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PEO White Papers

 Professional Employer Organizations: Fueling Small Business Growth

  • (Bassi & McMurrer, 2013)

“The evidence on employment growth suggests that PEOs are making it possible for their clients to grow more quickly than their peers – both other small businesses as well as all companies throughout the economy. This can be attributed to a variety of PEO-related factors discussed in this study. Employees in PEO arrangements have access to a broader array of HR-related benefits and services. Yet PEO clients spend less on HR administration than similarly-sized peers, freeing up money that can be reinvested in the business…”

Professional Employer Organizations: Keeping Turnover Low and Survival High

  • (Bassi & McMurrer, 2014)

“In the 2013 report, ?Professional Employer Organizations: Fueling Small Business Growth,? a comprehensive analysis of existing economic data showed that small businesses in PEO arrangements have higher growth rates than other small businesses, and small business executives who use PEOs are better able to focus their attention on the core business. In further exploring the impact of PEOs and their potential to help small businesses better meet the challenges of today’s demanding economic conditions, this follow-up study examines employee turnover and business survival rates for businesses using PEOs and compares them to national data available from the U.S. Bureau of Labor Statistics (BLS)…”

An Economic Analysis: The PEO Industry Footprint

  • (Bassi & McMurrer, 2015)

“Our previous research on a variety of measures has found that this arrangement yields significant benefits to PEO clients, as they grow more quickly than comparable other businesses, doing so with lower rates of employee turnover and higher rates of year-to-year business survival. Anecdotally, evidence points to a growing PEO industry driven by a rebounding small business sector, an increase in the use of outsourcing by small businesses, and the rise of complicated employment regulations such as the Affordable Care Act (ACA)…”

The State of the PEO Industry 2016: Markets, Value, and Trends

  • (Bassi & McMurrer, 2016)

“This report on the state of the PEO industry in 2016 is the fourth in NAPEO’s series of white papers designed to help the general public and small business owners better understand the economic impact and value of the PEO industry. It explores three main topics: the market for PEO services, the value that PEOs create for their clients, and trends currently shaping the PEO industry. It uses a variety of sources, including external data (from governmental and  ongovernmental sources), econometric analysis, and interviews with industry experts by the authors. It also draws on key articles, laws/regulations, surveys, and reports…”

 

 


Interested in learning more about the PEO concept? – visit our PEO 101 Hub for additional insights.

On the other hand, if you have seen enough and want to get in touch with a member of the Simploy team, submit a contact request and a Simploy associate will reach out to you shortly.

Simploy representatives meet with hundreds of business owners a year and when interacting with business owners, one of the questions we get asked a lot is: ?Is my business ready for a PEO??

Now, our sales department would like us to respond to this question with an abrupt, ?Yes! Of course it is!? but, in reality it’s not that simple. In fact, there are cases in which a PEO is just not the right fit.

Within this piece we will take a moment to outline the characteristics of a business that make it suitable for a PEO, and, we will discuss some of the business traits that prevent a PEO partnership from being successful. Ultimately, you know your business better than anyone and only you can determine whether a PEO is right for you. Our job is to breakdown all of the online chatter and make that decision simple for you.


 When is a PEO partnership a good fit?
We are routinely told just how beneficial our expertise has been to our clients, and we are proud of that. It was not until recently that we began to ask, why are some of our clients experiencing such incredible results and cultivating their PEO partnership, while our other clients (who are also growing) experience a lesser level of success. That inspired this piece and got us to think about the characteristics that make for a great PEO partnership.

When your business is growing
As your business grows it will be greeted by the additional tasks that expansion requires. Unfortunately, these are a massive drain on productivity (and profitability). It’s easy to understand that as your workload increases with fixed resources (manpower, time, etc.), you will become stretched and overextended.

If your business is currently experiencing growth in employees, or you expect to grow within the next few months, now is your time to get out ahead of the complications growth will bring. By partnering with a PEO, you can outsource the headache tasks and focus on what made you grow in the first place.

