Why Your Association Should (or Should Not) Partner With a Professional Employer Organization

Running your business comes with unique challenges, especially when managing a diverse workforce of office staff and workers. One solution many companies turn to is partnering with a Professional Employer Organization (PEO). A PEO handles many employment-related tasks like payroll, benefits, and compliance, allowing your association to focus on operations. However, like any business decision, there are pros and cons to consider.

What is a PEO?

A PEO creates a co-employment relationship where both the business and the PEO share employment responsibilities. You handle day-to-day operations, while the PEO manages administrative tasks like workers’ compensation, employee benefits, and ensuring compliance with labor laws.

Benefits of Partnering with a PEO

1. Lower Workers’ Compensation and Unemployment Costs
   PEOs leverage their large insurance pools to secure better rates for workers’ compensation and unemployment insurance.
2. Access to Better Benefits
   PEOs offer small businesses access to Fortune 500-level benefits like health insurance and retirement plans, helping you attract and retain top talent.
3. Compliance Assistance
   Staying compliant with regulations can be overwhelming. A PEO ensures your business follows federal, state, and local regulations, keeping your team compliant and avoiding costly penalties.
4. Streamlined HR Management
   A PEO provides a one-stop solution for HR tasks, from recruiting to payroll and employee benefits. This simplifies workforce management, especially when balancing office staff and field workers.

Drawbacks of a PEO

1. Dependency
   While a PEO handles many tasks for you, it can also make your business dependent on their services. If you decide to leave, you’ll need to rebuild relationships with vendors for payroll, benefits, and insurance, which can be time-consuming and costly.
2. Loss of Control
   Partnering with a PEO means handing over control of HR functions like payroll and benefits, which can feel uncomfortable for some business owners who prefer direct oversight.
3. Fees
   While PEOs can save money in areas like insurance, they charge fees—typically a percentage of payroll or a flat rate per employee. These costs can add up, especially if you have a large workforce.

Is a PEO Right for You?

A PEO can provide much-needed relief from the complexities of managing a diverse workforce, offering better benefits and lower costs. However, it’s essential to weigh these advantages against the potential loss of control and the costs involved.

In the end, a PEO can be a great partner if your priority is focusing on operations while leaving HR and compliance to the experts. Carefully assess your business needs and long-term goals to determine if a PEO is the right fit for your company.