Tasks such as hiring, payroll, and compensation management are time-consuming and don’t generate revenue. At some point such activities create so much loss that a company may be better off outsourcing human resources to a professional employer organization (POE). When working with a PEO, the business is now free of the hassles and time-draining activities involved with human resources and has more time to dedicate to revenue-generating activities. The PEO handles the hiring of new employees, pays those new employees (who technically work for the PEO), and often facilitates a better a benefits package, which leads to the hiring of better employees. In return, the company pays an average of 2-11% of wages to the PEO.
The question then becomes, how does one determine if his or her company should hire a PEO? The answer, of course, is that it depends. Size is one important factor. If the company is too small, then it’s not wasting a lot of time on human resources tasks. If the company is very large, then it can have its own human resource department. Another factor is the price of hiring a PEO, which varies per PEO as well as the size of the company doing the hiring. Finally, you should consider the amount of control you want over your human resources. If you want a high level of control, then perhaps a PEO is not the best route for you.
There are many factors to consider when weighing the pros and cons of doing business with a PEO. It can free up a lot of time for more productive work, but in exchange you lose some control.
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