The Pros and Cons of Using PEO Companies in 2020

Small businesses often find that the best way to stay on top of such tasks as managing employee benefits, recruiting, training and more is to hire a professional employer organization (PEO). These firms can handle many employer responsibilities for you on an outsourced basis, freeing up time for you to focus on your business.

As with any third-party resource, PEOs have their advantages and disadvantages. Check out a few of the pros and cons so you can make an educated decision on whether a PEO firm is the right choice for your business.

First, the Pros

1. People Management is Completely Addressed. As an employer, there are certain responsibilities you have to your employees, many of which are also required by regulations. If your business is small, you may not have the bandwidth to address all of these, but a PEO would be able to handle it all for you and ensure that you’re in compliance with all local, state and federal laws.

For instance, the PEO firm could oversee benefits administration, recruiting/onboarding, unemployment requirements, workers’ compensation claims, employee leave, drug testing, off boarding and much more.

2. You Only Pay for What You Use. If your business had to hire an HR and benefits department, you’d be paying the salaries and benefits for those staff members, but if you use a PEO, you’ll only pay for the time and services that you use. This way, you aren’t spending money on services you don’t actually need — you’ll only pay for what your business requires.
3. You Don’t Have to Invest in Tech. When you outsource your PEO, the third-party firm will invest in the technology and systems that you need to keep your HR department running smoothly. Due to that, you won’t have to buy expensive payroll and HR technology or additional computers for staff members.

Now, the Cons

1. Customer Service Can be Challenging. It’s likely that you won’t be the sole customer of your PEO, and therefore, you may have trouble getting personalized attention from the organization. Ensure that you partner with a company that has a dedicated rep who is assigned to your business so you won’t be sitting on hold with a customer service line if you need assistance.
2. Compliance Remains with You. Even if you outsource your HR and benefits responsibilities, your business is still responsible for maintaining a compliant program. Therefore, you should look for PEOs with compliance guarantees that ensure that any issues become their financial responsibility, and you should always review testimonials and reviews from other customers to ensure that your PEO firm is trustworthy and on top of all compliance guidelines.

3. Company Culture Can Suffer. When employees have issues that require HR or benefits experts, it can be a challenge to direct them to a third-party company. In many cases, businesses want to own the HR responsibility so they can maintain a strong company culture around it. Therefore, always use a PEO firm that shares the same culture and values you do to ensure a seamless experience for your employees.