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PEO Benefits

The Ultimate Guide on PEOs

Table of Contents

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Benefits of a PEO

Whether you’re an SMB, a growing organization, or simply interested in saving time and money, there are many reasons you might partner with a PEO. Among them are nine essential benefits:

1 Cost Savings

PEOs operate at a larger economy of scale than many of their customers—this, coupled with their domain knowledge and expertise, enables PEOs to conduct tasks more cost-effectively than their customers could.

Just how significant is this difference? A PEO gives customers access to an entire professional team, but the annual cost of a PEO could be as little as half the cost of hiring a single employee. While some companies benefit from economies of scale gradually as their organization grows and matures, PEOs allow their customers to enjoy the benefits of a large-scale operation early in their organization’s lifetime.

One of the ways economies of scale can work to a PEO’s advantage is when it comes to employee benefits. Since PEOs often represent multiple customers, they can usually offer much better rates and terms on employee health insurance, retirement plans, and other benefits.

Another way PEOs can save customers money is by consolidating HR activities under one roof. This means customers only deal with one HR partner, as opposed to dealing with several service vendors such as health benefits brokers, life insurance brokers, workers’ comp consultants, and more.

PEO Pricing Simplified: A Guide for Business Owners

Learn exactly how PEO pricing works for your business.

2 Time Savings

The core function of a PEO is to perform HR tasks so that the customer doesn’t have to. This allows the customers the ability to spend more of their time and resources on other important tasks and projects.

One of the key benefits of a PEO is the tools and experience to carry out HR tasks more efficiently than customers alone. Not only is this a win for the customer and HR manager because they’re saving the hours they would have spent carrying out their HR duties, but it’s also a win for time-sensitive tasks like payroll and tax remittance.

3 Employee Benefits

One of the primary duties of a PEO is to administer employee benefits. These resources can include common benefits like health insurance and less common benefits like tuition reimbursement.

While the actual benefits offered by each company ultimately depend on its policies and resources, some common benefits administered by PEOs are:

  • Health Insurance: PEOs leverage their size and bargaining power to negotiate favorable terms on health insurance plans, including Preferred Provider Organization (PPO) and Health Maintenance Organization (HMO) plans, High Deductible Health Plans (HDHPs), and Point of Service (POS) plans.
  • FSAs and HSAs: Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs) are both types of tax-privileged accounts that allow employees to contribute pre-tax dollars toward healthcare expenses. FSAs exist to help employees pay for healthcare expenses not covered by traditional health insurance, while HSAs primarily help individuals enrolled in high-deductible plans (HDHPs) save for current and future healthcare expenses.
  • Retirement Plans: A PEO can administer a variety of retirement plans, including 401(k) plans; Traditional, Roth, and other types of IRAs; and even profit-sharing plans. Most PEOs will offer the a cost savings of a Multiple Employer 401(k) Plan, which offers the benefits of lower fees and less fiduciary risk for the worksite employer. PEOs also manage employer contributions to retirement accounts.
  • Life and Disability Insurance: Life insurance could include basic group term or supplemental coverage. Disability plans could include short- or long-term income replacement. Like other benefits, the specific life and disability insurance offerings of a PEO will vary between organizations, companies, and roles.
  • Paid Time Off (PTO): Types of PTO can include vacation days, personal days, holidays, sick leave, bereavement leave, parental leave (such as maternity, paternity, and adoption leave), and even time off for jury duty.
  • Employee Assistance Programs (EAPs): Though less common than other employee benefits, EAPs provide support and resources to struggling employees. This can take the form of therapy and counseling services, financial counseling, childcare, and legal assistance.

Customers who are already saving time and money by partnering with a PEO to provide employee benefits can also benefit from the PEO’s administrative support.

For example, open enrollment is a crucial period—it’s the time when employees have the opportunity to review and make changes to their benefits for the coming year. Open enrollment involves communicating and coordinating with the entire workforce, so it’s a significant administrative undertaking that happens every single year. PEOs help customer organizations by managing open enrollment including communication, education, assistance, and support.

