PEO Appeals vs. Reality

There are many things a small business owner needs to consider. On top of everything else you are working on, comprehensive HR and payroll might feel out of your reach. That’s where Professional Employer Organizations (or PEO’s) aim to come in. They claim to relieve employers of the responsibilities and liabilities of HR, compensation, payroll, benefits, and workers’ comp.

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What PEO's do is also termed a “co-employer” arrangement, where the small business outsources these key functions. If you are the small business owner, your employees would work under the PEO company while the PEO leases your workers back to you for a fee while providing HR, benefits, and whatnot. That sounds like it could take care of so many things for you, right?

Well, the reality of PEO’s, like everything, is that there are good ones and bad ones. We want you to be well informed before making any decisions that seem too good to be true, so let’s take a look at some of the appeals of a PEO and some realities that come with it and compare it to Journey Payroll and HR and what we offer.

In general, the appeal of a PEO is that the owner will have fewer responsibilities on their plate so they can focus on other parts of being a business owner, and there will be less turnover because employees will have access to better benefits. But could there really be a sense of belonging to a company that, as an employee, you technically don’t work for? In the shoes of an employee, if your benefits and pay are coming from the PEO’s name and not from the small business you work for, that could get confusing in the line of authority and benefactors. This is true regarding loyalty as well: it could be perceived that the PEO is the one who provides the most for their employees, while the business owner is not pitching in as much. The line is blurred between who the business owner is, who signs the paychecks, and who provides the benefits. Sounds pretty confusing for all parties involved. Here at Journey, we offer HR and payroll – without stepping on your toes. An HR expert is just a call or email away throughout your workday with Journey’s HRNOW.

Speaking of HR, another factor that attracts people to PEO’s is because they allege they take responsibility and full liability when it comes to your HR needs. In reality, that responsibility still falls on you, the small business owner. Sure, they will provide HR assistance by phone or in person when needed, but you’re still legally liable if anything should happen. Legally, both parties can be implicated in the event of an employment practice or workers' comp claim, and if you are completely reliant on your PEO’s insurance policy, you may lose control over the way the claim is handled – or, depending on your contract, you might have to hire and pay your own counsel. If you choose to partner with Journey, we can provide HR support for small business owners and include the best of both worlds — quality HR experts at a great value. Our HRNOW human resources services is the best of both worlds for your company’s HR needs — all the perks of having a dedicated human resource specialist without the price tag.

Another huge and intimidating process PEO’s will tell you they take care of is workers' comp. If you are a small business owner with more than one employee, you will have to carry workers' compensation insurance. To some people, it sounds so appealing to let someone else to handle because, once again, who has time for that worry? They will sell you that you will pay less in workers' comp because you will pool with all the PEO clients. Now here you need to do your research because in most states, you can only pool a self-insured portion of workers' comp. All states have different regulations when it comes to workers' comp, and the PEO you choose might not cover all the state regulations where your company operates. Researching your state regulation is one thing, but another is researching the PEO for you and your company’s safety. There have been many reports of questionable practices with PEO’s and this type of coverage: wire fraud, money laundering, and dividing up overpayments for their own pockets. Journey can also help you in workers' compensation with our pay-as-you-go method. Not only will this save you money, but it is more accurate as well. We integrate with many workers' comp insurance brokers and seamlessly incorporate it into your payroll processing.

Payroll is another important duty that PEO’s will tell you they take over after all the employees technically work for them. You, however, still need to send them hours, calculate overtime, employees’ wages, and bonuses. If you get any of them incorrect, you are the one who will be responsible. Payroll is one of the many things Journey does best. Not only do we take care of your complete payroll operations, but you also get your own dedicated payroll specialist that is readily available to give you the customer service you deserve! You’ll receive payroll submission reminders and cash requirement notifications each payroll, so you never have to scramble at the last minute.

This article was not to bash PEO’s, there are some good ones out there that might be perfect for you and your company, and we love to see it! At the end of the day, we root for small business owners to win, regardless of who they are working with. We just want to make sure everyone has a chance to make a well-informed decision on such a big part of their small business.

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We're looking forward to working with you and your business!