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03/07/2024
Posted by: Altura Benefits in Insurance
A professional employer organization (PEO) helps small and midsize businesses manage employment-related issues. However, signing up with a PEO is a major decision you should not take lightly. The PEO you choose will become your company’s co-employer, meaning it will have a direct impact on employee satisfaction, operational costs, and, ultimately, the success of your business. By asking the right questions before you choose a PEO in Utah, you’ll avoid bad choices and big headaches.
Many small employers feel overwhelmed by HR and compliance requirements. As your company grows, it will become subject to more regulations, such as the ACA, COBRA, and FMLA. State regulations add another layer of compliance, and companies with employees in multiple states may have to navigate a complex web of requirements. When in-house HR departments feel like they’re in over their heads and need assistance, they may turn to PEOs.
Since noncompliance with federal and state laws may lead to expensive penalties or even lawsuits, it makes sense to seek expert advice. However, signing up with a PEO may be going overboard if this is all you need. Before you enter a relationship, consider whether you could receive the compliance support you need elsewhere.
For example, your employee benefits provider may be able to provide HR and compliance support. In some cases, this support may be available to you at no added cost as a value-add to your existing benefits plan. Unfortunately, some businesses overlook this source of free assistance because they don’t realize it’s available.
Another reason small to midsize companies sometimes decide to work with a PEO is because they need payroll assistance. Payroll is not as simple as it seems, especially when you consider overtime pay, required state and federal withholdings, and benefit deductions. As a company grows, its payroll responsibilities become bigger.
A PEO can alleviate this burden. However, there are other ways to secure payroll services. Although a PEO may be a good fit, a standalone payroll service may be more affordable.
Working with a PEO may seem like the easy option. Instead of worrying about how to manage employment issues, you can outsource these tasks and minimize your own risk in the process – or so many business owners assume. However, when you sign with a PEO, the agreement frequently creates a co-employment arrangement. In other words, you’re not free of responsibility for employment matters. If anything goes wrong, your company may still be on the hook.
The legal resources a PEO offers may be shallow. Some PEOs don’t have an in-house attorney and may need to seek expert help from outside the organization. Before you sign up, make sure you know exactly what resources you’ll be receiving, both for day-to-day activities and if anything goes wrong.
It’s always smart to double-check promises about saving money. For example, a PEO may say it can offer better deals on health insurance. However, once you sign up, you may find out that only some employers qualify for the good deals – and your company isn’t one of them.
Nothing causes more headaches than trying to use two incompatible systems. Imagine signing on with a PEO, agreeing to a long-term contract, paying a setup fee – and then realizing the PEO doesn’t work with your existing employee benefit system.
Unfortunately, some companies find themselves in this situation when they sign up for a PEO without understanding all the ramifications. You can avoid this headache by determining whether the PEO you’re considering is compatible with the system you use. If you manage your benefits through an employee benefits provider, find out whether the system your provider uses is compatible with the PEO. Failing to do this could create a ton of extra work.
When looking at PEOs, it’s easy to focus on the numbers. This makes sense – you need a partner that will help you protect your bottom line. However, culture also matters. A PEO that isn’t there for you when you need support may end up being more trouble than it’s worth. Your company deserves a partner that will take care of it and your employees.
Of course, during the sales pitch, every PEO will try to convince you it offers a great service. Some may be telling the truth, but others may oversell and underdeliver. Read reviews, talk to other clients, and seek out third-party opinions before you sign up.
The NAPEO says there are 523 PEOs in the U.S. That’s a lot of options to choose from. A good PEO that fits your company culture, needs, and budget may be the right way to go if you need a high level of support with employment-related matters. However, if you just need some guidance or support for certain tasks, a PEO may not be the most cost-effective choice.
If you decide to go the PEO route, Altura can help. We can provide an objective opinion to help you:
If you need support but don’t want to pay for a PEO, we can provide you with compliance and HR resources or help you find a payroll service provider.
At Altura, we’re here for our clients. When you choose us as your employee benefits provider, you don’t just gain access to great plan options; you also gain a partner. The last thing we want to hear is that one of our clients has moved to a PEO only to realize it wasn’t a good fit. We would prefer to discuss your plans and needs BEFORE you sign up, to provide you with guidance and insight. You may even find you don’t need a PEO after all, thanks to the HR and compliance support we offer at no extra cost and the all-in-one benefits system that makes employee benefit administration a piece of cake.
Do you need help understanding your options for PEOs in Utah? Contact Altura.