Why Large Businesses Should Use a PEO

Running a large business requires paying keen attention to the big picture. Owners and managers of these large companies are generally focused on long-term growth and overall business objectives, leaving little time for details like overseeing hiring, risk management, payroll, compliance, and tax duties. 

By outsourcing these administrative tasks to a professional employer organization (PEO), business operations can keep running smoothly even while higher-ups are focusing their efforts on the future. That’s why PEOs are a great resource for larger businesses to ensure compliance and get essential tasks done while emphasizing overall growth and revenue. For big businesses, using a PEO is good for employers, employees, and the company’s bottom line.

What is a PEO and How Does It Work?

A professional employer organization, also known as a PEO, serves as an HR partner or co-employer for client companies. Depending on the company’s needs, a PEO might perform all or just some of a company’s HR functions, including managing benefits, payroll, hiring, and training.

After partnering with a PEO, businesses report wages paid to their employees under the PEO’s employer identification number (EIN). This means PEOs assume employee liability, such as payroll taxes and worker’s compensation coverage.

PEO Service Models

Typically, PEOs structure their partnership with client companies around two service models, co-employment or administrative services organization:  

• Co-employment or the shared liability model: Under this model, a PEO acts as the administrative employer and shares employment-related liabilities with a business. The client company reports wages under a PEO’s EIN, reducing a company’s legal and financial risks.
• Administrative services organization (ASO) model: With this model, a PEO doesn’t assume administrative employer responsibilities and only offers essential HR services. ASO models don’t shield client companies from legal or financial liabilities.

Business owners and executives must weigh what PEO partnership model makes the most sense for their company. The right PEO partnership streamlines a company’s HR functions and guides it through intricate employee-related issues like reviewing compensation plans.

What to Look For in a PEO

The ideal PEO has years of experience managing the burden of employee administration and providing long-term growth strategies to businesses in different industries. Such PEO service providers have a vast network of bank and insurance partners that empower them to provide their client companies with the most comprehensive and competitive offerings.

A top PEO like Resourcing Edge focuses on empowering, not replacing, a company’s HR department. This outlook tends to work well for large companies because most already have in-house HR departments. Partnering with a PEO offers those businesses greater operational efficiency while freeing up their top talent from administrative responsibilities.

Benefits of Outsourcing Admin Services To a PEO

Large companies that partner with PEOs enjoy a number of benefits.

Time Savings 

According to Statista, U.S.-based companies spend 163 minutes per week on administrative tasks. Time is a limited resource for big companies, and those minutes add up.

PEOs manage the recurring and mandatory admin functions like payroll processing and tax reporting that typically take up much of HR’s time. With less paperwork to do, a company’s HR staff can dedicate more time to programs that advance employee well-being and engagement. For instance, HR personnel can concentrate on advancing the 5 Cs of employee engagement — connection, communication, collaboration, congratulation, and care — in the workplace, which boosts retention and productivity. 

HR departments contribute more to a company’s growth and sustainability when they have time to complete more strategic than administrative functions. Because they know their workforce more closely than a PEO, they’re more successful at implementing employee wellness and engagement programs.

Cost Savings

Companies with a PEO co-employment arrangement enjoy substantial short- and long-term cost savings. According to the National Association of Professional Employer Organizations (NAPEO), companies leveraging PEO services enjoy a return on investment (ROI) of 27.3% in cost savings alone. 

A 27.3% ROI margin is impressive, especially for large businesses that spend a lot of money on HR functions. According to Gartner, companies’ HR functions tend to spend between $1,350 and $3,800 per employee. So, imagine a company with 300 workers spends $1,350 per employee, totaling $405,000. With a 27.3% ROI, this business would save $110,565 in total by using PEO services.

Legal and Financial Protection

Large companies with a significant workforce do a lot of paperwork for tax, compliance, and payroll purposes. With such a heavy workload, there’s an increased chance of errors slipping through the cracks.

