Many businesses outsource their HR needs to a PEO, or Professional Employer Organization, in order to save money and time in the long run. If you are thinking about entering into a business relationship with a PEO, one of your top questions is probably how payment works. Though your business is unique, and the co-employment agreement you will sign with a PEO is unique, payment is usually rendered in one of two ways.
Usually this is between $900 and $1,500 per employee, per year, and is used to keep the overall cost very predictable for annual budgets.
Percentage of Payroll
Usually this is between 3% and 10% of the overall payroll for each pay period.
The cost of using a PEO is often much cheaper than hiring an in-house accounting or HR staff, and it can be an especially useful tool for businesses that have between five and 100 employees. Additionally, having a PEO perform and manage numerous services can allow you, the business owner, to focus more on the day-to-day operations of your company. This can mean higher profits and a smoother workflow.
Deciding Which Payment Structure Is Right For You
For some businesses, it may not be clear whether payment per-employee-per-year or payment as a percentage of overall payroll is the better option. However, it is not uncommon for PEOs to work with clients in finding the right solution for all involved. Overall, many businesses like to have the predictability of one lump-sum payment per-employee-per-year, but smaller businesses may prefer to pay a percentage of payroll each pay period rather than deal with a large lump sum.
At NetPEO, we have one of the largest networks of PEOs across the nation. As a PEO brokerage service, we can assess your business needs, offer a selection of PEOs that can fit those needs, facilitate the co-employment arrangement, and make sure that you are continually satisfied with all of the services you pay for. In fact, we have the highest client satisfaction rates and the highest client retention rate in the industry.
What You Pay For
PEOs offer a wide selection of services to meet businesses’ specific needs. Some of the services on offer through NetPEO’s network include the following:
- Payroll Management
- Employee Benefits
- Employee Training
- Workers’ Compensation Claims
- Creation of Employee Handbooks
- Compliance with Federal and State Regulations
With our network, you can choose to outsource the entire services of a PEO HR department or you can decide to order specific services in an a la carte fashion. While the more comprehensive arrangement offers the most benefits to your business and is often the better deal, it may be the case that your company only requires a few key services to be outsourced. At NetPEO, we start the process by assessing these needs and advising you accordingly.
In addition to the actual services, you are paying for much more when you outsource to a PEO. You are also paying for more intangible benefits like:
- More time to focus on your actual business model
- Peace of mind knowing that experts are handling your HR needs
- Increased efficiency
Not only is using a PEO a way to manage your interests, but it also provides a wider pool for employee benefits. This can result in happier employees who will stay with the company long-term, reducing the cost of constant turnover. It can also have a significant effect on your company’s ability to recruit top talent in key positions.
What Does Co-Employment Mean?
For a PEO to take over some of the responsibilities of your business, it is necessary to sign a co-employment agreement. Contrary to how it sounds, this arrangement does not mean that you are taking on more employees or more expenses. Co-employment is merely a legal arrangement that gives the PEO the proper authority to perform the services you need, such as allocating employee benefit packages or drafting and enforcing your company’s sexual harassment policy.
How Do You Hire A PEO?
Outsourcing your HR needs to a PEO starts by contacting NetPEO for an evaluation. Our experts will speak with you and assess your company’s specific needs. Once we have a good idea of what you are looking for, we will comb through our extensive network to find several PEOs that fit the bill. You have the final say, signing a co-employment agreement with the PEO of your choice. We stick with you all the way, regularly checking in to ensure your satisfaction.