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How PEOs Are Behind Companies With the Best Benefits

Joshua Stowers
Joshua Stowers

Want happy employees? Learn how working with a PEO can help you provide them with the best perks and benefits.

  • Choosing a PEO solution with robust employee perks can help small businesses attract and keep valuable employees.
  • Companies with the best benefits usually have comprehensive health insurance and retirement plans for their employees, and can PEOs generally offer better plans than those that small businesses could otherwise afford.
  • In addition to employee benefits, PEOs provide small business owners with HR support and technology, including employee recruiting and trainings, payroll, and regulatory guidance. 

Enticing good employees to work for you can be challenging. While competitive pay is important, so, too, is having an appealing benefits package. This is where a professional employer organization (PEO) becomes a great option for small businesses. 

PEOs serve small businesses that don't have substantial human resources teams by performing most of the standard HR responsibilities and tasks. They also offer top-notch benefits plans. This allows small business owners to focus on growing their companies by hiring top talent and building a solid workplace culture. 

The perks that small businesses can offer their employees through a PEO can improve employee morale, company culture and instill a better work-life balance for employees. Creating a great place to work for employees can result in higher retention rates and positive employee reviews, which, in turn, can lead to a broader, stronger workforce.


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How PEOs help companies offer the best benefits

PEOs can provide small businesses with benefits packages typically only offered by Fortune 500 companies. Employee benefits may include medical, dental, and vision insurance; hospital and accident insurance policies; life and group life insurance; a 401(k) retirement plan; tuition reimbursement; short-term and long-term disability insurance; commuter benefits; and the ability to work remotely. 

Small businesses often can't afford to independently provide their employees with the benefits that larger companies offer. However, they can work with a PEO that is affordable, according to Matt Diggity, CEO of Diggity Marketing

"A PEO works with many small companies, so it becomes easy for them to help [a] small business's employees access medical, dental and vision coverage at affordable rates," Diggity told "The collective number of employees of different small companies is … equal to the employees of a big firm, so PEOs harness the buying power generally reserved for much larger enterprises." 

PEOs help employees understand their benefits

In addition to offering employees quality benefits, PEOs save harried business owners and staff time and cut through mountains of paperwork. For example, when it comes to annual enrollment alone, PEOs save business owners hours they would otherwise spend researching benefit options, explaining those benefits to employees and then fielding employee questions. 

"Employees no longer need to turn to overworked HR departments to get a comprehensive understanding of what they're signing up for," said Gary Stevens, front-end developer and founder of Hosting Canada. "Instead, any questions employees may have can be turned directly to the PEO. Since one of their main functions is finding the best plans available, employees no longer need to worry that they're making a mistake during their yearly enrollment." 

Choosing a PEO solution that has high-quality employee perks can help boost employee satisfaction. When your employees know they're receiving quality perks, they can focus on being productive members of your team. 

Other HR benefits of using a PEO

A PEO performs many HR tasks, which can ease pressure on a company's internal HR staff and free up the business owner's time to focus on more pressing matters within the company. 

Shraga Jacobowitz, managing partner of ARC PEO Consultants, says small businesses can benefit from using a PEO in four ways: 

  1. A PEO reduces employee-related costs, such as discounted employee benefit costs, workers' compensation costs and sometimes taxes.

  2. It reduces a company's employee-related liability.

  3. A PEO provides additional HR support and technology to its clients, including employee handbooks, training, and performance
    management; job descriptions, recruiting, and applicant tracking systems; government compliance and regulatory guidance.

  4. A PEO can provide an HRIS, or human resource information system, to help small businesses manage their employees. 

PEOs offer small businesses greater options with health insurance plans

The companies with the best benefits usually have comprehensive health insurance plans for their employees. PEOs generally allow small businesses to offer their workers better health benefits than what they could otherwise provide from standard employer-sponsored health insurance plans. 

An additional advantage of having your health insurance sponsored by a PEO is that the PEO is responsible for compliance related to administering health insurance plans, according to Michael Roloson, founder of PEO Focus

"Most PEOs will offer access to master health plans or association health plans that allow for more cost consistency and predictability when it comes to health insurance costs and renewals each year," Roloson said. "Other perks include offering multiple health insurance plan options, tiering employer contributions by employee responsibility or tenure, and coupling options with access to FSA and HSA plans without incurring additional costs or administrative burden." 

PEOs help small businesses offer good retirement plans

The companies with the best benefits generally have great retirement plans, such as 401(k) plans that include profit-sharing contributions and vesting, which encourage employee retention. A PEO helps small businesses provide good 401(k) plans to employees. 

PEOs assume fiduciary liability and sign all necessary compliance forms, which can shield your company from potential legal issues associated with employee retirement plans. 

"PEOs allow access to a multiple employer plan (MEP), which shifts compliance responsibility to the PEO as a co-employer," Roloson said. "In the event the funds that employees have access to underperform in a way that severely impacts retirement balances negatively, it is the PEO [that] would be responsible in the event of litigation." 

How does working with a PEO affect employee child care leave benefits?

When an employee gives birth, fosters, or adopts a child, child care leave provides them with a certain period of time in which new parents can recuperate from childbirth and care for new family members. The best child care benefits usually include maternity or paternity leave, sick leave, onsite child care and backup child care

Under the Family and Medical Leave Act, eligible employees can take unpaid, job-protected leave for family and medical reasons with continuation of group health insurance. Being a federal law, this is not to be confused with specified state laws or requirements regarding parental leave. 

For example, New York's paid parental leave benefit provides most New York State workers, including part-time employees, the right to take paid time off without losing their job or health insurance so they can welcome a new child or care for an ill family member. 

Using a PEO that offers child care benefits for your employees gives them a significant reason to stay and work for your company, according to Simon Hansen, founder of HomeBrewAdvice.

"As working parents no longer need to worry much about their children, they are more emotionally and mentally healthy," he said. 

PEOs can streamline payroll processing and HR compliance

A PEO can administer your payroll, pay payroll taxes, maintain workers' compensation insurance and manage the regular compensation of your employees. 

When a company uses a PEO for payroll processing, the PEO becomes co-employer and assumes the duties of managing the client's payroll-related tasks, such as paying wages depositing taxes and issuing employee W-2s. 

Below are three advantages of using a PEO when it comes to managing payroll, according to Nidhi Joshi, business consultant for iFour Technolab Pvt Ltd

  • PEOs help your business stay current with regulations. A PEO ensures that your company is always compliant. They do this by keeping tabs on ever-changing rules and regulations, and providing you with an action plan to help you stay in compliance.

  • They handle compliance paperwork. PEOs are experts on employment-related regulations. They know the paperwork you need to file, and, in certain cases, they can file it for you.

  • PEOs help reduce your risk of liability. A PEO gives you access to licensed HR professionals and attorneys who can help you lower your employment-related risks.
Image Credit: fizkes / Getty Images
Joshua Stowers
Joshua Stowers Staff
Joshua Stowers is a and Business News Daily writer who knows firsthand the ups and downs of running a small business. An entrepreneur himself, Joshua founded the fashion and art publication Elusive Magazine. He writes about the strategic operations entrepreneurs need to launch and grow their small businesses. Joshua writes about choosing the choosing and building business legal structures, implementing human-resources services, and recruiting and managing talent.