PEO: Professional Employer Organization. A firm that employs staff who are experts in a wide range of human resources and employee management roles. These trained staff can take over key HR and administrative functions (such as payroll administration) for a client organization. The PEO firm may also assume the role of Administrative Employer for a client company’s employees (the client company continues to be the common law employer and retains full responsibility for hiring, firing compensation and supervision,) but the PEO firm acts on behalf of the client firm when negotiating benefits and dealing with government agencies in matters that relate to employment law.
A PEO organization helps small and medium-sized businesses by reducing the impact that growth has on human resources, back office and administrative demands. When many of these businesses first start out, they often have a person (sometimes one of the company founders) who is responsible for payroll, general ledgers and other back office tasks. Payroll might consist of cutting a handful of checks each month, for instance. However, as the business grows and takes on additional staff, back office tasks quickly become more time consuming.
Not only that, but human resources -something that probably wasn’t even on the radar- becomes an increasingly distracting issue. More employees means more demands, more management time spend trying to track attendance and vacation entitlement and more time trying to schedule shifts that maximize output while keeping staff happy. Other areas of HR that might have been minimized during startup also become increasingly important: ensuring the company complies with applicable labor laws and filing Workers’ Compensation claims, among others. As the company grows, the demand for skilled employees grows too, so recruitment is added to the list of HR-related tasks. Along with that, many savvy potential hires will ask about official job descriptions, employee manuals and benefits before accepting a position.
Things can quickly get out of hand and management can get bogged down with the distraction of HR issues and back office requirements, instead of focusing on running the business. According toManagement Today, a leading industry publication, 53 percent of small businesses fail with five years and one of the biggest causes for failure is a lack of HR policies â€”staffing issues can literally sink the ship, even when product demand is climbing.
This is why a PEO Company is so valuable to small and medium businesses. Partnering with a PEO firm removes the burden of back office support from the company and provides a solid HR foundation that accounts for all the company’s growing needs, including regulatory compliance. It ensures policies are in place to attract and retain the best employees. But, it does so without the expense of creating a fully staffed HR department and without requiring constant attention from the management team.
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This article was sponsored by National PEO, LLC. National PEO is a leading provider of PEO services to hundreds of companies all over the US. Let us handle the burden of Payroll Services, Benefits Administration, Worker’s Comp, and Human Resources for your company. Contact us today to request a quote!
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