Publisher's Page: Uncovering the Hidden World of PEOs

Posted on April 1, 2004 by Sara Eastwood - Also by this author

Employee management today is a lot like tiptoeing through a minefield. At our recent LCT Show, our corporate HR manager was a featured speaker on the subject and she was literally besieged with questions and concerns about employee issues to the point that it seemed she was never going to leave her session room. Upon returning from the show I did some research and stumbled upon something I think most of you can benefit from. Go to your web browser and type in “Professional Employer Organization.” There you’ll find an entire industry for the outsourcing of human resource services referred to as PEOs.

What exactly does a PEO do? PEOs enable businesses to cost-effectively outsource the management of human resources, employee benefits, payroll and workers' compensation. PEOs contractually assume substantial employer rights, responsibilities, and risk through the establishment and maintenance of an employer relationship with the workers assigned to its clients.

According to the National Association of Professional Employer Organizations (NAPEO.org) the growing burden of employee law and regulation is the main reason PEOs are gaining popularity. There are several factors driving the growth of the PEO industry. First, over the last two decades, this nation has seen a significant increase in employment-related federal, state, and local laws and regulations. Second, the expertise required to manage a small to mid-sized business has outgrown the experience and training of many entrepreneurs who started these businesses. Third, working Americans demand quality, low-cost health care, retirement savings plans, and other employee benefits for themselves and their families.

In response to these demands, the PEO industry evolved from the need to divide the "business of business" into manageable parts and the need for small businesses to achieve economies of scale.

Bob Bellegamba of Concorde Limousine Service (and recent Operator of the Year winner) told me that he and two other New Jersey operators signed on with a company called Extensis after hearing a presentation from them at a LANJ meeting. Two years later, they can’t say enough great things about working with a PEO.

Mike Renehan, a board director of the NLA and president of Allaire Limousines is another operator who is very happy with his PEO. He estimates that his company has shaved a minimum of 30 hours a week by outsourcing HR services. According to Mike, “In the old days we had a manager and a bookkeeper working together to handle human resources and payroll. It was a monumental burden to their already hectic jobs. Plus on our own we could not have afforded the benefits packages that our PEO provides our employees. Their fees are nominal—a percentage of my gross payroll. I have seen absolutely no downside to working with a PEO.” Here you have it. A new solution to consider for HR management so you can get back to the task of running your companies and not your employees. Good luck and let us know if you’d like to see a feature article on this subject in the future.


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