How HR and PEOs Work Together for Business Success in California

A Guide for Business Leaders Looking to Achieve HR Success


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Many small to mid-sized businesses may think that human resource management is something that is part of a large corporate structure and out of the reach of the smaller boutique firms or startups. In reality, HR can be a strategic part of supporting long-term business goals no matter the size of your company. By choosing a strategic partner to work by your side, it allows your business to move beyond administrative duties and focus on the HR principles and best practices that support the company's overall mission and strategy. Let's look at how HR and PEOs work together to allow you and your management team to focus on your core competencies while ensuring efficient and effectively managed HR tasks. 

The information is organized as follows. You can read it from top to bottom, or move to any section by clicking on one of the following links:

Section 1: Why Use a PEO?

Section 2: What are the Benefits of a PEO?

Section 3: What are the Roles and Responsibilities of HR?

Section 4: How HR and PEOs Work Together

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Why Use a PEO?

A PEO or professional employer organization is an entity that allows small to mid-sized businesses to outsource many HR tasks under the co-employment model. This strategic partnership enables the PEO to assume certain responsibilities and risks so that the company can focus on operations. PEOs employ 3.7 million people, allowing them to provide services to 175,000 small and mid-sized businesses. Some of the services PEOs offer include:





Human resources - The term human resources can encompass many capabilities. It refers to a department responsible for everything from recruiting new employees to hiring, training, managing personnel records, and designing your employee benefits package. PEOs may offer a variety of services, such as helping to design your overall employee strategy. 

Payroll - PEOs ensure that employees are compensated correctly, on time, and with the correct deductions. They manage time and attendance monitoring, often improving timekeeping methods and payroll records. They help businesses manage the legal obligations of paying their employees for the time they've worked.
Compliance - Ensuring compliance with all state and federal laws governing payroll is a critical part of human resource management. PEOs can help businesses by taking over the responsibilities and many of the risks associated with new hires, payroll tax reporting, filing W-2s, and unemployment reporting, as well as paying workers' compensation and employment practices liability insurance premiums. PEOs can be invaluable for helping companies comply with the many employment laws, such as FMLA, COBRA, ERISA, HIPAA, PPACA, and more.
Employee benefits - The administration of employee benefits is one of the services offered by PEOs. They can help small businesses find affordable medical, vision, and dental coverage by aggregating their many clients to create master group policies with access to better plans and options. PEOs can assume responsibilities for access to 401k plans, as well as mental health and care services for a variety of needs. Your PEO can also manage a variety of perks like transportation or wellness benefits.    
7 Things to Know About Your Benefits Package-1
What Are the Benefits of a PEO?

Outsourcing your HR administration to a PEO provides many benefits. A report from NAPEO found that PEOs help businesses save up to 35% on HR administration. The following illustrates how HR and PEOs collaborate to provide greater value to the business and its employees. The partnership allows the business to:


Alleviate administrative tasks so management can focus on business growth.
Gain access to state-of-the-art Human Resource Information System (HRIS) for management and employees.
Leverage expertise in benefits administration and compliance with employment laws without recruiting and hiring for these specialty roles in-house.trative tasks so management can focus on business growth.
Offer employees a better variety of employee benefits than they would be able to provide as a small business.
Prevent fines, lawsuits, and penalties for non-compliance, late filings, or other costly mistakes.        
Should Your Business Be Partnering with a PEO?       

What Are the Roles and Responsibilities of HR?

The primary purpose of human resources is to maximize an organization's productivity by optimizing the effectiveness of its employees throughout the entire employee lifecycle, from the recruitment process through separation or termination. However, it is also there to support the employee by providing career growth guidance, continuing education, training, and supporting their general health and wellness. According to a recent survey of 9,000 businesses, 80% listed wellness as a primary concern. They may be called on to manage claims of harassment or discrimination, help with benefits questions or changes, or help an employee navigate difficult personal circumstances. 

By aligning your HR strategy with your business strategy, you ensure that every department is working in lockstep to achieve the same goals. Your human resources partner should be included in conversations regarding strategic alignment initiatives to:

4 Questions Your HR Representative Should Be Able to Answer

1. Understand the business strategy.
2. Leverage knowledge of past issues or concerns to proactively identify and assess current conditions.
3. Plan and implement a comprehensive HR strategy, including organizational structure, compensation, training, and succession planning that supports business goals.
4. Identify the best strategy to track and measure performance and identify talent or employees at risk of leaving.
5. Plan mitigation or adjustment tactics if necessary.


How HR and PEOs Work Together

Outsourcing human resource management is ideal for smaller businesses that don't have the capacity for a full HR department, much less the systems, software, and technical support required. There are different structures and options to define how HR and PEOs work together. Some businesses may choose to outsource all HR functions, beginning with payroll and encompassing legal compliance and employee benefits. 

HR outsourcing can mitigate questions of confidentiality or favoritism that could arise with established friendships or relationships within a company. It can also make it easier to take disciplinary action when an employee of any level violates policies. By having a close partnership with your PEO, you can resolve organizational issues by adhering to the strategy, policies, and techniques for recruiting talent and measuring performance. 

When choosing the right PEO for outsourcing your HR, consider these suggestions:

Assess your needs, then meet with prospective PEOs to ensure they can fill them.
Check client and professional references.
Ask how the employee benefits are funded and ensure they meet your employees' needs:
1. Is it fully insured or partially self-funded?
2. Who is the third-party administrator or carrier, and are they authorized to do business in your state? 
What professional experience, industry experience, and expertise do their staff and senior management have?
Understand the responsibilities, provisions, liabilities, and remedies outlined in the service level agreement before signing


Focus Less on Admin and More on Your Business by Partnering With a PEO

PEOs are the ideal solution for small and mid-sized businesses that aren't positioned to sustain an entire HR department. It allows them to ensure accurate wage statements and payments, taxes, and insurance, as well as employment law compliance without hiring an expensive team. Partnering with an experienced PEO allows business leaders to concentrate less on administrative tasks and more on their business operations. To learn more, download our eBook.

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