Payroll errors, like misclassifying employees and missing tax deadlines, are common mistakes companies commit, and they can come with hefty penalties and fines. With a co-employment agreement, a PEO protects businesses from legal and financial liabilities. If errors occur, the PEO assumes responsibility subject to the service agreement deal.

The legal protection that PEOs offer is a major plus for big companies, as it safeguards their reputation in the industry and among customers.

Managing Workers’ Compensation

States regulate workers’ compensation programs. It’s mandatory in all U.S. states besides Texas, and the specifics vary from state to state. That can make it a challenge for large businesses with employees across many different states to find the right compensation program that satisfies different states’ requirements. 

States impose steep penalties on companies without worker’s compensation insurance. For instance:

• California fines companies between $10,000 to $100,000 
• Florida fines companies two times the insurance premiums a business would have paid for two years
• Illinois fines companies $500 per day with a minimum of $10,000.
• North Carolina fines companies $1 per employee daily with a minimum of $50 and a maximum of $100 per day

When companies partner with a PEO, they pass the burden of purchasing and managing worker’s compensation insurance to the PEO. The PEO is liable for all non-compliance penalties, saving business owners from financial and reputation damage.

Family and Medical Leave Administration

Big companies with 50 or more employees must comply with the Family and Medical Leave Act (FMLA). The FMLA mandates companies to grant eligible employees 12 weeks of unpaid leave annually to care for family members with health conditions, among other reasons.

While the FMLA is designed to advance employee welfare, it can be tricky to navigate for both employees and employers. Employees misusing the policy can be costly to employers, while violations of the FMLA on the part of companies can incur huge settlement fines.

PEOs have experience administering the FMLA in many industries and for many business sizes. They know how to abate employee misuse of FMLA and avoid expensive FMLA lawsuits, without complicating relationships between management and employees. This expertise makes it safer and cost-effective for big companies to outsource FMLA management to a PEO. 

Elevate Employees’ Experience 

By handling the administrative side of human capital services, a PEO ensures all employees have the right insurance coverage, compensation package, and privileges, such as those provided by the FMLA.

These subtle details may not be top of mind for business owners preoccupied with more significant issues like expanding to new locations, but they make a big difference to employees. PEOs take care of all the humdrum details that go into creating great employee experiences, empowering companies to pursue their growth goals without neglecting employee welfare.

Additionally, PEOs generally offer their client companies wellness programs, medical insurance, and vision insurance. Such offerings enhance employee experience without steep implementation costs.

What Sets Resourcing Edge Apart

Every business that partners with Resourcing Edge gets a dedicated team of professionals to help them solve all their human capital needs. Large companies with varying HR needs get the benefit of a single point of contact for managing all HR functions. No more scattershot approaches to management: Resourcing Edge gets it all done in one.

At Resourcing Edge, big businesses can enjoy these human capital services:

• Payroll and tax administration
• Benefits administration and consultation
• Risk management and compliance
• Time keeping and attendance
• Employee relations and training
• Tech platform for managing employee affairs and compliance online

Our PEO services cover a wide spectrum of functions, from everyday tax tasks like quarterly filings and W-2 processing to more elaborate tasks like EEOC claims management, new-hire reporting, and compensation analysis.

Because human capital needs for large companies can shift quickly, we offer each company a customized solution that scales with their needs. Resourcing Edge delegates a Personal Account Manager to each company, who serves as the chief liaison officer and streamlines communication and collaboration with the client company. 

Find a Better HR Solution with Resourcing Edge

Out of the 508 PEOs operating in the United States, Resourcing Edge is in a class of its own, thanks to its customized solutions for each company and over two decades of consulting experience.

With Resourcing Edge as your PEO partner, you’ll benefit from our cutting-edge tools that boost your productivity and efficiency, while working with a specialist account manager to advance your needs. Whether you have 50 or 5,000 employees, Resourcing Edge has the resources, expertise, and financial muscle to be your professional employer organization partner. 

Contact us today and let us customize a PEO deal that serves your current human capital needs and scales with your company.