A PEO, or Professional Employer Organization, benefits not only employers who are owners of small to mid-sized businesses but also employees of those businesses. PEOs are designed to work with these business owners to provide employees with access to higher quality, more affordable benefits. For employers, PEOs take the burden of administrative and human resources (HR) duties, like payroll, compliance, benefits, and workers’ compensation, from them.
Overall by the numbers, the National Association of Professional Employer Organizations (NAPEO) reports that small businesses that outsource their HR to a PEO benefit by:
- Growing their business up to 9% faster
- A 10% decrease in employee turnover
- Cutting the likelihood of going out of business in half.
These are just a few reasons that there are benefits to hiring a Texas PEO for their employee benefits services.
How Does a Texas PEO Work?
The working partnership between a small business owner and a Texas PEO company is like a shared or co-employment relationship. While the business owner still controls the daily activities of their employees, the PEO manages the administrative paperwork and is responsible for payroll, tax reporting, benefits, risk management, and more.
The modern technology of PEOs allows companies to avoid fully outsourcing the functions of HR and instead sort the parts of those functions that keep their most private information in-house, while still benefiting from the better benefits, consulting services, and time savings of a PEO.
How Texas PEOs Help to Enhance Employees’ Medical Benefits
A significant advantage for employees working for a business that uses the services of a Texas PEO is the wide range of medical benefits available at a higher quality and lower cost, which includes life and health insurance, plus any supplemental policies.
Employees of small businesses can have access to big Fortune 500-level benefit packages that combine medical, dental, vision, and short- and long-term disability insurance – even a health care FSA (Flexible Spending Account). Business owners can customize the benefit plan that is best for their employees’ needs and their budget, tiered with a range of deductible limits.
Health insurance companies in the United States are increasingly hiking their rates by 20 to 35%, according to studies performed by the National Conference of State Legislatures (NCSL). PEOs, however, are protected from these rate increases because of the strength of their cost-containment strategies and purchasing power. Because of a PEO’s massive roster of employees, they do not have to acquire coverage through the market, but, instead, they can write their own insurance rate on better terms – holding to a much lower rate increase of approximately 7% on insurance premiums.
How a Minimum Essential Coverage Plan Helps Employees Under a Texas PEO
Signed into law by the U.S. Department of Health & Human Services in 2010, the Health Care Reform Act cites that employees who are not covered by an employer health plan or other government assistance are required to have an insurance policy. Otherwise, a penalty will ensue. Also part of the law, employers with 50 or more full-time or equivalent-to-full-time employees must offer their employees affordable health care benefits.
Thankfully, PEOs offer Minimum Essential Coverage (MEC) and Minimum Value Plans (MVP) to their employees. These plans are simpler health plans that offer at least 60% actuarial benefits, which means they pay at least 60% of claims submitted by policyholders. These scaled-down plans normally have a lower premium than plans in the marketplace.
Additional Benefits of a Texas PEO
Because a PEO in Texas provides health insurance benefits, retirement benefits, and HR services for small companies, who otherwise may not be able to fit them into their budget, there is a wide array of other advantages of PEO for both employees and employers.
HR and Payroll Admin
With the help of a PEO, human resource professionals are able to reduce many liabilities by first assisting with the creation of safety and employee handbooks, lawful hiring, and essential employment procedures.
A PEO can take over supervision in the HR department by:
- Processing your payroll
- Managing your tax deductions
- Easing the task of time-tracking
- Managing compliance, records, and reports
- Handling employment verification and onboarding through online technology
- Streamlining employee access to their paystubs, W-2s, and benefits info online
- Taking care of payroll services, such as paper checks, direct deposit, tax reporting, and more.
There are many PEOs that also offer a wide range of retirement savings plans for employees, including 401(k)s. The advantage to this is that the PEO becomes the plan’s co-sponsor, taking on the high fiduciary liability of retirement plans and saving the employer on hefty retirement costs and fees.
The Texas PEO organization will also take over these responsibilities:
- Monitoring the 401(k) service providers
- Managing the plan’s administrative duties
- Investment-related responsibilities
- Depositing employee contributions in a timely manner
- Paying any expenses from plan assets
- Ensuring there is adequate ERISA fidelity bond coverage
There are also many valuable benefits of businesses having workers’ compensation carried by a Texas PEO, starting with little to no money down, low rates, no state fees, and no annual audits.
Additional advantages of having a Texas PEO workers’ compensation benefits plan include:
- OSHA/DOL compliance
- Risk management and safety programs
- Return-to-work programs
- Easy certificates of insurance
- Employee Assistance Programs (EAPs) to help with life needs of the employee and their family
- Pay-as-you-go plans that improve cash flow
- Partnerships with A-rated carriers
The HR professionals of a PEO can also guide employers through the overwhelming process of recruiting the best talent out of a pile of resumes, and offer effective training to add to your company’s profitable performance.
How Much Do Texas PEO Employee Benefits Services Cost?
While all PEO companies in Texas are different, they usually charge a fixed percentage of your total payroll or a flat rate per employee. Another factor of the fees, of course, depends on how many services are needed and the types of those services.
Regardless, working with a PEO will save your business money long-term in administrative costs and human resource liability instead of handling it in-house, so contact a Texas PEO today.