One of the best-kept secrets for several small and medium-sized businesses is a professional employer organization or PEO. These organizations provide businesses with the option of outsourcing several employee management tasks like employee benefits, payroll and workers compensation, recruiting, risk/safety management as well as training and development.

PEO is gaining in popularity owing to the diverse range of services they offer. They have become the preferred option for many organizations HR needs. PEOs are able to efficiently manage an organization’s employee services and administration.

Let’s look at five key aspects of PEOs that help improve organizations:

Multiple Areas for Cost Reduction
The main reasons organizations choose to outsource HR is to save money and operational costs. A PEO is capable of delivering HR services at a significantly lower cost when compared to a full-time in-house HR team. Another aspect that PEOs save money is through insurance costs. As PEOs negotiate insurance rates on the behalf of their clients, they are able to broker significantly lower group insurance costs, worker’s compensation discounts as well as a lower state unemployment insurance (SUI) rate.

Better Access to Technology Services
Large organizations are able to afford the latest HR technology as well as an advanced HR Information System(HRIS). Small to mid-sized businesses, however, tend to lack the resources and indeed the budget for such endeavors. A PEO provides the benefit of all the HR technology solutions which they would not have had access to before. These solutions range from HRIS to implementing system capabilities for HR analytics and payroll. HR outsourcing is one of the major factors of PEOs that attracts organizations.

Improved Compliance
Being up to date on all state and federal laws is near impossible for most small businesses. Employing the services of PEOs to handle the task makes more sense. PEOs have access to more bandwidth to help customers be proactive and compliant with the continually changing nature of laws related to taxes, hiring, insurance claims, wage claims and benefits. This reduces the chances of noncompliance from an organization. From employee handbooks to understand their insurance plans, partnering with a PEO can provide the necessary compliance guidance required by a business.

Level the Recruitment Playing Field
Employing the right person for an open position is vital especially for small businesses. Even if the error of hiring the wrong person is recognized within six months, it would still take approximately 2.5 times the person’s salary to replace them. Small businesses are unable to afford such mistakes. A lot of PEOs have employees that have formal hiring expertise and a wider network for recruiting. They manage salary negotiations, onboarding as well as overall compliance.

Better Business Focus
A benefit often overlooked is the ability of PEOs to free up internal resources to better focus on the business’s goals and growth model. PEOs allow businesses to devote their time to doing what the company does best and allowing them to handle the rest. The effectiveness of HR functions can decrease across several departments within the organization. PEOs allow business owners and their employees to retain flexibility and focus on scaling the business while leaving the HR and other operational tasks to their team of experts.