Pros and Cons of PEOs

A Professional Employer Organization (PEO) is a very attractive model for small employers that want to access a variety of competitive benefits options and streamline administrative tasks. PEOs become the employer of record and, as a result, are able to offer large group benefit offerings to smaller employers. PEOs are also a great solution for organizations that prefer to delegate their tax and compliance responsibilities. Here are some pros and cons to consider when researching whether to select a PEO.

Pros

Expertise

For organizations that don’t have the expertise in-house, many PEOs handle:

• all mandatory notices

• access to required training

• tax and state registrations and reporting

Although few PEOs offer HR support, they lean towards focusing on the benefits, compliance, and the administration side of HR.

Software Functionality

Variety of Tools - Some PEOs offer tools to help an organization manage their HR day-to-day tasks. E.g. performance management tool or an applicant tracking system.

Automation - The benefits enrollment process is usually automated and easier to use for both administrators and employees.

Cons

Higher Cost

As PEOs take on the liabilities mentioned above, they tend to be more expensive than pure payroll vendors or other HR systems. Some may charge a percentage of your payroll, and others bill a pay period set fee per user.

Strategy

PEOs typically do not offer advice on strategic areas of HR. It is key to plan for additional support in employee engagement, DEI, strengthening an organization’s culture, aligning HR initiatives with the organization’s mission and goals, as well as other strategic HR ops planning needs.

The last piece to consider when making your decision is that PEOs’ customer service can vary, from having a dedicated representative to being able to email or call a customer service line when needed.

Reach out to a Kiwi HR Advisor to assess if a PEO is the right solution for your needs. It is now the perfect time to perform a needs assessment, select the vendor, and be prepared for a January start date.