PEOs also help with the insurance claims administration process. While the insurance providers are ultimately responsible for paying qualified damages, the company is responsible for the handling and processing of claims—a major task in and of itself. The good news for businesses is that PEOs can handle all the administrative work of processing claims on the customer’s behalf.

4 Payroll

Another key duty of PEOs is payroll administration.

Payroll administration involves many separate tasks, starting with employee onboarding and ongoing payroll tasks and duties. To accomplish these tasks, PEOs often employ Certified Payroll Specialists (CPSs), also known as Certified Payroll Professionals (CPPs).

Having a CPS/CPP on staff is one way that PEOs can demonstrate their commitment to high-quality payroll. To become certified as a payroll specialist, individuals must pass a certification exam and may be required to meet certain work and education requirements.

The specific tasks of payroll administration can vary based on the needs of the customer and the stipulations of the co-employer contract, but they generally include:

  • Employee Onboarding: PEOs gather information from employees and enter that information into a payroll system. Onboarding involves setting up direct deposit information, issuing credentials for time-tracking software, and documenting voluntary withholding preferences.
  • Time and Attendance: PEOs support customers by integrating time and attendance data with their payroll system. In some partnerships, PEOs deliver technology solutions for tracking work hours and attendance, while in other partnerships the PEO integrates with the customer’s existing system.
  • Periodic Payroll Processing: At the end of the pay period, the PEO uses the time and attendance data they’ve collected and together with the information they gained during employee onboarding, use it to process payroll. Payroll processing involves calculating wages, commissions, taxes, benefit contributions (such as a contribution to a retirement account that’s based on a percentage of each paycheck), and other withholdings. At the end of the payroll processing task, PEOs generate and distribute paychecks (or initiate direct deposits).
  • Tax Collection and Payment: As part of each periodic payroll process, PEOs calculate and withhold employment taxes. These taxes include federal, state, and local income tax, and Social Security and Medicare taxes. PEOs remit taxes according to each tax authority’s remittance schedule. Larger companies typically remit taxes more often than smaller companies that may only remit taxes monthly.

Compliance and Reporting: PEOs perform wage and tax reporting (both quarterly and annually), new hire reporting, unemployment insurance reporting, and state and local reporting. This allows companies to stay compliant while avoiding the administrative burden of compliance reporting.

Payroll Software in Action

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Case Study: Rapid Growth

As the demand from the community continued to soar, a local grocery store made the strategic decision to expand its operations to five additional locations. Witnessing the rapid growth of his small business, the owner embarked on a search for an organization that could not only streamline their HR processes but also optimize their newly expanded workforce.

BCN Services engaged in a comprehensive discussion to address their immediate need for employee training and development as well as establishing an efficient payroll system. The BCN team promptly initiated the creation of an employee handbook and implemented policies tailored to enhance their business operations and workplace environment. BCN Services also provided their team with direct deposit services, tax reporting, PTO management, and a fully web-based payroll system.

5 HR Administration

Beyond the administrative tasks involved in benefits administration and payroll processing, many of the day-to-day tasks of running a business involve HR administration. These HR administration tasks represent a significant workload for the customer.

Some of the tasks of HR administration include:

  • Developing and Maintaining Employee Handbooks: PEOs can help their customers create and update their employee handbooks. These documents outline the customer’s policies, procedures, and expectations, and must comply with regulations, such as Equal Employment Opportunity (EEO) laws and the Fair Labor Standards Act (FLSA).
  • Training and Development: While PEOs may conduct orientation training as part of the onboarding process, they can also conduct ongoing training on topics such as diversity, inclusion, and sexual harassment. Customers are more likely to conduct training that involves job functions and duties, while PEOs are more likely to conduct training related to ethics, safety, and compliance.
  • Performance Management: While a PEO’s scope of authority is different in each organization, they typically do not have hiring or firing authority. PEOs frequently assist with performance management, including identifying Key Performance Indicators (KPIs), setting performance benchmarks, and measuring employee performance.

6 Risk Management and Compliance

Regulations change frequently.  Many customers simply don’t have the time or resources to read and understand every piece of relevant legislation. For companies that want to mitigate risk and stay compliant without wasting resources, PEOs take the guesswork and legwork out of regulatory compliance.