 

When your business is hiring
Like business growth, hiring (when not well managed) can be an incredibly time consuming struggle. If handled internally, hiring gives you two options: 1) spend valuable time to find the right candidate (which is very expensive), or 2) don’t spend enough time and run the risk of hiring the wrong candidate.

If your business will be hiring within the next twelve months, find a PEO, fast. The expertise possessed by PEOs will ensure you find quality candidates without having to spend huge amounts of time and money.

 

When your business is still fairly new
At Simploy we are lucky to be headquartered in a city experiencing an incredible entrepreneurial renaissance. Tech startups from across the world are opting to call our city home due to the startup infrastructure and culture here. This has blessed Simploy staff with additional opportunities to support passionate entrepreneurs as they form fledgling businesses.

They often ask us if it’s too soon for their new business to utilize a PEO, and, there is no easy answer to that question. If this is your concern, determining your suitability for a PEO will require some additional discussion. We invite you to reach out to the Simploy team for additional advice and guidance HERE.

Alternatively, head over to our article discussing PEO’s and Startups, HERE

 

When you make more than $15 per hour
As a business owner, you should rarely ever find yourself utilizing administrative software (QuickBooks, Sage, FreshBooks etc.) When you perform these menial tasks, you immediately turn yourself into a $15 an hour employee. Don’t. Your time as a business owner is far more valuable than that.

If the above statement fits your weekly routine and you find yourself completing clerical tasks, a PEO is in your interest. Outsourcing these tasks to an expert in that field will allow you to recover the time you would have wasted, whilst saving money.


 When is a PEO a bad fit?
When you have “1099 employees”.
We are sorry to be the bearer of bad news but, there is no such thing as a 1099 employee. A company’s workforce will either be made up of W2 Employees, or, 1099 Contractors. Unfortunately, the inaccurate classification of W2 employees as 1099 contractors makes it impossible to work with a PEO. A PEO relationship would see your employees become co-employees of your company and your PEO, but if your workers are classified as 1099 contractors, this is not possible.

 Note on 1099 Contractors
When an employee is incorrectly paid as a 1099 contractor, the employer is not expected to pay unemployment tax on that individual. This in turn results in lost government revenue. However, this exploitation is no secret and the government has proactively ordered auditors to hunt down this activity and stomp it out (through very steep punishments).

 

When you haven’t done your homework
Like any large decision, establishing a relationship with a PEO and trusting them requires a fair amount of due diligence. Do not use the first PEO you come across. At Simploy, we are confident in our model and conscious of what makes us great. If we are the first PEO that you have looked into, we are happy to let you take a look at the competition before partnering with us.

 

When your company is too big
Generally speaking, partnering with a PEO is no longer cost effective when your workforce exceeds 200 employees. At that stage, it could be in your interest to hire a dedicated HR associate.

If your company fits this description or is close to 200 employees, you should still get in touch with us. We will happily provide you with a side-by-side cost comparison as part of our quote. 


Summary
Determining whether a PEO is the right choice for your company is a decision that cannot be rushed. Almost every small- to medium-sized business will benefit from a PEO. Cases when this is not the case are extremely rare.

Nevertheless, take your time and read the articles within our PEO 101 Hub Page, we know how important it is that you come to a well educated decision.


Interested in learning more about the PEO concept? – visit our PEO 101 Hub for additional insights.

On the other hand, if you have seen enough and want to get in touch with a member of the Simploy team, submit a contact request and a Simploy associate will reach out to you shortly.

For some companies, outsourcing various administrative and human resources tasks may be more efficient than handling them in-house, or may even be necessary due to a lack of time, resources or expertise. Consider the advantages of an administrative service organization (ASO) if you want to outsource employment-related tasks.

  What is an ASO?

An ASO is an organization that provides administrative and human resources services for its clients; this is a simple way to outsource tasks that can be more efficiently handled outside the company.

