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Buying Guide for PEO Employee Leasing
Introduction
With the ever increasing competition amongst the various industrial players, businesses and organizations are coming up with creative ways to help them survive in the harsh business environment. One of such innovative strategies is employee leasing by PEO companies. The PEO Company takes charge of your Human Resource responsibilities which allows your business to focus on other growth agendas. Dealing with human resource management can be tasking and usually faced with huge risks such as legal battles and other administrative burdens that may hinder the growth of your business.
The Professional Employer Organization offers the employee leasing services that helps to relieve your company of legal and other administrative burdens that come with human resource management. By taking up the employee leasing services, the PEO Company becomes a co-employer of the personnel in your organization thereby taking up the responsibility of managing such employees.
Under the agreement, the PEO Company hires your employees and releases them back which transfers the employee liability to the PEO Company. The company reconciles the payroll of employees, secures their employment benefits, prepare and file employees' taxes and also secure workers compensation for them. The PEO assumes the overall human resource functions of your company and also ensures all the laws guiding human resource management are followed.
The biggest gains by the contracting company are reduced operational costs, reduced time and other resource wastage. The contracting company also as a bigger say in the employment market since qualified personnel are lured by the attractive packages offered by the PEO Company. The business is also able to retain qualified and experienced personnel thanks to the professional human resource services such as constant motivation and other performance enhancing schemes offered by the PEO Company.
Most people do not differentiate between the services offered by the PEO companies and the Human Resource Outsourcing (HRO) companies. While it is true that most of their roles match, the HRO manage the personnel as a third party and not as a co-employer. This means that the HRO Company does not bear much of the human resource management liabilities.
Purchase Considerations
An ideal employee leasing agreement should benefit both the employer and the employee. In such a case, the hiring company should pay attention to the following.
- If the PEO Company has a thorough and up-to-date safety and risk management systems. It includes compliance with all the industry regulations that guide employment and other regulation such as OSHA that ensure there is no discrimination in the course of employment.
- The services offered by the PEO Company in terms of payroll processing and remittance of taxes and tax statements as required by the law.
- The employment benefits offered by the PEO Company to the employees such as insurance covers and other benefits including the paperwork associated with such benefits.
- Complete Human Resource Management to ensure the business conforms to all the industry standards as regards the personnel management.
The employee leasing services can be used by all companies irrespective of their size or area of operation. The benefits that accrue to such agreements are immense to ignore.
Choosing the Right PEO Company
When sourcing for employee leasing services, one has the option to either approach a PEO Company or use the services of the brokers. Approaching an established PEO Company can limit your bargaining power since most of them set fixed premiums for their services.
Brokers, on the other hand, assess your business needs and try to match those needs with the different PEO Companies in the market. They do much of the research and negotiations which increases the chances of landing to a good employee leasing company.
PEO pricing
Most of the Professional Employee organizations begin the contract with a fixed initial setup fees that could be in the range of $1000 to $5000 depending on the type of the contracting company. From there the leasing company agrees on a fixed premium payable at every month that is usually a certain percentage of the payroll.
The premiums come in the range of 2% to 6% also depending on the industry. Companies with small payrolls may be charged higher percentages that huge organizations. Other charges may also come in so as to ensure the compensation costs for the employees are catered for. The PEO client service agreement is a special one and in most cases it is renewed annually to cater for changes in the market.
Buying tips
- It is advisable to sign employee leasing agreements at the beginning of the year. Doing it in the middle of the year may result in additional charges such as insurance that is a loss to the company.
- Take advantage of all the services you are paying for. Do not pay for services that you do not use, it is a waste of money for the business.
- Since PEO companies do not assume all the employee liabilities, it is important for the business to clearly understand its responsibilities to avoid conflict with the law.
- It is always important to discuss with the employees on employment benefits to clearly understand their needs.
- Take your time when choosing brokers because at times, they have a conflict of interests since they are paid by the PEOs.
- If you are considering outsourcing services for health benefits management, you may consider Administrative Services Only (ASO).