Is a PEO Right for your Business?

April 4, 2018


Every business textbook says something like this: “Use your core competencies as your strategic advantage”. In other words, do what you are best at doing. When you run a business, you want to spend your time producing, improving and selling your product. Unfortunately, there is much more to running a business than these essential tasks.

Are You Lost in Administration?

The dictionary definition of administration is the process or activity of running a business or organization. In practice, administration includes accounting, HR, payroll, and any other task not directly related to providing your products and services. While these tasks are an essential part of running your business, they take your time and energy away from growing your business.

This problem is familiar to everyone who runs a business. Most people do not relish the idea of dealing with the mundane administration of a business. However, there are people who excel at these types of tasks. Some people like these have built their own businesses, dedicated to helping other businesses with their administrative tasks. This type of business is called a Professional Employer Organization or PEO. Is a PEO right for your business? The answer may surprise you.

What Can a PEO Do for Your Business?

In short, a PEO is a company that can help you with your payroll and HR chores. You can outsource your payroll, taxes, workers’ compensation insurance and benefits to a PEO. When you use a PEO, your employees officially work for the PEO for tax purposes.

How does this work in the real world? It is pretty simple. You tell the PEO how many hours each employee worked. The PEO will calculate employee paychecks and tax liabilities then pay your employees with checks or direct deposit. At tax time, the PEO will take care of dealing with the IRS on your behalf. Does all of this sound too good
to be true? There is a downside. While a competent PEO can provide all of these services, they come at a cost.

The Costs of Working with a PEO

A PEO provides a valuable service, and it understandably costs your business some money. A typical PEO costs between 2% and 10% of your salary. That means if you have five employees, each earning $30,000 per year, a PEO will cost between $3,000 and $15,000 per year. Before you commit to using a PEO, be sure to account for this cost.

In addition, most PEO’s require you to sign up for a long-term contract of at least a year. This means that once you get started, it can be difficult to end the agreement if things do not work out. Finally, there is a cost to your business in privacy and autonomy. When you work with a PEO, they will, by necessity have access to confidential information about your business. It is essential to know that your PEO has adequate security measures in place to protect you and your employees.

How Paypro Can Help

Considering working with a PEO?  Speak to one of our account executives first, we can offer a full service workforce management solution without the costs of working with a PEO. Call 631-777-1100 or email  [email protected].


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