ASOs can provide a variety of services for your company, including the following:
? Payroll?Direct deposit, W-2 processing, tax filing, reports, 401(k) administration and other tasks
? Human resources?Employee newsletters, help desk, handbooks, file maintenance, employee surveys, background checks, recruiting and other service options
? Employee benefits?Benefits enrollment, payment and premiums, COBRA administration and more

  ASOs Versus PEOs

ASOs differ from professional employer organizations (PEOs), which provide a more comprehensive package of services and include a co-employment arrangement. The co-employment arrangement in a PEO contract means that the PEO becomes the employer of record and the PEO assumes some or all of the risks and liabilities related to employment.

PEOs became popular in the 1970s and ’80s. ASOs emerged in the late 1990s as an alternative to PEOs that does not involve co-employment. The services offered by an ASO depend on the vendor, ranging from a few services such as payroll to many of the same services offered in a PEO model. ASOs typically offer more flexibility in what services are outsourced and allow the employer to retain all employment responsibility.

Aside from the issue of co-employment, another major difference between ASOs and PEOs is the fee amounts and how they are calculated. For PEOs, fees are typically a single amount for a comprehensive set of services that are bundled together, and fees are usually 2 to 6 percent of employees’ gross wages. With ASOs, fees are sometimes charged either per transaction or per employee, and you only pay for the services you want to use?no bundled services and accompanying fees.

ASOs can provide expertise and efficiency that can’t be obtained in-house, while still giving you more flexibility than a PEO. ASOs can cost as much as 50 percent less than PEOs both because you can pick and choose the services you want and because your company retains all employment risks and liabilities.

  Is an ASO right for your company?

Whether or not an ASO is right for your company depends on several factors. First, you need to consider whether you want or need to outsource administrative and HR tasks. If so, do you need a full-service contract or just a few tasks handled for you? If you’re looking for a complete package of services and are willing to enter a co-employment agreement, a PEO may be a better choice. ASOs might be the favored option if you want to keep more employment control and need to choose only a few services to outsource.


Interested in learning more about the PEO concept? – visit our PEO 101 Hub for additional insights.

On the other hand, if you have seen enough and want to get in touch with a member of the Simploy team, submit a contact request and a Simploy associate will reach out to you shortly.

Starting a company is not easy. It is a daunting process that requires an incredible investment of time, effort and capital. It is during this time that startup founders must leverage their relationships and sources of guidance to improve their chances of survival. A common surprise that startup founders fail to anticipate is just how much goes into HR. Whether it’s the increased levels of liability or the ever-growing number of employer regulations, accurately handling HR is a mammoth task that is almost always overlooked.

However, all is not lost. By visiting the Simploy learning center, you are on the right track. Within our learning center we have a plethora of articles aimed at guiding business owners so they feel comfortable making educated decisions.

Within this piece will we discuss several of the key benefits that a PEO will provide to a newly formed company. This will include the key benefits that PEOs provide to each and every client, as well as the unique benefits that a PEO can provide to a startup.


  PEO Benefits

Time & Opportunity Cost

Establishing a relationship with a PEO immediately frees up valuable time on your calendar. By outsourcing incredibly time-intensive activities to the experts, you can focus on performing the other tasks required of a business owner. The value of this should not be overlooked. If you pay yourself $60,000 p.a., every hour you spend performing a HR-related task, costs you almost $29!

When partnered with a PEO, you can expect the following to be entirely managed by the PEO:

  1. Workers’ Compensation, Safety & OSHA Management
  2. Government Compliance
  3. Recruiting, Hiring, Retention and Dismissal
  4. Training & Development
  5. Payroll (including PTO management, garnishments, withholdings, deductions, etc.)

As a startup founder, you know that time management is key to productivity and efficiency. With a small team of employees, you do not have the manpower to reap the benefits of specialization and instead are forced to each operate within varied roles. As mentioned earlier, a PEO will rid you of countless hours of non-revenue generating tasks, allowing your team to focus while you outsource the headaches.

 

Cost Savings/Economies of Scale

By partnering with a PEO and utilizing co-employment, a business owner can benefit from economies of scale that would have previously been unattainable. These economies of scale see cost savings in the areas of Workers’ Compensation & Benefits (401(k), Group Medical, Life, Discount Purchasing, Dental, Vision, etc.

