Now, more than ever, small businesses are relying heavily on their Human Resources partners to make critical business decisions. It’s possible businesses are receiving guidance from their PEO. PEO stands for Professional Employer Organization. But, are they the best option for your company right now? Can companies that offer generalized solutions actually meet your company’s specific and intricate needs in the face of the economic downturn? We offer some sage advice on things to consider before cutting ties with your PEO – and demonstrate how engaging with an HR consulting firm is the better option.
Oftentimes, companies will enter into an agreement with a PEO to help reduce costs, especially since they are often able to offer small business employment benefits plans at a lower price. PEOs are also likely to offer outsourced HR services, as they take on the administrative and liability burden (although the employer should still maintain EPLI benefits, for they are still ultimately responsible) of their client companies, so it makes sense for them to oversee regulatory compliance, benefits administration, worker’s compensation claims, and other people-facing functions. By bundling these services, the PEO is often able to make the case that they are a more cost-effective solution to hiring a full-time HR Manager or working with a specialized HR consulting firm.
PEOs position themselves as an affordable option when it comes to healthcare, as they are able to leverage their multiple employment relationships into more cost-efficient group health benefit rates. However, that severely limits the options available to an organization’s employees. The employer is only able to choose from the PEO offerings, and those health plans may not meet the specific needs of their employee population, and the employer is severely limited in their ability to negotiate on behalf of their people. By ceding control of the benefits package to the PEO, the employer is subject to any significant rate increases or change in payment terms, with very little recourse. What seemed like an affordable solution to a costly problem has now become more costly – and there isn’t much a business can do about it.
Over the past weeks, you may have been one of the many business leaders who made the difficult, but critical, decision to furlough or lay off your workers. You’ve since pivoted to navigating the next few weeks (or months?) to keep your business viable and come out of the other side of this intact. As you begin to evaluate your financials to make even more crucial cost-cutting decisions, you may begin to critically evaluate your PEO.
Now is the time to have an honest assessment of the services they’ve provided and if you aren’t satisfied, consider spending those financial resources on more effective and individualized HR support. You need to have total control over your business right now, and you have the unique, inherent knowledge of how your business can be successful. If you are looking for HR support and considering a PEO or you are reconsidering your current relationship with one, read below to consider what you need to know before making your next move.
The Results
Construction and Contracting
A commercial roofing contractor was in hyper growth mode. They had goals to increase their field workforce to expand their service area to additional states and geographical locations. If they were to grow their field workforce, they would also need to increase their administrative, operational and sales headcount to support the additional workload created by increased field work. Additionally, they were challenged in workforce retention and development, experiencing high turnover, and did not have a dedicated Human Resources professional to manage employee relations and compliance issues that come with trying to scale a business.
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