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The Orlando Sentinel - July 26, 1999
Make Sure You are Comfortable With PEO
Question: We operate a small service
business with eight employees, but over the next several months
plan to have significant growth, which will require at least doubling
our employment. The human resources issue of hiring and management
are consuming a great deal of time and effort, and I would like
to know what are the advantages, disadvantages and selection criteria
for using a professional employer organization (PEO) for a small
business such as ours?
The main advantages of using a PEO are improved focus on your business,
peace of mind and a stronger ability to attract and retain quality
employees. Most business owners understand how systems for information,
operations, finance and sales are necessary to stay focused. The
human resource area also needs a system, and PEOs provide it. PEOs
remove some of the problems associated with having employees such
as payroll and benefits administration, recruiting and selection,
performance management, incentives and training. Most owners could
be doing a better job in these areas but don’t have the time
or expertise to do them well. PEOs also may help manage employee-related
liability and compliance matters.
Disadvantages include perceived loss of control,
cost and confusion about which PEO to select. Business owners usually
like control, and it may be tough for them to consider having an
outside firm so involved. But PEOs are actually a resource to help
owners call the shots more efficiently and effectively.
Cost is always a key factor in PEO decisions.
If the business is growing and trying to increase productivity,
PEOs can be viewed as an investment to help accomplish that: however,
if the business is content with status quo, then it will see PEOs
as an expense. Generally, PEOs will charge 1 percent to 5 percent
of payroll, over the current payroll burden. Most companies that
use PEOs would never go back to doing things themselves. As far
as how to select a PEO, check it out financially, time in business,
accreditation, vendor relationships and references.
Bill Clements, District Manager
Administaff
Selecting a professional employer organization,
or PEO, requires the same attention to detail as the selection of
any service or professional firm. For Florida licensing information,
contact the Board of Employee Leasing, Department of Business and
Professional Regulation at (850) 922-2971.
PEOs are accredited by the Institute for Accreditation
of Professional Employer Organizations, or IAPEO. Call (501) 219-2045
or visit their Web site at www.iapeo.org for a listing of standards
and procedures. Also contact the Florida chapter of the National
Association of Professional Employer Organizations at (850) 222-6000
or www.fapeo.org.
Additional references should be available from
other companies using the PEO; from insurance companies providing
health and workers’ compensation coverage; from accounting
statements showing payment of payroll taxes and insurance premiums;
and from banks and other credit references.
Al Polfer, Director
Small Business Development Center
Reprinted with permission of The Orlando Sentinel
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