For a startup, the economies of scale offered through co-employment are incredibly beneficial. Almost all companies begin as small entities which lack the purchasing power of established businesses. The economies of scale that a PEO will bring to you would otherwise be completely unattainable.

 

Hiring & Retention

As a PEO client, your ability to attract and retain talent will drastically increase due to three key reasons:

  • The quality of HR assistance provided to your employees improves. Simploy’s staff are true experts within their field and make a point to get to know your employees on a deep level. This results in your employees feeling valued which reduces their likelihood of leaving.
  • The aforementioned economies of scale allow you to offer competitive benefits packages. In the modern economy, benefits are highly important to those on the job market and offering a benefit package that exceeds your rival’s will attract quality talent to your company.
  • PEOs, like Simploy, pride themselves on their ability to accurately deliver payroll to their clients. Attempting to conduct payroll internally will increase opportunities for mistakes which can see your staff incredibly unhappy.

For startups, partnering with a PEO early in your business’s lifecycle will have long term benefits. By sourcing quality talent and harnessing their abilities during the early growth stages of your company, you can see rapid growth that would have otherwise been impossible. 


Summary

To summarize: the aforementioned benefits provide startups with an immediate competitive advantage versus their peers. A PEO, like Simploy, will ensure you are more productive than the competition, have better staff than the competition, and lower costs than the competition.

Those crucial competitive advantages have combined to create the following statistical fact: Companies that partner with a PEO are 50% less likely to go out of business. It’s as simple as that.


Interested in learning more about the PEO concept? – visit our PEO 101 Hub for additional insights.

On the other hand, if you have seen enough and want to get in touch with a member of the Simploy team, submit a contact request and a Simploy associate will reach out to you shortly.


In the modern world, there are more abbreviations than we know what do with! BBB, ACA, ERISA, FICA, FUTA, and all the rest, get incredibly confusing at times. Unfortunately, all those abbreviations can make it tough to discern the differences between two incredibly beneficial human resources outsourcing (HRO) strategies: PEO & ASO.

Within this article, we will provide a thorough definition of both PEO and ASO, describe the major differences, and finally discuss how you can determine which is right for your company.


What is a PEO?

A PEO is a professional employer organization. PEOs provide outsourcing solutions to their clients. These outsourcing solutions typically concern Human Resources Management, Payroll, Compliance, Workers’ Compensation, Safety & Benefits. PEOs provide reductions in liability as well as reductions in net labor costs and the time spent dealing with non-revenue generating HR. This culminates in the client achieving maximum productivity and increased profitability. The secret ingredient that allows for PEO arrangements to yield such fantastic results is Co-employment.

Co-Employment

Co-employment is a legal construct that involves the sharing of employer responsibilities between a PEO and client. Through co-employment, workers are technically employed by two separate entities, you the business owner, and a PEO. Under a PEO arrangement, the client company remains the common law employer, but the PEO becomes the employer of tax record. Thus, with some exceptions, wages are reported under the PEO’s Federal Employer Identification Number (FEIN). The co-employees may be eligible for certain benefits offered by the PEO.

For more on co-employment and some of the common misconceptions related to co-employment, visit our article HERE


What is an ASO?

Administrative service organizations (ASOs) provide a similar service to that of a PEO, with a key difference. That being, under an ASO arrangement co-employment does not exist. The employees of the client company remain legally employed by the client company, not only as the employer of record, but also for tax purposes.

Outside of this, PEOs and ASOs typically offer many of the same services. An ASO may manage payroll, provide compliance guidance, govern workers’ compensation claims, etc. Ultimately, this will yield many of the same benefits (time savings, accurate payroll management, etc.)

ASO arrangements can be incredibly beneficial to business owners and the model is very attractive, especially to those businesses which already feature a dedicated HR professional(s). In these situations the ASO can operate in addition to incumbent HR staff and provide targeted assistance towards a  specific need.

