Small Businesses Use PEOs to Cut HR Costs

For many small businesses, human resources represents a major cost center. Significant resources must be dedicated to handling payroll processing, employee benefits administration, hiring and firing, and increasingly complex government regulations.

For many businesses today, the solution to this problem is simply to get out of the employment business and turn these responsibilities over to a professional employment organization (PEO). By drastically reducing the time spent on administrative matters, a PEO can allow a business to focus on its key profit centers.

PEOs offer many benefits, including (1) instant access to the HR capabilities and professionalism of a larger organization, (2) the PEO’s ability to keep up with changing government regulations, (3) recruiting assistance, and (4) the PEO’s enhanced buying power, which can provide a business with access to outstanding benefits packages at reasonable prices.

Note: employees work for the PEO for tax purposes. Before contracting with a PEO, therefore, be sure that it’s structured properly to avoid potential problems with the IRS.