What Does PEO Stand For In HR?

June 11, 2019

What Does PEO Stand For In HR?

The acronym PEO stands for Professional Employer Organization. Practically, this means a PEO service, like ours at Consolidated Personnel Services, will help you manage, oversee and run the human resource aspect of your business more efficiently. If you own a small to medium-sized business, partnering with a PEO to handle the human resource function of your business is a good way to focus more on other elements of your business that you might have been forced to neglect in order to focus on HR.

Defining Human Resources

Before looking at ways a PEO can help you handle human resource situations, lets first look at what human resources entail. According to Entrepreneur, human resources is defined as “The department or support systems responsible for personnel sourcing and hiring, applicant tracking, skills and development tracking, benefits administration and compliance with associated government regulations.” The following is a practical breakdown of some of the duties that could be classified under the human resource heading:

  • Employee benefits, which could include retirement accounts, insurance, etc.
  • Payroll. Ensuring that each and every employee gets their paycheck and that the proper amount of taxes are withheld per state and federal guidelines.
  •  Keeping up to date with all federal and state laws your business most adhere to.
  •  Firing and hiring employees, which includes checking out references for potential employees.

Human Resources Challenging to Manage For Small to Medium Businesses

In large corporations, there are usually whole departments focused solely on human resources.  However, in small to medium-sized businesses, dealing with human resources can become problematic. That’s not all, it can actually become a legal issue if it isn’t maintained properly.

You Assume a Risk When You Manage Your Own Human Resources

If your company is too small for its own designated group of professionals in the form of a human resources department, the task of managing all the above elements falls on your shoulders. Even if you think you are doing everything correctly dotting all i’s and crossing all the t’s, you can be held legally responsible or fined if things aren’t completed exactly as they are required by law to be accomplished. For example, according to a Business Insider Article, some 33% of startup businesses are fined each year for the same reason, what you might ask? Payroll issues. In addition, another one-third of small business owners are forced to pay payroll penalties on an annual basis.

The Easy Solution to the HR Problem is a PEO

Therefore, one easy way to ensure you aren’t fined, or even legally charged with wrongdoing related to human resources issues, is to partner with a PEO service. The following is a breakdown of the services you could offload to a PEO service and take off your already full plate:

  • Payroll: Let’s just get this one out of the way first. No employee is going to be happy if their income is delayed. They aren’t doing you a favor by coming in and working. Understandably, they want to be paid. A PEO service can take your payroll mess and set it up on either automatic deposits, one-time payments or more, depending on your business needs. They can also help you administer payments to contractors or vendors or part-time employees as well. They essentially oversee everything to do with getting your employees paid on a regular basis.
  • Various Benefits: Depending on what you want to offer your employees, there are many types of benefits PEOs can help you oversee. They can help you with claims, such as worker’s compensation or unemployment situations. They can also give you access to vision, dental and medical insurance coverage for your employees, at lower rates. Using the reach and scope of a PEO service gives you, as a small business owner, the benefit a large corporation enjoys in terms of premium rates and the like. Some PEO’s even give their clients access to discounted gym memberships and access to 401(k)s.
  • Compliance Support: Another huge benefit of teaming with a PEO is having access to compliance support. This can include the following:
    • Insurance filing for unemployment.
    • EPLI, also known as Employment Practices Liability Insurance
    • 1099 and W2 filings
    • Workers compensation issues
    • New hires
    • Payroll taxes to ensure all employees have the correct amount of earnings withheld from their income towards their state and federal taxes. This will usually include overseeing and handling reporting and employee tax forms.

Why Not Just Outsource Each Human Resource Need?

Admittedly, you could resource each element under the heading of human resource. You could get a service that would just manage your payroll. Hire another consultant to handle your employee insurance and a tax professional or accountant for the other issues. However, this will likely not yield the results you hope. Having everything aspect of your business’s human resource department under the umbrella of the same organization is ideal. It will give you the most benefits in terms of premium rates and other added bonuses as mentioned above.

A PEO will also ensure the machine that is your business operates as smoothly as possible. Why would you go through the trouble of finding professionals for each element of human resource instead of just hiring one organization or oversee it all? An organization in the form of a PEO, which has extensive experience handling all things human resources. There simply is no reason not to take advantage of what a PEO can offer if you own a small to medium-sized business. Conversely, you can face the prospect of fines or even legal charges if you try to do it yourself and don’t get it exactly right.

For more information Contact Consolidated Personnel Services at (602) 230-8940.

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