Still unsure as to what an ASO is? Visit our article HERE for a more in-depth explanation


  PEO vs ASO: Major Difference

The absence of coemployment under the ASO model prevents the PEO from becoming the employer of record for your workforce. Co-employment allows for the amalgamation of businesses into large buying groups which, in turn, deliver economies-of-scale derived cost savings in the realms of Workers’ Compensation & Benefits. Without co-employment, the potential ROI from an ASO will almost always be less than that of a PEO.

For more on co-employment and some of the common misconceptions related to co-employment, visit our article HERE


  PEO vs ASO: Other Differences

Liability & Risk Apportion

Under an ASO framework, employer liability falls solely on the business owner/common-law employer.Alternatively, under the PEO model, some forms of liability are shared between both parties. This is a very attractive feature of the PEO model that results in a fiduciary relationship between the PEO and employer.

A la carte

The ASO model allows for the construction of customized service offerings on a case-by-case basis. Whilst this often results in a more convoluted billing process and reductions in clarity, the freedom to pick and choose which services your business harnesses exists. Alternatively, under a PEO model, for the sake of simplicity a single, all-inclusive, service package is offered. This can create a situation in which you pay for services that you do not utilize. However, an innovative business owner will recognize the value in these services.

 

  PEO vs ASO: Which is right for you?

Ultimately, this choice is a simple one. As a business owner, you must consider how much of the PEO model you intend to utilize and evaluate their value. Should you intend to harness the PEO’s expertise across most of the following: HR, Payroll, WC & Benefits, a PEO is probably the right choice for you. Alternatively, should you only see yourself wanting to capitalize on their expertise for select services, then, an ASO might be worth exploring.

With that said, you are in luck: Simploy possesses both a PEO and ASO offering. Reach out to us HERE and a member of our executive team will consult with you to determine your best fit.


Interested in learning more about the PEO concept? – visit our PEO 101 Hub for additional insights.

On the other hand, if you have seen enough and want to get in touch with a member of the Simploy team, submit a contact request and a Simploy associate will reach out to you shortly.

?How much do you charge?? is a question that we hear a lot at Simploy. We interact with thousands of prospects a year and they are always price conscious. This is no surprise. As humans whether we are buying a candy bar, a television or a home, price is incredibly important. Unfortunately, when it comes to ?how much do you charge??, there is no simple answer.

Every partnership between PEO and client is a unique arrangement that will have a unique cost. Therefore, this article cannot simply provide a list of prices like a restaurant menu. If only it were that simple! Instead, we will outline the different variables that make up a PEO’s cost structure and discuss how you can ensure your PEO relationship is as cost-effective as possible.


  What makes up a PEO’s price?

Every PEO quote is unique and the different factors that make up a PEO’s price structure can vary. However, there are several factors that every price calculation will include. Some of these components are purely pass-through charges which your business must pay, regardless of whether you use a PEO i.e. FICA, State Unemployment Tax (SUTA) and Federal Unemployment Tax (FUTA).

Within this portion of our guide we will address every factor that determines a PEOs pricing structure. After reading this, when you talk to a PEO, you will be better educated and able to make the best decision for your company.


Taxes: FICA (Social Security), FICA (Medicare), SUTA & FUTA

?Tis impossible to be sure of any thing but Death and Taxes,? – Christopher Bullock (1716)

As Mr. Bullock expressed back in 1716, we cannot escape taxes. If your business aligns itself with a PEO, or attempts to operate without a PEO, the charges described in the table below must be paid regardless.

Nobody likes paying taxes, but, what’s wonderful about these four components of PEO pricing is: as the employer you already know what you are paying. Therefore as a business owner/employer, you can easily determine any tax-based savings that a PEO will provide.

SUTA Tax Savings

State Unemployment Tax (SUTA) varies from company to company. When a company is formed, it is assigned a SUTA rate depending on the state which it calls home. However, as time goes by, that rate can increase as employees leave the company and claim unemployment.

In some states, when a company partners with a PEO and harnesses co-employment, they are subject to the PEO’s SUTA rate rather than their own. This can result in tax savings.

