Why Your Small Business Needs a PEO

Why your small business needs a peo

There are a whole lot of good reasons to start or run a small business — making good on a lifelong dream, building a useful product, employing talented team members, making a difference in your industry.

But anyone with experience as a small business owner knows that the journey isn’t all fun and games. HR headaches come up more often than you’d like. Keeping up with changing legal requirements around employment, taxes, and insurance can turn into a full-time job. Administering payroll, and paying related taxes, is a doozy that never goes away. So is figuring out which benefits to offer your team, and how to fit them into your budget.

Faced with these HR and administrative headaches on a regular basis, it may be difficult sometimes to remember why you started your business in the first place.

That’s where a PEO, or Professional Employer Organization, comes in.

What is a PEO?

PEOs help small businesses take care of all that nitty-gritty stuff that’s crucial to your business being, you know, a legally functioning entity — but which you really don’t want to deal with on your own. Think payroll administration and related taxes, access to benefits, employment-related compliance, and more.

PEOs partner with small businesses under a co-employment contract, which allows the PEO to handle these areas, while you maintain oversight over all other areas, e.g., operations and day-to-day management of employees. PEOs are typically a great fit for businesses with between two and 200 employees. So if your business isn’t large enough for an in-house HR team — or if you have a small HR team that’s constantly underwater — a PEO can help ease the burden. PEOs can also help negotiate better health benefits and perks for your employees, at lower rates than you could get on your own.

How Can a PEO Help Your Small Business?

The back-office functions of a typical small business are inherently complex. There’s lots of paperwork involved, lots of deadlines and shifting regulations. Plus, it can be difficult to prioritize these tasks when you’re focused on operational issues that have a direct impact on revenue. The #1 priority of a PEO is to be a compliance and benefits expert. PEOs pride themselves on being on top of all employment-related concerns and requirements — and by partnering up with one, your business can be too!

Every PEO is different, but here are a few ways most PEOs can help small businesses.

1. Big Company Benefits (at Small Company Prices)

Health benefits and other perks are a key factor in retention and recruitment for small businesses. When it comes to job satisfaction, 92% of employees say benefits make a difference, according to a 2018 survey by the Society for Human Resource Management. A good benefits package can mean employees are less likely to look for a new job — while subpar benefits can send them packing.

But benefits are expensive — hence why many small businesses have threadbare offerings. Because the PEO model aggregates employees of many small businesses under one umbrella, PEOs have the buying power to negotiate affordable rates for high-quality benefits and perks. This includes medical, dental, and vision packages, but also commuter benefits, insurance and disability policies, 401(k)s, gym memberships, and more.

2. Easy-as-Pie Payroll

As your business grows, administering payroll gets more and more complicated, particularly when you add taxes into the mix. PEOs can help administer payments to all employees (full-time, part-time, hourly, salaried…) and many assist with vendor and contractor payments as well. PEOs can streamline your payroll through direct deposit and other methods, and also manage one-off payments like expense reimbursements and commissions. Most PEOs offer integrations with your existing finance software as well. Your PEO can also file payroll-related taxes on your behalf, saving time and ensuring your business stays compliant.

3. Compliance Without the Complications

For small employers, a PEO acts as a shield against government complexity. More than a third of small businesses get fined each year for making payroll mistakes. PEOs provide compliance support for payroll taxes, W-2 and 1099 filings, employment insurance like workers’ comp and state unemployment insurance, new hire reporting, and more. In many cases, they can even file your employer-related paperwork on your behalf.

4. An HR Helping Hand

For small businesses strapped for resources, joining a PEO is a cost-effective alternative to hiring an in-house HR professional or expanding your existing HR team. In addition to benefits, payroll, and compliance support, many PEOs have built-in tools to help you manage paid time off, onboard new team members, and store important employee documents securely. Some PEOs also have extensive content libraries so you can easily look up FAQs and best practices on thorny HR, compliance, payroll, or benefits questions. Look for a PEO with highly responsive customer support and easy-to-use tools for both HR professionals and employees.

How Justworks Can Help

Justworks helps small business owners take better care of their teams. In addition to all the standard benefits of a PEO, we’ve built simple, easy-to-use software that makes life easier for you and your employees alike. Our automated software allows you to manage payroll and compliance, and your employees to adjust their benefits policy as needed, without picking up the phone (or waiting on hold). Trust Justworks to handle the behind-the-scenes details — so you and your team can focus on building your business.

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