Enterprising Women - July/August 1997

Administrative Relief:
Is A PEO Right for Your Business?

By Gwen Fey

Genie Gardner of Deer Trail, Colorado, needed more time. More time for her business, her students and her family. As a business owner, wife and home teacher to her two children, the paperwork of running Gardner Construction was overwhelming. Payroll, quarterly and year end reports, unemployment forms and insurance claims were taking all her time. She was desperately searching for a solution that would allow her more time for the rest of her business, not to mention her family.
Enter a Professional Employer Organization, or PEO, offering to provide a wide range of human resource services. Gardner was thrilled. "They could take care of it all and give me time for more important things – at the office and at home."

Gardner’s story is becoming more commonplace as the relatively young PEO industry expands rapidly across the country. According to the National Association of Professional Employer Organizations (NAPEO), PEOs account for between two million and three million employees, up from only 10,000 in 1984. And by the year 2000, that number is expected to exceed 10 million.

So what is a PEO, and why would a PEO be of particular interest to a woman-owned business? Ask any entrepreneur – male or female – and you’ll quickly learn the answer.

Starting a company requires long hours and sacrifice. Unfortunately, many of those late nights, early mornings and long weekends are not spent building the business, but running it. Endless paperwork, reports, claims and compliance issues can easily eat up most of the business day and those extra hours. As the business grows, so does the paperwork, and the excitement of owning your own company can soon wear thin.

PEOs were born of this frustration, providing small- and medium-sized businesses an effective option for managing critical human resources responsibilities. As co-employers with their clients, PEOs handle payroll processing, tax reports and deposits, personnel records and benefits packages. And they help keep the business owners informed and in compliance with changing personnel laws and policies while helping to manage liability exposure.

You can almost see the load being lifted off their shoulders as business owners begin to understand the PEO concept. They quickly realize that they will not lose control of their operation, but will gain more time to concentrate on their core business, which is what they set out to do in the first place.

In addition to relieving administrative burdens, PEOs help create a level playing field for small companies trying to compete with Fortune 500 corporations in the employee benefits arena. With a PEO, the more sought after employees will find a small employer’s benefits package just as attractive as a major corporation’s, which helps make recruiting a lot easier and more successful. From health insurance and employee assistance programs to "401k" plans and credit unions services, a PEO offers benefits generally not available to many small business owners. Economics of scale allow them to procure these benefits at more favorable rates.

Importantly, PEO clients can be proud that they are not among the many U.S. businesses not offering key benefits to their employees.

Although a PEO may not be the answer for every small business, it’s definitely worth considering. The National Association of Professional Employer Organizations advises small businesses to do their homework before signing on the dotted line. Check references, find out how the service was after the sale and confirm that the company is a member of NAPEO. Because many states do not require certification or licensing, NAPEO membership will assure you the company has been audited by an outside firm to verify that taxes and insurance premiums were paid properly and reports were filed on time. For more information, contact NAPEO at 703-836-0466, or see their home page at www. napeo.org/peo/.

Perhaps the best indication of a PEO’s effectiveness comes from Colorado’s Genie Gardner, who now enjoys more time for her company and her family. "I knew I’d made the right decision when the only person who noticed the difference in how we do business was me!"

Gwen Fey is Vice President, Client Services Coordination for Administaff, Inc. (NYSE: ASF), a leading PEO based in Kingwood, Texas. She joined Administaff in 1990 and is currently responsible for coordinating the company’s services to approximately 1,700 small business clients throughout the U.S.

Reprinted with permission of Enterprising Women.