PEOs can handle compliance and manage risk for their customers because they research and understand relevant regulations for human resources activities. Some of the other tasks PEOs can help their customers with include administering employee insurance and benefits, ensuring payroll and tax compliance, HR administration, workers’ compensation claims management, employee training and development, access to HR expertise, streamlined processes, scalability, and legal support.

To manage the regulatory risks that arise from HR activities, PEOs must be familiar with various labor laws, tax regulations, employment standards, benefit laws, data privacy regulations, and more. However, It’s important to note that while PEOs can help mitigate various risks associated with HR and employment, they do not eliminate all risks. Businesses should still clearly understand their contractual agreements with the PEO and actively participate in risk management efforts to ensure a successful partnership.

Case Study: Nursing Home During the Pandemic

When the pandemic first hit, an assisted living facility with more than 8 locations and 400 employees faced a daunting challenge in finding up-to-date and relevant COVID guidance for their staff. The management team was particularly concerned about vaccination eligibility and wanted to ensure their company’s protection in accordance with government mandates and restrictions.  

In Michigan alone, there are a total of 83 counties; Both state and individual counties have different compliance and regulations. The BCN Services team spent hundreds of hours to prepare for these new agendas and navigate the changing landscape of the workforce, based on customer need.

For weeks, our internal staff called county-to-county to become first on the list for vaccine eligibility. We educated the customer and spent days ensuring their business would remain profitable through the pandemic and provide for their employees.

7 HR Technology (HRIS)

Without a PEO partnership, companies must solve HR technology gaps by researching, licensing, implementing, administrating, and continuously updating their software. The worksite employer must also become trained on all levels of software operations and support, spending countless resources on becoming an HRIS expert. PEOs take on this burden by providing access to delivered and supported enterprise technological solutions, typically referenced as Human Resource Information Systems. (HRIS).

This enterprise technology handles:

  • Payroll
  • Benefits Administration
  • Time and attendance tracking and scheduling
  • Compliance
  • Reporting
  • Document management software
  • Recruiting
  • Self-serve employee and management portal (time-off requests, account management, benefits management, etc.)

The HR technology (HRIS) used by a PEO can save customers significant time and money. This is because the PEO team is comprised of experienced professionals who are trained to use the appropriate software tools. Since PEOs have already completed the research and training phases of HR technology, customers can piggyback off their success.

However, the HR technology savings that come with a PEO go beyond research and training. PEOs who manage large numbers of software licenses can secure more favorable terms for their customers. Software licenses can quickly become cost-prohibitive, so the best practice for new and growing companies is to take advantage of the HR technology offered by PEOs.

The best HR software is cloud-based, which provides PEOs and customers a greater degree of flexibility. Cloud-based software also aids in communication, so both the PEO and the customer can remotely access relevant information without exchanging physical documents. Because of this, cloud-based software is good for accountability, productivity, and efficiency.

PEO HRIS Software: Supercharge Productivity Now

Discover more about how HRIS software can help your business’ human resources management.

8 Workplace Compensation, Safety, and Loss Control

Although workplace safety may involve domains that a PEO isn’t typically involved in (such as manufacturing or retail sales), the ethical and regulatory implications of workplace safety make it relevant to PEOs. Workplace safety isn’t just about the day-to-day operation of a business—it’s also about protecting employees, complying with regulations, and mitigating the legal risk that could arise from lawsuits stemming from unsafe working conditions.

PEOs provide a managed workers compensation program to its customers, with risk management resources that record and manage work related injuries. The ability of a PEO and its carrier insurance to respond quickly to an injury often saves the customer both time and money. There are also cost savings by helping customers design light duty work to reduce claims cost.

PEOs perform compliance and worker injury record keeping for OSHA, the primary regulatory body that institutes workplace health and safety standards.

Though the practical implementation of workplace safety protocols will vary from industry to industry, PEOs are responsible for administrative tasks like creating safety manuals, ensuring safety protocols are in place, and providing safety training for employees.

