Guide to Professional Employer Organizations (PEOs)

Outsourcing HR is becoming popular for small business

By Toni Klym McLellan

Professional Employer Organizations (PEOs) offer a solution to this problem. Delegating core HR tasks can save time, resources, and headaches – allowing you concentrate on core business endeavors.

The benefits of hiring a PEO include:

1. Built in expertise – PEOs know the legal and logistical requirements pertaining to their services so you don’t have to wander the mazes of employment regulations and bookkeeping know-how.
2. Bundled HR assistance – most firms provide multiple human resource needs, saving companies from having to do payroll, background checks, and benefits management in-house.
3. Lifting the burden of potential litigation – many PEOs also offer risk assessment and liability protection.

Action Steps
The best contacts and resources to help you get it done

Determine your human resources needs

If your company has employees, chances are it could benefit from a PEO. They saves time wading through employment regulations or performing background checks and let you get down to business.

I recommend: Take Administaff's Company Profile Test for a free evaluation of your HR needs. Staffmarket.com offers a PEO comparison sheet for selecting a PEO based on services needed.

Shop around

With hundreds of PEOs to choose from, finding the best one for your company can be daunting. Professional organizations and private vendors both offer listings of member PEOs, some by sending several free quotes from local PEOs.

I recommend: Check out c|net's Alpha blog for an overview of how to choose the right PEO. Get free quotes from up to five PEOs in your area from BuyerZone.com or check StaffMarket.com's extensive listing of PEOs (check out their buyer's guide while you're there). The NAPEO web site also features a searchable database of member PEOs.

Ensure a seamless fit with your business

When you've narrowed your choices, be prepared to ask detailed questions. What kind of written agreement governs your relationship? What if you're not satisfied with services offered? What certification and/or licensing does the PEO carry? What assurances regarding employee litigation can the PEO offer?

I recommend: Track industry trends by reading the National Association of Professional Employer Organizations' PEO Insider and BuyerZone.com's PEO Buyer's Guide, which offers information on the nature of the PEO co-employer agreement.

Helpful advice for making the most of this Guide

• •  Remember that you may not necessarily save money using a PEO, but you will save time managing myriad HR issues.
• •  Check to see whether your PEO is licensed by your state.
• •  Have an attorney review the service agreement between your company and the PEO.
• •  Reassure your staff that their jobs are not in jeopardy due to outsourcing; the PEO is there to manage human resources issues.
• •  Ask what services are offered as a package or “a la carte.”