6 common PEO myths debunked
Don’t let these common myths stop you from outsourcing your human resources to a PEO.
Are rumors about companies that have had professional employer organization problems keeping you from hiring a PEO?
Granted, it’s certainly wise to do research about HR outsourcing. And it’s natural to have a few concerns at first, especially if co-employment is a new concept to you.
But let’s take a close look at six myths about PEOs.
Myth 1: “I’ll lose control of my business.”
You have a specific vision for your company and are working hard to develop it into reality. Thus you might fear that entering into a co-employment scenario with a PEO means you’ll have to give up decision-making power in your business as well as the ability to operate it the way you want.
But rest assured — a PEO is employer for certain purposes only (e.g., payment of wages and payroll processing). This frees you up to focus more intently on your revenue-generating projects. You’ll also continue to control and run your core business.
As a co-employer, a PEO works right alongside your business. Its role is similar to a director of human resources (HR), a trusted confidant at the leadership table, operating at your direction.
You tell the PEO what you’re trying to accomplish, and the PEO provides you with HR guidance and best practices on how to achieve those goals optimally while potentially minimizing risks.
For example, if employment regulations or labor laws change suddenly, being with a PEO can give you access to timely information that empowers you to make the best decisions.
Myth 2: “I’ll have to let go my HR manager or team.”
Earlier we compared PEOs to HR directors, but that doesn’t mean that joining a PEO will make letting go of your internal human resources staff inevitable.
In reality, not a lot of senior HR professionals enjoy tactical HR management tasks (e.g., developing an employee handbook or healthcare benefits administration). Frankly, they would rather be developing an HR program that supports their company’s goals. However, if they’re too busy with administrative tasks, they don’t have the time to pursue strategic projects.
With a PEO, your HR professionals may find that they have more time to work on strategic projects that might otherwise sit on the back burner. By outsourcing time-consuming administrative and compliance tasks to a reliable co-employer, your in-house HR professionals may become more valuable to you.
For instance, your HR department will now have time to finally tackle that performance management initiative that identifies appropriate training opportunities for your employees.
Additionally, when you work with a PEO, you gain access to a team of HR professionals who work with a number of industries and can bring HR best practices from those industries to the table.
It’s unlikely, too, that even the most talented HR professional you can hire will have the breadth of experience and knowledge that you can get from a PEO’s team of HR specialists, professionals who are continually gaining deeper insights through the experiences of their other clients.
A PEO’s HR specialists are also generally available when your internal team may not be available. For example, if your HR director is out of the office, you still have a knowledgeable team of HR professionals who can make sure you have the best and most up-to-date information when an unforeseen issue arises.
At the same time, as your business grows, outsourcing HR can help you save money when it comes to HR staffing. Joining a PEO may make it possible to keep your organization’s internal team small, while other companies struggle to increase HR headcount to keep up with growth in other departments.
Myth 3: “I’ll lose my status as a small business.”
As a small business, maybe you’ve benefited from programs that were only available to you because of the size of your company — e.g., state grants or Paycheck Protection Program (PPP) loans.
If so, you may wonder if you’d lose your small business status and be classified as a large employer once you join a PEO.
Generally, most PEO clients retain their eligibility for many grants and economic incentive programs, and the PEO can help you qualify for more of these special opportunities by providing you with organized employee information and reports that are readily available. As a result, a PEO client may find themselves more ready to apply (and apply quickly) when an opportunity presents itself.
Myth 4: “My employees won’t embrace the change.”
Employees leaving because their company enters a PEO relationship is virtually unheard of. In fact, the opposite is likely true.
With a PEO, your staff gains access to employee benefits that rival that of a Fortune 500 company — including health insurance plans, retirement and other benefit plans.
Moreover, because PEOs don’t get involved with the day-to-day operations of a client company, your employees should easily understand that they still work for you.
In other words, PEOs aren’t in the business of changing company culture (unless that’s something you need help with, of course). Rather, a PEO enhances the culture of an organization and creates a more engaged and productive workplace.
Myth 5: “I will lose the power to decide who gets hired and fired.”
When it comes to hiring and firing, your company will still make those decisions. However, with the assistance of your PEO’s HR specialists, managers will breathe a sigh of relief when they know they’re doing things the right way. And you’ll feel better knowing that the PEO is helping to manage potential risks.
For example, when you work with a PEO, your supervisors will be trained to follow through with progressive discipline, if necessary. They’ll learn how to counsel employees and document discussions so that you can make sure everything is handled and documented properly in the event of an employment claim.
With recruitment assistance from your PEO, you can find a candidate with not only the right skills, but also someone who fits in with your organizational culture.
A good PEO’s recruiting team will take the time to get to know your organization. From there, they can help you decide what kind of skills and experience your new employee needs to be successful. When the time comes to narrow your list of candidates, you’ll be able to focus on qualified candidates, rather than sifting through bad ones.
Myth 6: “All PEOs are the same.”
Whether you’re shopping for a PEO for the first time or looking to make a long-anticipated change, finding one that best meets the needs of your particular company and its goals is important.
When choosing a PEO, there are many questions you should ask. For example:
- Are you a certified PEO?
- How will my workers’ compensation experience rating be affected by joining?
- What does your HR services agreement look like?
PEO services can vary widely, so don’t make the mistake of believing all PEOs are the same.
Want to learn more about how a PEO can help take your business to the next level? Download our free e-book, HR outsourcing: a step-by-step guide to professional employer organizations (PEOs).