Four Common PEO Misconceptions Debunked

Four Common PEO Misconceptions Debunked

Professional employer organizations can be a wonderful way for businesses large and small to handle and strengthen their human resources capabilities, but many organizations new to the industry don’t know what to expect from their PEO partners. As one of the nation’s leading PEOs, CoAdvantage is no stranger to working with businesses who have fallen for a few myths. Here we correct some of the biggest misconceptions we encounter.

Myth #1: PEOs are only for big businesses.

Actually, the opposite is true. According to the National Association of PEOs (NAPEO), most PEO customers are small businesses. In 2015, the average PEO client had 22.5 worksite employees. In fact, in some ways, small businesses reap bigger benefits than larger organizations from PEO partnerships. For example, small businesses don’t have the deep pockets of enterprise-scale organizations, meaning time freed to focus on core activities at economy-of-scale pricing of a PEO, can have a disproportionate benefit.

Myth #2: PEOs take control.

This is a big fear. Many businesses worry that they must surrender all control of HR functionality to the PEO. Not so! While the PEO does become the “employer of record” for things like payroll taxes, the contractual agreement between the PEO and the business is always clear that the business is the one in charge of making decisions to run their business. The business retains control over decisions while freeing themselves from the tedium of administrative tasks like payroll, benefits administration and compliance issues.

Myth #3: Employees suffer under HR outsourcing.

Many organizations wonder if their employees will suffer from having to work with outsiders. In fact, employees appreciate having access to a wider variety of cost-effective benefits and services, including self-service portals, than they would have otherwise. That gives workers more options and more power over their own experience. The result is increased employee retention: NAPEO reports that employee turnover is 10 to 14 percentage points lower for companies that use PEO services versus those who do not.*

“It's an easy story to tell your employees why it's beneficial to join a PEO when they watch their healthcare costs come down and when they see additional benefits and vision and dental and life insurance and retirement plans that we get to offer as a part of being with a PEO,” says Ryan Gay, CEO, Levatas.

Myth #4: PEOs are too expensive.

PEOs are cheaper than the DIY method, on average: per NAPEO, HR administration costs PEO clients an average of 25.7% less than all employers.* Plus, when structured wisely, the PEO partnership frees you and your workers to focus on core, revenue-producing tasks and, thus, increase your earnings potential. 

Need more information about HR outsourcing? CoAdvantage, one of the nation’s largest Professional Employer Organizations (PEOs), helps small to mid-sized companies with benefits, payroll, compliance, and HR best practices. To learn more about our integrated HR outsourcing solution, contact us today.

*NAPEO