 

Tax Rate (Percentage of Payroll)
 FICA Retirement 6.20%
 FICA Medicare 1.45%
 Federal Unemployment Tax  (FUTA) 0.60%
 State Unemployment Tax (SUTA) Varies by State
 Additional Local Taxes Applicable in certain geographic locations
 Total (Before SUTA & Local  Taxes) 8.25%

 

When a PEO charges a service fee calculated as a percentage of gross payroll, the above percentages will always apply.


  Workers’ Compensation Insurance & Risk Mitigation

The provision of quality risk management solutions and Workers’ Compensation insurance is a principle of every PEO and the cost of workers’ compensation insurance is directly correlated to the level of danger involved in that role. For instance, a clerical office employee will pay approximately $0.25, per $100 of wages whereas workers’ compensation insurance for a roofer will be considerably more expensive.

Co-employment allows PEOs to aggregate their clients into a large buying group before sourcing WC coverage. This creates levels of economies of scale that are incredibly cost effective. Clients are then charged WC premiums on a pay-as-you-go basis to ensure accurate premiums are paid. Ultimately the cost of WC through a PEO should always be less than any other provider might offer.

For more information on Workers’ Compensation, visit our Workers’ Compensation Master page HERE


  Administrative Fee & Other Charges

Outside of taxes, workers compensation and the PEO’s margin, there are a huge array of potential charges that will make up a PEO’s price structure. These charges range from employment practices liability insurance, employee assistance programs, life insurance coverage, pre-employment drug testing, on-site employee training classes, job candidate sourcing, etc.

Not unlike purchasing a car, these extras can quickly see your PEO costs rise. To ensure you are not faced with a nasty surprise when you get your first invoice be mindful of whether the PEO charges extra for these services. And, if they do charge for them, be sure to have the PEO disclose the itemized cost.

The best method to overcome the risk of small fees piling up is: use a PEO that charges an annualized, all inclusive, service fee. By aligning yourself with a PEO that charges an all-inclusive service fee, you can be safe in the knowledge that you will not receive an expensive surprise in the mail. Additionally, when operating this way liaise with your team of PEO partners to ensure that you take full advantage of their service offering and truly harness their expertise.


Summary

Breaking down PEO pricing, like building a home from scratch, is very complex. Just like a bespoke home can be comprised of a unique array of rooms; every PEO calculates their price in their own unique way. However do not get discouraged, there are several core components that every PEOs pricing structure will be made up of. 

They are:

 FICA (Retirement & Medical)  7.65%
 Federal Unemployment Tax  0.60%
 State Unemployment Tax  Varies by employer
 Workers’ Compensation Insurance  Varies by job role
 Additional Charges*
 PEO Administrative Fee  1.50-2.50%

*Assuming the PEO does not offer an all-inclusive structure.

Therefore, it is possible to get an approximate feel for how much a PEO relationship will cost your business.

To truly conduct cost benefit analysis and calculate whether a PEO will be a good fit for your business, it is important to consider the benefits that PEOs provide to their clients. Whilst these benefits can be hard to quantify we have outlined those benefits in an additional article.


Interested in learning more about the PEO concept? – visit our PEO 101 Hub for additional insights.

On the other hand, if you have seen enough and want to get in touch with a member of the Simploy team, submit a contact request and a Simploy associate will reach out to you shortly.


 

Co-Employment is simply the sharing of employer responsibilities between a PEO and its client.

Through co-employment, workers are technically employed by two separate entities, you the business owner, and a PEO.

Under a co-employment arrangement the PEO carries primary responsibility for traditional Human Resources functions. The exact mix of tasks handled by the PEO can vary, but a PEO typically manages payroll, compliance, benefit administration, workers’ compensation, unemployment claims & the pre-employment process (hiring, onboarding, etc.).

Co-employment also allows PEOs to significantly reduce a business owner’s liability by staying ahead of regulatory changes and by handling compliance issues, including workers’ compensation claims, unemployment claims, mediation, reporting and many other concerns. While PEOs utilize their unique skillset to manage those tasks, the business owner is still responsible for coordinating daily work, making hiring/firing decisions, setting pay rates, and completing the other tasks necessary to run a business.

