Professional Employer Organization (PEO): A Guide


Professional Employer Organization (PEO): A Guide

Few entrepreneurs start their own companies because they love managing human resources. However, many become buried in the details of workforce management as their companies grow.

Small businesses with a headcount of 10 to 100 employees often find themselves in human resources limbo. They lack the time to address HR issues and also lack the resources to create an HR department.

Fortunately, many HR functions can be outsourced for a fraction of the cost of managing them in-house. Many small- to mid-sized companies hand those responsibilities over to professional employer organizations, or “PEOs.”

What is a PEO?

Put simply, a PEO is a third-party provider that can operate as your company’s off-site HR office. Just as an outside law firm might help your company with legal matters, the PEO can manage all HR-related jobs. Those functions include payroll, employee benefits, unemployment insurance taxes and worker’s compensation. The role of the PEO is to be an expert in all aspect of employing workers.

Used in Many Industries

What kind of a company would co-employ its workers with a PEO? The practice has become common across a wide range of different industries. Almost any kind of business may find value in outsourcing its employment work. Even companies with as many as 500 employees enlist the help of a PEO.

Small businesses lacking resources or expertise to perform most HR functions can gain the most from hiring a PEO. A good PEO offers efficiencies, integrated technology and cost savings in managing employees. A PEO also makes sure its clients comply with complex and ever-changing employment laws and regulations. Also, handing over most of the employment responsibilities to a PEO frees company owners to spend more time running and expanding their business.

A PEO appeals to many companies because it can help save money. Outsourcing employment responsibilities allow a business to maintain a scaled-back in-house HR department or no department at all. The PEO’s economy of scale also reduces costs related to recruiting and hiring, and software technology for HR functions.

Keeping Control

For some business owners, handing over so much responsibility to an outside firm sounds risky. Can using a PEO to handle payroll, worker’s comp, health care benefits and other functions mean possibly losing control of your company?

The short answer is no. The PEO’s client retains ownership of its company and control over operations. In a typical PEO contract, the PEO and client share employee responsibilities and liabilities as “co-employers.” The company still has control over maintaining its worksite and complying with safety regulations. Because it handles payroll, taxes and maintains employment records, the PEO does reserve a right to hire and fire. Generally, however, the PEO has no control over a client’s business operations.

Looking for PEOs in Jamaica? Contact us at 1-876-971-7632 or email us at sales@caribbeanhrsolutions.com

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