Case Study: Skyrocketing Worker's Comp Claims

An organization in the pavement industry, consisting of 30 employees, faced a significant challenge with workers’ compensation claims that were negatively impacting their bottom line. The company’s existing risk management strategies were no longer sufficient to handle the growing number of workplace accidents and potential liabilities. Urgently, they sought comprehensive solutions that would safeguard their employees and their business. 

The dedicated safety and workers’ compensation team at BCN Services formulated an advanced compensation and claims management process. By partnering with a PEO like BCN Services, the pavement company was able to effectively reduce their workers’ comp premiums.

This was achieved by ensuring that their safety manuals were regularly updated with top-notch safety practices, providing comprehensive safety training for both current and new employees, implementing an effective return-to-work program, and handling all reporting and claims management. BCN’s commitment to ensuring OSHA compliance has resulted in increased productivity, improved employee morale, a decrease in accidents and injuries, and cost savings for the organization.

9 Talent Management

The co-employer relationship uniquely positions PEOs to benefit from employee success. While PEOs don’t directly share in the customer’s profit or loss, they do benefit from reduced turnover, increased customer satisfaction, and growing businesses.

Talent management includes the activities involved in promoting employee success, which includes the ways a PEO attracts, retains, and develops the customer’s shared talent. While the company’s organizational culture is ultimately up to the company, PEOs can work within their domain to improve employee outcomes.

The components of talent management include:

  • Employee Retention: PEOs promote employee retention by offering high-quality benefits, frequent and accessible communication, and fair compensation packages.
  • Recruiting Support: While PEOs rarely evaluate skill sets and determine operational fit for their customer, they can offer recruiting support in the form of resume screening, background and reference checks, and interview support.
  • Job Description Writing: PEOs leverage their industry expertise to help customers write compelling and concise job descriptions. In addition to using best practices for formatting and structure, PEOs can help ensure job descriptions use clear and legally compliant language to avoid misunderstandings and liabilities.
  • Job Posting: In the modern world, recruiting involves posting on job boards and recruiting sites. PEOs assist customers with two major tasks: creating job postings and posting openings on the appropriate sites.
  • Employee Agreement Design: In a co-employment model, employees generally sign two employee agreements: one with the customer (as the primary employer) and another with the PEO (as co-employer/employer of record). In addition to the employee agreement, PEOs can assist the customer with crafting their employee agreement with legally compliant language and relevant details.

Training and Interviewing Supervisors: In addition to the onboarding of employees, supervisors should receive ongoing training in ethics, safety, and compliance.

Case Study: Recruiting Great Talent

With a workforce of over 1000 individuals, a convenience store faced challenges in optimizing their recruitment and hiring procedures and improving the overall candidate experience. The process had become tedious and inefficient for their internal team to manage, prompting them to seek a more streamlined solution that would automate tasks and save valuable time and resources for the organization.

BCN Services had the perfect solution for this manufacturing client – an Applicant Tracking System (ATS). By utilizing BCN’s ATS system, the company experienced numerous benefits including time savings, improved organization, higher quality hires, increased applicant engagement, improved compliance, and enhanced efficiency. Given the company’s need to hire and manage a large number of employees, automated software was the ideal choice.

Our team of HR experts took charge of creating job board postings, managing applications, and scheduling interviews on behalf of the client. Centralizing all job candidates into one platform not only freed up location managers to focus on other important tasks, but also saved countless hours of screening and vetting applicants. Within a matter of days, our team successfully found top-notch candidates to fill the open positions.

Final thoughts

In Conclusion

PEOs offer comprehensive HR support, thereby greatly reducing their customer’s overall risk and administrative workload.

PEOs are unique from other types of HR support because they form a co-employment relationship with the customer. In this role, PEOs offer valuable administrative support, process payroll, administer benefits, and support the goals of the customer.

The services provided by each PEO will depend on the unique needs of their customer and the unique qualifications and offerings of the PEO. Since PEOs draw on an existing pool of experienced professionals, they can be a consistent, scalable, and invaluable resource for small to medium sized businesses.

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