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Check the Pros, Cons of Using PEO Companies in 2021

Posted by Tasnim Ahmed

December 14, 2020

As an entrepreneur, you may be so busy managing employee benefits, recruiting, training and performing all of the other people management responsibilities that you don’t have time to scale your business. Some business owners instead choose to work with a professional employer organization (PEO). These firms can handle many employer responsibilities for you on an outsourced basis, freeing up time for you to focus on your business.

Whether you’ve hired outsourced partners before or not, you’re probably well aware that working with third-party companies can have their pluses and minuses. It goes without saying that PEOs are no different — you may find that a PEO is the right choice for your business, or you might discover that these aren’t the ideal partner for you at the moment.

To help you make a decision on whether or not to partner with a PEO, check the following pros and cons of working with these organizations.

Check These Pros

1. You Address All of Your People Management Needs.

As an employer, there are certain responsibilities you have to your employees, many of which are also required by labor and payroll regulations. If your business is small, you may not have the bandwidth to address all of these, but a PEO would be able to manage it all for you and ensure that you’re in compliance with all local, state and federal laws.

For instance, the PEO firm could oversee benefits administration, recruiting/onboarding, unemployment requirements, workers’ compensation claims, employee leave, drug testing, offboarding and much more.

2. You Only Pay for What You Use.

If your business had to hire an HR and benefits department, you’d be paying the salaries and benefits for those staff members, but if you use a PEO, you’ll only pay for the time and services that you use. This way, you aren’t spending money on services you don’t actually need — you’ll only pay for what your business requires. You can easily scale your use of the PEO firm up or down based on how your business is doing at any given moment.

3. You Don’t Have to Invest in Tech.

When you outsource your PEO, the third-party firm will invest in the technology and systems that you need to keep your HR department running smoothly. Due to that, you won’t have to buy expensive payroll and HR technology or additional computers for staff members.

Now, Review the Cons

1. Customer Service Can be Challenging.

It’s likely that you won’t be the sole customer of your PEO, and therefore, you may have trouble getting personalized attention from the organization. Ensure that you partner with a company that has a dedicated rep who is assigned to your business so you won’t be sitting on hold with a customer service line if you need assistance.

2. Compliance Remains with You.

Even if you outsource your HR and benefits responsibilities, your business is still responsible for maintaining a compliant program. Therefore, you should look for PEOs with compliance guarantees that ensure that any issues become their financial responsibility, and you should always review testimonials and reviews from other customers to ensure that your PEO firm is trustworthy and on top of all compliance guidelines.

3. Company Culture Can Suffer.

When employees have issues that require HR or benefits experts, it can be a challenge to direct them to a third-party company. In many cases, businesses want to own the HR responsibility so they can maintain a strong company culture around it. Therefore, always use a PEO firm that shares the same culture and values you do to ensure a seamless experience for your employees. Also ensure that the PEO creates an employee portal so that staff members can log in at any time and review their payroll, benefits and other issues independently.

After evaluating whether the pros outweigh the cons, consider contacting a PEO that might work with your needs so that you can focus on scaling your business while your employees remain well protected.


Tasnim Ahmed
Tasnim Ahmed

Tasnim Ahmed is a content writer at Escalon Business Services who enjoys writing on a multitude of subjects that include finops, peopleops, risk management, entrepreneurship, VC and startup culture. Based in Delhi NCR, she previously contributed to ANI, Qatar Tribune, Marhaba, Havas Worldwide, and curated content for top-notch brands in the PR sphere. On weekends, she loves to explore the city on a motorcycle and binge watch new OTT releases with a plateful of piping hot dumplings!

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