Evaluating the Professional Employer Organization (PEO) Model for Your HR

The Professional Employer Organization (PEO) Model is a co-employment model in which a company works with a selected provider of specific services as a partnership. In the HR world, a PEO is a relationship with a HR management benefits provider. A PEO shares responsibilities, risks and the overall workload in addition to serving as the ‘employer of record’ for your personnel.

ADP lists some of the advantages for hiring a PEO, including delegating payroll responsibilities, worker’s compensation, access to high quality care, and providing IT infrastructure for HR management. “Shared responsibility means you’re not facing the threat and impact of changes to laws and regulations and other compliance requirements alone.”

Ashley Smith, a contributor for Business News Daily, says that a PEO has the responsibilities regarding employee administration, while the company who has outsourced to the PEO is responsible for providing accurate information to the PEO, as well as managing employees on a regular, day-to-day basis. This co-employment model works well for HR as some of the more tedious or time-consuming responsibilities can be handled elsewhere in order to alleviate the most common workload pressures.

“From an HR standpoint, the infrastructure that a PEO can help build for the client improves effectiveness organization-wide by adding consistency and validity to employment practices. Additionally, many business owners express that the most challenging part of running their company is actually managing tasks associated with their employees, not their core business. When an issue involves an employee — whether it’s a question about benefits, a labor regulation, or even a direct deposit change — the business can improve efficiency by streamlining these questions back to their PEO point of contact for clarification or resolution,” said Jillienne Allgäuer, area manager of Paychex HR.

Allgauer also stresses the cost-effectiveness of utilizing a PEO, citing the fact that PEO’s can offer a buying power that really impacts worker’s compensation and health insurance, more so than a business can do on its own. PEO’s are highly valuable to HR and might be able to help your organization as it grows.

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