What is a Professional Employer Organization (PEO)?

A Professional Employer Organization (PEO) is a firm that provides comprehensive HR solutions for small and mid-sized businesses. Businesses gain access to payroll processing, employee benefits, HR services, workers' compensation coverage, compliance assistance, and HR technology platforms through a PEO. Businesses can offload many administrative and HR tasks by partnering with a PEO, allowing them to focus more on their core operations and growth.

Key Benefits of Using a PEO

• Access to Fortune 500-Level Benefits: PEOs provide small businesses with access to high-quality employee benefits such as health insurance, dental and vision care, life insurance, and retirement savings plans, which are typically available only to large corporations.
• Expert HR Support: PEOs offer access to human resource professionals who help businesses comply with federal, state, and local employment laws. This support helps employees better understand their rights and responsibilities.
• Enhanced Productivity and Profitability: By taking over payroll, benefits, and HR services, PEOs enable businesses to increase productivity and profitability. Business owners can focus on their core missions and growth instead of getting bogged down by administrative tasks.
• Compliance Assistance: PEOs assist businesses in navigating the complex web of employment laws and regulations, reducing the risk of non-compliance and associated penalties.

Co-employment Explained

Co-employment is a contractual agreement between a company and a PEO, often called a client service agreement (CSA). This agreement divides employer responsibilities between the client company and the PEO.

In a co-employment relationship:

• The client company maintains direct relationships with its employees and is responsible for business decisions, day-to-day supervision, job assignments, employee reviews, and determining salaries and benefits.
• The PEO manages employment-related tasks such as payroll processing, payroll tax administration, employee benefits, HR services, workers' compensation claims management, and compliance assistance, and provides HR technology platforms.

Control and Decision-Making

• Ownership and Operational Control: The business owner retains full ownership and control over business operations. The PEO handles only employment-related tasks as specified in the CSA.
• Hiring and Firing: While the client company makes final decisions about hiring and firing, the PEO ensures procedures are followed appropriately and risks are managed.

Impact on Employees

When a co-employment relationship is established, employees experience minimal disruption. They continue to be employed by the client company, with the PEO becoming a co-employer for specific administrative tasks. This arrangement often results in employees receiving better benefits and more robust HR support.

The PEO Industry Landscape

WIDESPREAD REACH: PEOs serve over 200,000 small and mid-sized businesses, covering 4.5 million employees.

ECONOMIC IMPACT: In 2022, the total payroll processed by PEOs was $305 billion.

MARKET PENETRATION: PEO clients represent 17% of all employers with 10-99 employees, a significant portion of the small business market.

Conclusion

Partnering with a PEO can revolutionize how your business handles HR and administrative tasks. By leveraging the expertise and resources of a PEO, small businesses can provide their employees with top-tier benefits, ensure compliance with labor laws, and focus their efforts on what truly matters—growing the business.

About BestFit PEO Solutions

BestFit PEO Solutions, LLC was founded with a single goal: to help businesses navigate the increasingly complex world of professional employer organizations (PEOs). We are a team of seasoned professionals with over 100 years of combined experience helping businesses find and implement the best PEO solutions for their unique needs.

With nearly 500 PEOs in the United States alone, our team has deep connections within the industry and unmatched expertise. This enables us to provide customized financial analyses that save businesses time and money. Our comprehensive analysis ensures that our clients can confidently make informed decisions, which often lead to increased revenue and long-term success. Allow us to do the heavy lifting—schedule your no-cost PEO analysis today.

Ready to transform your business? Speak with a BestFit PEO Advisor today about how partnering with a PEO can benefit your company by visiting www.bestfitpeo.com.