 


  Co-Employment & Common Misconceptions

Now that we have clearly outlined what co-employment is and what it means for your business, read on to hear exactly what co-employment is not. In the following, we will clear up a few common misconceptions concerning co-employment and answer some frequently asked questions. Similar to many other topics, information on the internet is not always reasoned and informative. So business owners may become misinformed through no fault of their own.

 

If I partner with a PEO, will I lose control over my company?
Far from it. By outsourcing tasks that owners spend on non-revenue generating tasks, control of their business increases. With fewer distractions, owners can focus on what’s important to their business’ success and take greater control over those factors.

Can I fire a co-employee?
Of course. An owner is absolutely able to dismiss an employee. However, dismissing an employee is a delicate situation that carries with it a series of risks. In order to protect owners and their businesses, we encourage them to reach out to their PEO representatives before dismissing a member of staff. That way their dedicated HR support team can provide guidance and coaching on how to minimize any negative fallout.

What are the risks of co-employment?
Under some laws, both parties in a co-employment relationship can be held responsible for some regulations. The Fair Labor Standards Act is the most prominent of these. If a worker is not paid properly, the Department of Labor can hold both co-employers responsible.


Summary

Co-Employment is at the heart of the PEO model – the legal construct that allows Simploy to provide amazing results. We recognize that deciding to partner with a PEO is not a small decision. We developed this article because it is important that you understand co-employment.

Co-employment is a partnership, not unlike a pilot and co-pilot. Both work with each other to complete their mission. Furthermore, both have different responsibilities; while the pilot steers the co-pilot navigates. To take this example further, the business owner is the pilot, driving crucial day-to-day activities. And the PEO serves as the co-pilot, completing specialized tasks and supporting the overall mission. Both are invested in achieving a common goal and working toward that end. But ultimately, the pilot is in the driver’s seat, while the co-pilot provides assistance no matter where the pilot decides to go!

 


 Interested in learning more about the PEO concept? – visit our PEO 101 Hub for additional insights.

On the other hand, if you have seen enough and want to get in touch with a member of the Simploy team, submit a contact request and a Simploy associate will reach out to you shortly.

Unfortunately, at Simploy, we hear this question far too often despite the PEO industry combining for annual revenues over $140 billion. 

Professional Employer Organizations (PEOs) are incredibly beneficial for small- to mid-sized businesses, however, the concept is relatively young and a lack of awareness exists. It is the long-term goal of the Simploy Learning Center, to educate business owners regarding the PEO concept, in order to assist with the growth of their businesses. 


  Professional Employer Organizations – Defined

The National Association of Professional Employer Organizations (NAPEO) defines a PEO as a provider of ?comprehensive HR solutions for small and mid-size businesses.? At Simploy we expand this definition and take it one step further.

Internally, we define a PEO as an ?intimate and trusted partner, with extensive knowledge of our client’s business, allowing for the provision of comprehensive HR solutions and expert consultative support across HR, payroll, workers’ compensation & benefits.?


  Brief History of PEO

The roots of the PEO industry can be traced back to the formation of ?employee leasing?. Employee leasing allowed companies to ?lease? back their own employees from an employee leasing company (ELC). Many of the HR functions crucial to a business’ success were then provided by the ELC. Initially employee leasing succeeded and allowed for increased efficiency. However, in time, the concept was exploited as a means to allow business owners to maximize their retirement contributions without offering the same to their employees. In response to this, new regulations were created to prevent misuse of the concept.

Whilst these regulations served a valid purpose, unfortunately, many of the regulations implemented proved to do more harm than good. As each newly formed regulation was imposed, the resources required to stay educated and compliant increased. This created an environment in which business owners were forced to devote vast amounts of time to the various non-growth generating functions of their business, just to stay ahead of the curve.

In response to this, the PEO was born, and, the desire to recapture time required to deal with HR-related tasks is still one of the main reasons business owners use PEO services.

 


  How does a PEO work? It’s called “co-employment.”

PEOs consistently provide incredible benefits to their partner companies by applying the foundation of the PEO model: co-employment.

