Overwhelmed with HR Operations? Outsource with a PEO
I stumbled upon Administaff while talking with a small business client on Friday. It really turned me on to the whole idea of a PEO (Wikipedia Article). Essentially, as a small business owner you can contract a third party to be the employer of record for your employees. They manage your payroll, benefit packages, and other HR related functions you don’t want to deal with. What a novel idea. I’m sure it’s making a lot of people rich (Looks like 2006 was a good year). These are the win win relationships that make small businesses better. This is definitely something I’ll consider when I’m looking to hire employees.
The only thing I couldn’t find is how cost effective it is. I’m sure there’s a significant cost, but the convenience of the whole relationship must make it worth your money.
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PEOs can reduce the overhead cost of many companies by devoting time to the core tasks they do best.
NetPEO (www.netpeo.com) helps small to medium size companies evaluated the right options avialble for thier specific needs.
A free anaylsis can be requested here http://www.netpeo.com/peoservices_inquiry_peo.html or by calling 866-463-8736.
Dan, you came across one of the biggest secrets among entrepreneurs and small business owners. There are over 700 integrated HR Outsourcing companies across the United States. Some offer a comprehensive level of services which includes a choice of quality health, dental, and disability plans at affordable rates, 401k plans, leading HRIS platforms, and expert HR compliance and support services.
Other companies just provide low cost payroll services and workers compensation coverage. Fees range from $1000 - $1500 per employee per year for a high level service firm. You can find providers for $800 and less, but don’t expect much more than basic services.
Comparing the fees between PEOs or employee leasing companies can be very challenging. Business owners should consider the services of HR Outsourcing consultants before signing any agreements.
A PEO may be a great solution for your small business, but be sure to know what you are paying for. As noted in the previous comments, you may be receiving limited services by a provider that really is just delivering payroll and insurance coverage for your employees.
But let’s face it, as a small business owner you are competing with larger organizations with more comprehensive “services” from a HR perspective; and you want to offer the same. See that the PEO not only offers you the administrative relief you are looking for (payroll, benefits administration etc) but also inquire about the technology platform they are using for their Human Resource Information System (HRIS). Tools like employee and manager self-service may be included in their price along with other bundled applications that may benefit you and your employees.
From a pricing perspective, ask how their costs are calculated. Typically, they are presented as a per employee per year or a percent of your gross payroll. Ask if they are flexible on the model because pending on the type of business you are (employees receiving commissions/bonuses for example) one may cost you more in the long run.
Good luck and good shopping!
Dave Lewan President, Centric Consulting Group, LLC.