If you’re a small business owner, handling human resources tasks can be a tedious time-suck. You went into business to make your idea a reality and connect with customers, not to file insurance paperwork, right?
Caring for your employees’ well-being is essential, but you don’t actually have to do it. Professional employment organizations, or PEOS, are businesses that take on your HR workload. They allow you to focus on making and doing, not emailing health insurance companies. If you use a PEO, you outsource your HR tasks the same way you might outsource graphic design, development, or customer service.
The PEO structure may seem odd, but it’s increasingly common: between 156,000 and 180,000 small or mid-sized businesses use PEOS, according to research by NAPEO.
How Do PEOs Work?
The PEO/small business relationship has a term: co-employment. The PEO becomes the “employer of record,” according to TriNet, a popular PEO. That makes the PEO legally and fiscally responsible for your benefits, taxes, and more.
You’re still in charge of all your employees, but you no longer have to worry about handling their HR paperwork. In exchange, you pay the PEO an agreed-upon percentage of your employees’ payroll.
Here are five specific tasks that a PEO can manage for your business.
1. Health Insurance/401k Administration
When you’re searching for health insurance for you and your employees, all the frustrating bureaucracy might make you throw your laptop out the window. PEOs have experience wading through piles of paperwork, though, and know which plans work best.
What’s more, they group small businesses together in order to leverage better healthcare and 401k options. Your business gains access to the same plans and funds that corporations use.
Unless you already know the ins and outs of 401k and medical benefits, a PEO is almost certainly savvier at administering them.
2. Recruiting New Candidates
If you don’t have an HR department of your own, you probably don’t have a team dedicated solely to recruitment. When you need to fill a position, either you or another employee must take time to seek out candidates, read resumes, and negotiate benefits. The process is exhausting.
When PEOs handle recruitment, they reach out across extensive employee networks and job boards to make sure that the most qualified candidates know about your position. They take care of reaching out to candidates, scheduling interviews, and performing background checks.
Once you bring a new hire on board, your PEO will onboard your newest recruit onto any benefit plans you have.
3. Payroll and Invoices
Payroll is another business chore that requires specialized skills. If you’re managing your own payroll, it’s easy to mess up the numbers, especially when it comes to withholding taxes.
PEOs automate the payroll process, so you and your employees receive auto-deposits every payday. They calculate federal, state, and local tax so that you don’t have to.
PEOs also generate invoices so that it’s easier for your clients to pay you.
4. Performance Management
Employee feedback and performance management is difficult. It might slip your mind until the end of the year, or you might not know how to start feedback conversations in a positive way.
Most PEOs maintain online platforms that let you capture feedback at any point so that you can look back on it when you need it. You and your employees can set goals, see how close you are to meeting them, and prioritize targets that need more work.
Pre-loaded forms give you starting points for feedback conversations. You can use prompts from PEOs’ platforms to shape your feedback into points your employees will be able to act on.
5. Employee Mediation and Reporting
No matter how hard you try, you might not be able to avoid employee conflict.
If differing attitudes threaten to derail your team’s hard work, look to PEOs. Some of them offer mediation services, which means that they act as impartial third parties. They make sure that workplace disputes are resolved in the most respectful way possible.
In difficult situations like these, a PEO can save a small business from falling prey to infighting.
PEOS Handle Complex Tasks (So You Don’t Have To)
PEOs stand in for HR departments. They take on all the work you might not have the time or specialized skills to do, from researching health insurance to tracking employee performance.
If you’re a small business owner, you may find that PEOs save you valuable time by streamlining complex processes.
Elizabeth Ballou is a content developer and marketer at Clutch, a B2B research and reviews firm in Washington, D.C. She writes about business process outsourcing and manages Clutch’s Twitter. Outside of work, she listens to an ever-growing list of podcasts. Contact her at firstname.lastname@example.org.