Enticing good employees to work for you can be challenging. While competitive pay is important, so is having an appealing benefits package. This is where a professional employer organization (PEO) becomes a great option for your small business.
PEOs can serve your small business if you don’t have a substantial human resources team performing standard HR tasks. They also offer top-notch benefits plans. This frees up time to hire top talent and build a solid workplace culture to grow your company.
The perks that your small business can offer through a PEO can improve your staff’s morale and the company’s culture, and instill a better work-life balance for your employees. Creating a great place to work for your 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 offer the best benefits
PEOs can provide your small business with benefits packages typically only offered by Fortune 500 companies. This is key to attracting and retaining top talent. Here are some of the top benefits a PEO can offer your staff.
- Healthcare: One of the most significant advantages a PEO can offer is their competitive healthcare benefits, like medical, dental and vision insurance. Small businesses often can’t afford to independently provide their employees with the benefits that larger companies offer. However, a PEO can access group insurance rates, offering affordable insurance to your firm.
- Retirement: When you work with a PEO, there are two ways you can offer a 401(k) retirement plan to your employees. You can choose to do it the traditional way by using a third-party administrator, and the PEO will still handle payroll deductions and taxes. However, you can also use the PEO’s 401(k) option, in which the PEO takes on the fiduciary liability associated with it. Additionally, you will have the advantage of lower administrative costs.
- Payroll: When you partner with a PEO, it processes your payroll and taxes. This can be a huge relief, as it takes the burden off of you and reduces the potential for error.
- Employee assistance programs: Many PEOs offer employee assistance programs (EAPs), which can be a valuable resource for employees. An EAP can signify to your employees that you care about their health and well-being.
- Added benefits: Offering employee benefits can be pricey for small businesses. However, a PEO allows you to create an employee benefits package that includes life and group life insurance, tax-free savings accounts – such as an HSA, FSA and HRA – tuition reimbursement, health and wellness plans, disability insurance, commuting or travel assistance, and employee training and development.
Bottom line: A PEO can help you build a custom benefits package with the best employee benefits for your company’s specific needs.
How PEOs help employees understand their benefits
In addition to offering employees quality benefits, PEOs can cut through mountains of paperwork. For example, when it comes to annual enrollment alone, PEOs can save you hours that would otherwise be spent researching benefit options, explaining those benefits to your staff and then fielding 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.”
A PEO solution with high-quality 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 PEOs offer
A PEO performs many HR tasks, which can free up time for you to focus on more pressing matters and ease pressure on your internal HR staff.
Shraga Jacobowitz, a consultant at ARC PEO Consultants, explains small businesses can benefit from using a PEO in these four ways:
- A PEO reduces employee-related costs, such as discounted benefit costs, workers’ compensation and sometimes taxes.
- It reduces your company’s employee-related liability.
- A PEO provides additional HR support to its clients, such as helping create employee handbooks, providing training, helping with performance management, developing job descriptions, recruiting, ensuring government compliance and providing regulatory guidance.
- A PEO can provide an HRIS – or human resource information system – to help small businesses manage their employees.
Greater insurance plans
The companies with the best benefits usually have comprehensive health insurance plans. PEOs generally allow small businesses to provide 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, director 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.”
Good retirement plans
The companies with the best benefits generally have highly rated retirement plans, such as 401(k) plans that include profit-sharing contributions and vesting, which encourage employee retention.
PEOs also 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 added. “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 childcare leave benefits?
Child care leave provides new parents (whether by birth, fostering, or adoption) a certain period to recuperate from childbirth and/or care for new family members. The best child care benefits include maternity or paternity leave, sick leave, onsite child care and backup child care.
Did you know? Some employers are required to offer eligible employees unpaid sick leave in certain medical situations.
Under the Family and Medical Leave Act, eligible employees can take unpaid, job-protected leave for family and medical reasons with the 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 instance, New York’s paid parental leave benefit provides most 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.
A PEO that offers child care benefits for your employees gives them a significant reason to stay and work for your company, said Simon Hansen, founder of HomeBrewAdvice.com. “As working parents no longer need to worry much about their children, they are more emotionally and mentally healthy.”
How PEOs 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 your company uses a PEO for payroll processing, the PEO becomes a co-employer and assumes the duties of managing your payroll-related tasks, such as paying wages, depositing taxes and issuing employee W-2s.
These are three advantages of using a PEO when it comes to managing payroll, according to Nidhi Joshi, business manager at Kernshell:
- PEOs help your business stay current with regulations. A PEO ensures your company’s legal compliance 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 can sometimes file it for you.
- PEOs 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.
Joshua Stowers contributed to the writing and reporting in this article. Source interviews were conducted for a previous version of this article.