Partner Spotlight - Administaff

PEOs: The Benefits of Human Resources Outsourcing

Business owners looking for more efficiencies and broader resources are increasingly turning to outsourcing as an option. And one of the fastest-growing sectors of the industry is a form of outsourcing that benefits both owners and employees of small and medium-sized businesses: HR outsourcing.

Tired of the day-to-day administrative details and HR management headaches, many small and medium-sized businesses are turning to PEOs to manage their HR functions. Businesses that use the services of a PEO not only hand off HR responsibilities, they also “in-source” services they didn’t have before, including enhanced employee benefits, payroll processing, and employee training and development programs.

Big-Company Benefits

With a PEO at its side, a small or medium-sized business is in a better position to compete with much larger companies, especially when it comes to employee benefits. Benefits provided by full-service PEOs such as Administaff, the nation’s leading PEO, rival those of big corporations, making them an essential tool in recruiting talented employees. Those benefits often include medical, dental and vision coverage, retirement programs, life and disability insurance, on-site and online training programs, tuition reimbursement, credit union services and adoption assistance.

Besides providing and managing a wide range of employee benefits, a PEO typically handles all personnel-related functions such as payroll processing, payroll tax filing, assistance with developing an employee handbook, employment tax filings, and workers’ compensation coverage and claims resolution.

Most small companies simply don’t have the budget or staff to perform all of those functions. By using a PEO to provide those value-added services, business owners multiply their capabilities without increasing labor costs, freeing them to concentrate on their core business.

Relieving the Regulatory Burden

According to the U.S. Small Business Administration, America’s smallest companies bear the largest per-employee burden of complying with federal regulations. Businesses with fewer than 20 employees spend more than $7,600 per employee each year, compared with about $5,200 spent per employee by large corporations (those with 500 or more workers).

Today’s “alphabet soup” of federal regulations – Americans with Disabilities Act (ADA), Age Discrimination in Employment Act (ADEA), Family and Medical Leave Act (FMLA), Fair Credit Reporting Act (FCRA) – along with a labyrinth of state laws and regulations can intimidate and overwhelm even the most conscientious small-business owner.

An owner’s underlying fear is that the company will inadvertently violate a rule, resulting in a costly lawsuit or fines. A profitable enterprise built through years of hard work could take a big financial hit because of a single, unintentional misstep.

Working with a PEO allows a small business to offload a portion of its liabilities, reducing its vulnerability to potentially damaging fines and lawsuits. A full-service PEO such as Administaff oversees workplace safety concerns, assistance with government compliance and employer liability-management issues, helping to ensure conformance with state and federal regulations.

The Co-Employment Relationship

When a company enters into a co-employment relationship with a PEO, it transfers many of its liabilities to the PEO, shares others and maintains responsibility for the remainder. Besides taking on personnel administration and compliance with certain employment-related government regulations, the PEO typically assumes responsibility for payment of salaries and wages (as well as payroll taxes) of the company’s employees. Most PEOs charge a service fee, usually 2 to 4 percent of the client company’s employee payroll, according to the National Association of Professional Employer Organizations (NAPEO), the industry’s trade association.
Like any business decision, the selection of a PEO should be a careful one. It is wise to check a PEO’s references, inquire about the range of services and accompanying fees, and confirm that the company is a member of NAPEO (www.napeo.org). In addition, a business owner should check to see whether the PEO is accredited by the Employer Services Assurance Corporation (www.esacorp.org), an independent agency that evaluates PEOs’ adherence to important ethical, financial and operational requirements.

About Administaff – A Big Upside for Small Business

For small-business owners who want their employees to receive a premium package of employee benefits and are tired of grappling with day-to-day HR-related headaches, a PEO may be just the remedy – a solution that will have them wondering, “Why didn’t I do this sooner?”

This article was provided by Administaff (NYSE: ASF), the nation's leading professional employer organization (PEO), serving as a full-service human resources department for small and medium-sized businesses throughout the United States. All Covered has an alliance with Administaff that enables you to receive valuable human resources information and save 15% off the enrollment fee when becoming an Administaff client. For more information on the All Covered/Administaff program, call (800)465-3800, or visit www.hrtools.com.

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