PEO for help managing their human resources, employee benefits, payroll and workers’ compensation than it would be to hire HR professionals with experience in these areas.

According to Greg Clouse, vice president of service operations at Administaff, a Houston-based PEO, companies generally pay a percentage of their total payroll amount in exchange for PEO services.

Companies using PEO services also benefit by being able to attract and retain top talent with competitive benefits packages, which often include, medical, dental, vision and prescription plans; flexible spending accounts; 401(k) programs; 529 college savings plans; life and personal accident insurance; employee assistance programs and more. 

Other services provided by full-service PEOs include:

• Claims resolution
• Development of personnel policies
• Employment taxes
• Payroll processing
• Payroll tax filing
• Training and development course
• Workers’ compensation coverage
• And more
  

When a company enters into a co-relationship with a PEO, it transfers many of its liabilities to the PEO, shares others and maintains responsibility for the remainder.

When deciding if a PEO is the right solution for your HR headaches, Clouse recommends asking the following questions:

• Do you currently have benefits in place?
• Are your employees asking for benefits that you can’t currently offer?
• Are you paying too much for certain benefits?
• Are you spending a majority of your time managing your employees instead of your business?
• Is your office compliant with state and federal employment regulations?
• Do you have documented workplace policies and employee handbooks?
• Are your employees protected if they have a work-related accident?
• What hiring needs do you have for the next 12 to 18 months?
• Do you know enough about prospective hires before you make them job offers?
• Can you develop programs to retain employees?

Clouse also suggests checking the references of any HR services provider you are considering. Ask questions such as:

• How long did it take to transition to the PEO?
• Has the PEO helped streamline HR-related tasks?
• How did your employees feel about the co-employment relationship? Have they been affected positively or negatively?
• Were there any problems with the relationship? If so, how did your provider solve them?
• Do you feel you and your company and are better off working with your PEO?

“Most importantly, make sure you select a PEO that can meet all your needs, has a strong financial background and is a member of NAPEO,” Clouse concludes.