The Human Resources (HR) Department is arguably the most human aspect of any company, typically dealing with staffing, development, compensation, safety and health, and employee and labor relations. Having a highly functioning HR department can allow business owners and executives the relief that the needs of their employees are being met, and can save a company from all kinds of legal fees.

A problem that many businesses face is the sheer amount of responsibilities that are associated with the HR department, and of course the importance of such elements as staffing or employee relations which can affect your business as a whole.

Many companies are finding themselves a Professional Employer Organization or PEO to help with these delicate responsibilities.

What is a PEO?

A PEO is an organization which creates a joint-employment relationship with a company by leasing employees to the company, allowing the PEO to manage and support with the many employee-related responsibilities. This gives the company the ability to outsource their HR functions to the PEO, and relieve some of the strain from the HR department.

What Can They Do?

By taking on responsibilities of the HR department the PEO can relieve any HR staff that may not have the level of expertise or experience required of them, and there are a number of different functions a PEO can manage.

Recruiting and Hiring

The process of vetting potential staff members through posting a job vacancy to running interviews can be costly in time, energy, and sometimes even money. PEO’s are often equipped with experience and wisdom in the field of recruiting, and having them manage this aspect of your HR department can be a great way to ensure that only the highest quality potential employees are being considered.

Although there may be some concern from employees that the PEO doesn’t have the same effect as welcoming a member to a company through pre-existing employees.

Compliance Assistance

Maintaining compliance can be an ongoing struggle, especially for smaller businesses, and gaining assistance from a PEO with compliance can allow your HR staff to focus on other important aspects of the business. Breaking compliance can be incredibly costly, so ensuring that compliance is being met can mitigate unnecessary costs that could put your business under.

Payroll Administration

An aspect of HR that has always been vital for the survival of a company, having a payroll organized and being sent on time ensures your staff can maintain their financial security. Having a PEO manage your payroll administration can be ideal in much larger companies where there are other important HR responsibilities to stay on top of.

Outsourcing payroll admin can have some degree of risk, with employee paperwork being in their hands, and potential security issues with the vendor’s system. Finding a PEO which can ensure or insure their system and people are secure is ideal.

Drug Testing Programs

To ensure the efficacy of in-house drug testing programs the HR department may need to get uncomfortably close to the employees, this can be an HR nightmare in itself. Outsourcing the drug testing programs through a PEO can ensure that not only is the program being carried out to the highest professional degree, but also your employees and HR staff may feel more comfortable with how the process is carried out.

On the other hand though this can seem somewhat impersonal to staff members, so making sure they understand why you’ve incorporated a PEO to administer drug testing is a must.

Family and Medical Leave Act Administration

The Family and Medical Leave Act (FMLA) compliance requires HR staff to be aware of all the nuances and intricacies in the act’s details. For individuals new to HR or companies which are close to the 50-employee mark it’s important to be familiar with the basics of the act to ensure both the staff and the company are being treated fairly. Having a PEO manage this aspect of the business can be an ideal way to ensure that the act is being enacted fairly.

This is another area where having an impersonal relationship between the staff and PEO can create some resistance from staff, PEO’s can generally offer education about this to your staff to alleviate their concerns.

Benefits Administration

Having well-managed benefits administration can ensure your staff are incentivized to work their best, as well as attracting experienced key staff members to your business. PEO’s will often have formulas and plans for benefits administration, and their assistance can not only keep your staff happy but at a minimum cost to you and your business.

To PEO or Not to PEO?

As you can see there are many benefits to hiring a PEO to help with your business, although there are also some downsides which should be considered too. Make sure that if you’re going to hire a PEO to do your due diligence and work with your current HR staff to see which sectors they may be struggling with.