The role of a Colorado Professional Employer Organization (PEO) is to partner with small business owners and help them by taking over administration duties, such as payroll, benefits, human resources (HR), and workers’ compensation.
Many of these administrative tasks are those that employers need to perform, but they lack the skill set, knowledge background, time, and money to do so. With the help of a Colorado PEO, small businesses do not have to hire a full-time HR department to take on all employee-related administration – quite an expensive option – and they can focus on what matters to them most.
There are quite a few benefits of hiring a Colorado PEO for these employee benefits services.
What Is a Colorado PEO?
Modern PEOs allow owners of small to mid-sized businesses to streamline their day-to-day administrative and HR job tasks and to provide their employees with access to better benefits. Running a business nowadays can be demanding – especially with employees working remotely across different states.
A PEO acts as a co-employer, specializing in payroll, employee benefits, HR, and labor compliance services to stay up to date on labor and employment laws. Rather than the older, traditional method of outsourcing all of these HR functions to their PEO, employers can now automate them to keep the most important, private information in-house, while still taking advantage of the benefits of a PEO in Colorado.
According to the National Association of Professional Employer Organizations (NAPEO), smaller businesses that work with a PEO have a lower employee turnover and a 14% increase in employee satisfaction. Additional PEO benefits include:
- Offering high-quality employee benefits, which will help to recruit and retain top talent
- Offering cost savings per year, per employee for a valuable ROI
- Companies grow faster and are more likely to stay in business
How Co-Employment Works with a Colorado PEO
With a PEO acting as a co-employer for your business, the PEO co-employs your workforce for administrative purposes only. You still have full control over whom you hire and fire, which benefits plans and packages you want to provide to your employees, and other integral human resources decisions.
NAPEO defines co-employment as a contractual relationship between you and the PEO to employ your workers. The contract, usually called a client service agreement (CSA), will define the exact services the PEO will provide and the specific responsibilities of each party. Certain responsibilities are divided, where the PEO:
- Employs your workers for tax purposes and typically processes wages, benefits, withholdings, and taxes under their federal employer identification number.
- Reports, collects, and deposits employment taxes on the local, state, and federal levels.
- May have the right to direct and control employees regarding particular matters with workers in specific locations.
How a PEO Improves Employee Health Benefits
Healthcare benefits are a major draw for employees when they are making a decision on whether or not to work for your company. It is imperative for employers to offer a comprehensive healthcare plan for snagging current talent and ensuring future growth.
As a large group, a PEO can leverage its cost advantages from its economies of scale to negotiate pricing with providers. In addition, it can customize a plan that is best for your company, streamline employee enrollment administration, process claims, and more. To give you an idea of just how large the PEO economies of scale are, according to NAPEO, approximately 1,000 PEOs in the United States co-employ 3.7 million employees across 175,000 businesses.
On top of health benefits, PEOs can enhance benefits packages even more by offering 401ks, IRAs, life insurance, vision, dental, short and long-term disability, mental health support, dependent care, flexible spending accounts (FSAs), and health spending accounts (HSAs).
HR Administration and Compliance: How PEOs Help Small Businesses
Labor and compliance laws are becoming increasingly complicated and everchanging. It is becoming especially challenging with the shift toward remote work, and a PEO can help you follow all the rules and avoid the burden of fines. According to reports, 36.2 million Americans will be working remotely by 2025, which is an 87% increase from pre-pandemic numbers.
Having a full-time HR department is costly, but HR services with a Colorado PEO are included in lower-priced plans and can alleviate the high demands on your business, which include:
- Compliance with government and employment regulations
- Employee background checks
- Training new employees
- Design, draft, and distribute employment policies and handbooks
- Customize employee recognition programs
How PEOs Manage Workers’ Compensation for Small Businesses
Workers’ compensation coverage can quickly become too expensive for small businesses themselves in Colorado. But, with the help of a good PEO and their workers’ compensation administration services, business owners can breathe easier as the PEO takes over:
- Accident documentation
- Managing and reviewing claims
- Billing reconciliation
- Safety audits
- OSHA compliance
- NCCI mod rate reviews
- Annual cost reviews
How Do You Choose a PEO that Is Best for You?
Out of the thousands of PEOs in the United States, each is different, with some better for your company’s needs and wants. It is important that you compare and contrast their services and options that may factor into your final decision.
Do They Offer the Services You Need?
Make sure the PEO provides services specific to your company size, industry, and geographic location. They should be experienced in supporting your company profile as you continue to grow.
What Is Their Pricing Structure?
PEOs typically charge small businesses a flat fee per employee, which is usually more predictable and easier to budget, or a percentage of your payroll. The flat rates, however, can come with hidden fees and extra costs, so be sure to ask about these additional costs and choose a PEO that is fully transparent with their pricing scale.
What Are Any Other Requirements?
Verify whether or not there are any other requirements for you from the PEO, such as a minimum number of employees or the time frame for advance notice if you want to cancel their services without a fine.
Overall, the Colorado PEO you decide to partner with should be easy to use for both you and your employees.