PEO services also referred to as Professional Employer Organization is a form of outsourced HR services that enables a company to shift their hiring and HR processes to a third party. It can be argued that having a PEO offers a comprehensive approach to human resources management, but is there a downside to a PEO?
First, what is a PEO?
A PEO offers a variety of professional HR and business services to a company that may include:
- Hiring employees
- Recruiting employees
- Administering government compliance
- Creating hr policies
- Managing Payroll and Benefits
What a PEO isn’t:
PEO Services are not a temporary staffing firm or hiring agency, they are also not a payroll administrative function.
Is there an alternative to PEO services?
Yes. If you like the idea of having the staff on your payroll, yet like the concept of having an outsourced human resources department that acts as human resource support, you may want to explore a BPO or business process outsourcer. With a BPO, your employees are still on your payroll, yet you have the advice, experience and knowledge of an outsourced HR service.
A BP gives you some of the following advantages:
- Hire and retain your own staff. You may rely on the BPO to interview and recruit potential employees, yet you want to hire your staff and have them on your books. A BPO can assist with this and acts differently than a PEO. With a PEO, the employees are direct hires of the PEO, with a BPO they are your employees.
- Improve HR Regulatory Compliance. Both PEO services and BPO services help with assuring regulatory compliance and are expert in understanding the federal and state requirements.
- Reduced HR liability. With a PEO the thought is that the employee is the employee of the PEO. In reality, the employer is only part of the equation. Both the company that utilizes the employee as well as the PEO could be subject to litigation. With a BPO, the employer-employee relationship is clear, but the BPO supplies HR support and services to guide the employer and advise through situations to avoid litigation.
The workplace has changed dramatically in the last few years and PEO services and alternatives to PEO’s provide creative ways to control cost and mitigate risk of litigation.
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