Co-employment is the sharing of employer responsibilities between the client and the PEO. Within a co-employment relationship, employers and employees become part of a large buying group yielding economies-of-scale and related cost saving for the client company. These savings, combined with the PEO expertise, make the PEO offering very valuable to business owners.


  How much does a PEO cost?

 For a thorough breakdown of PEO pricing, visit our article HERE.

PEO service fees include a few components, some of which employers are already paying:

  • Federal Insurance Contribution Act: Retirement
  • Federal Insurance Contribution Act: Medicare
  • Federal Unemployment Tax
  • State Unemployment Tax
  • PEO Administrative Fee

Under the simplest PEO pricing, the bundled model, these components are combined to create a percentage-based service fee.


  Will a PEO benefit my company?

All employers should ask this question. Simploy can provide analysis and other information to help employers assess the benefits of a PEO relationship. Employers can also look at other indicators – information about how PEOs have improved other client companies.

However, we are here to help you make that decision and offer two methods assist you:

1) Refer to the statistics

For the business owner with an empirical mind, we invite you to look at the statistics. Historically, research studies have shown that Simploy provides results for companies as follows:

 

  1. Simploy clients are 50% less likely to go out of business
  2. Simploy clients experience 32% less turnover than their competitors
  3. Simploy clients grow 9% faster than their competition
  4. A conservative estimate (based on information from Bersin & Associates) is that PEO clients enjoy a 21% saving on HR administration.

 

2) Reach out to a member of the Simploy team.

By following this LINK and completing the form, an internal member of our team will  reach out, gather some information and objectively analyse your situation. We can provide you with a side-by-side, dollar-for-dollar comparison of what a PEO partnership would look like.


   FAQ’s

How big does a company need to be to use a PEO?
The answer to this question varies. A PEO’s appetite for smaller clients varies among providers, and many of the larger PEOs will not align themselves with companies with less than 5 (or sometimes 10) employees.

 

What is the difference between temporary staffing services and a PEO?

A temporary staffing service recruits and hires its own employees (not co-employees). The service then assigns those employees to clients in order to supplement the workforce for special work situations, e.g. employee absences, temporary skill shortages or seasonal workloads. These workers traditionally account for a small percentage of the workforce.

PEOs do not supply labor to worksites. PEOs co-employ existing workers and provide services and benefits to both the employer and the employees.

 

When is the best time of the year to partner with a PEO?

?The best time to plant a tree was 20 years ago. The second best time is now.? – Chinese Proverb

While the Chinese proverb listed above does a great job of beginning to answer this question, it must be added that many PEO clients find it best to partner with a PEO:

  1. At the beginning of a fiscal quarter
  2. When the current WC policy is up for renewal
  3. When changes to the workforce are anticipated (e.g. growth, additional locations, etc.)

 

Will my employees feel like they work for someone else?
Not at all. Historically many of our co-employees are thrilled at the prospect of improved HR management. And nothing changes with regard to reporting structures, assignments, hiring/firing, wages, etc.

 

Where can I find a list of reputable PEOs?
The National Association of Professional Employer Organizations (NAPEO) has created a list of reputable PEOs which can be found HERE.

 

How many businesses use a PEO?
PEOs provide services to approximately 180,000 businesses, co-employing around 3 million workers.

 

Does a PEO arrangement impact a collective bargaining deal?
No. PEOs work equally well with union and non-union affiliated companies.

 

Will I lose control of my business when using a PEO?
Without question, the biggest misconception based upon the co-employment model is that there will be a loss of control. This is an unfortunate misunderstanding. In a PEO relationship, business owners always retain control of their companies.

At Simploy, as your trusted partner, we only ever look to support your business’ goals. While we might provide advice and guidance concerning HR issues, the ultimate decisions are yours.


Interested in learning more about the PEO concept? – visit our PEO 101 Hub for additional insights.

On the other hand, if you have seen enough and want to get in touch with a member of the Simploy team, submit a contact request and a Simploy associate will reach out to you shortly.



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