Top Reasons to use a PEO

Written by Blake Odom

President & COO

Applied Business Solutions

August 16, 2018

It takes time, resources, and adequate staffing to operate a human resources department well. Unfortunately, these are things that many companies don’t have. This frustration has caused them to look for innovative ideas to effectively manage human resources functions while pursuing growth and profitability at the same time. If you can relate to this struggle, contracting with a Professional Employer Organization (PEO) may be just the answer you have been seeking.
Why Your Company Should Use A PEO

What is a PEO?

A PEO can help your organization with several human resources functions. The most common services that companies need assistance with include:

  • Compliance issues
  • Creating employee manuals, training programs, and compensation programs
  • Cyber liability
  • Employee benefits and retirement programs
  • Employment practices liability insurance
  • Handling workplace safety training and enforcement
  • Managing COBRA health insurance coverage for terminated employees
  • Offering strategies for increased productivity
  • Payroll
  • Recruiting and interviewing new candidates, posting job openings, testing applicants, and conducting background checks
  • Routine functions such as address changes and employee status changes
  • Tax reporting
  • Workers’ compensation

While your company may opt to outsource just a few of these functions, it’s also possible to hire a third-party organization to act as your in-house human resources department. You need to evaluate what your current human resources department has the time and resources to accomplish and decide which of these services will relieve some of their burden. Some businesses, especially those with employees, find that outsourcing all human resources functions makes the most sense because it allows management to focus solely on company growth.

Benefits You Can Expect from Using a PEO

The two biggest reasons that companies choose to go this route are to save money and to free up time to pursue other business goals. Choosing to work with a PEO offers several other advantages as well, according to the National Organization of Professional Employer Organizations. Faster business growth is just one of these benefits. In the decade from 2005 to 2015, small businesses outsourcing some or all functions to a PEO saw a seven to nine percent increase in company growth compared to those that didn’t use a PEO.

Another thing to consider is that companies that get help with their human resources functions have an annual turnover rate 10 to 14 percent lower than companies that handle everything in-house. The typical company sees a turnover rate of 42 percent every year, but it’s just 28 to 32 percent for those that outsource to a PEO.

Perhaps most importantly, businesses that use a PEO close their doors 50 percent less often than companies that do not use one. The failure rate for businesses of all ages and sizes in the United States is eight percent every year. However, it’s just four percent for those that recognize the need to work with a PEO.

Do you feel so overwhelmed with managing your administrative tasks and want to give up? There’s no need to do that when Applied PEO is here to help. Contact us today to learn more about how we can help at (855) 792-2808. We’re available to answer your questions and help you learn more about how a PEO can benefit your company.

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What is Human Capital Management?

Human capital management (HCM) provides an overall strategy to hiring the right talent, managing performance and optimizing productivity.

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Applied Business Solutions has 75+ years of combined Payroll, Insurance and Human Resources experience with companies ranging from 1 to 2,500 employees.