Human Resources has a tough job to do. The HR department often has a small staff without the expertise or experience to manage the research involved. HR should keep abreast of all labor-related federal and state legislative changes. In addition, regulatory agencies publish guidance that requires HR compliance, and there are a host of local municipal regulations in some jurisdictions. If an employer hires remote workers from other states, the HR challenges multiply.
More and more employers find that outsourcing HR administrative duties simplifies HR’s role. One way to streamline tasks is to hire a dedicated payroll company. Payroll companies calculate and distribute payroll and calculate payroll taxes, but the employer remains responsible for payment and accuracy of the tax payments.
The superior way to simplify HR tasks is to hire a Professional Employer Organization, more popularly known as a PEO. A PEO is an HR outsourcing solution that can process your payroll taxes and remit them on your behalf.
Benefits of working with a PEO include:
- Access to modern technology for payroll and timekeeping systems,
- Expanded employee benefits through access to increased buying power,
- Cost savings on Workers’ Compensation and Unemployment Insurance,
- Better Return on Investment (ROI),
- Legislative and regulatory guidance compliance assistance,
- And error alleviation
Naturally, employers should choose a healthy PEO in order to reap the rewards that come with the HR partner. This article describes the signs that a PEO is healthy and what employers can do to select the appropriate PEO.
What is a healthy PEO?
According to the National Association of Professional Employer Associations, the average return on investment for a PEO is 27.2%.
Keep in mind, too, that the large size of a PEO is not necessarily a sign that the PEO is a healthy one. Working with an unhealthy PEO comes with risks that employers can avoid by working with a healthy PEO.
What does a Healthy PEO look like?
The following characteristics indicate a healthy PEO.
Record of Growth
A healthy PEO should demonstrate that the PEO experiences a pattern of growth and an increase in its client base.
As an example, in 2019, Zamp HR became one of Inc.’s 5000 list of “Fastest Growing Companies in America." If a PEO does not show growth, it can mean either that the PEO has internal issues to resolve or that the company has reached its capacity.
High Client Retention Rate
Retention rates are an important indicator of the PEO's quality. Happy clients stay with a company. Unhappy clients look elsewhere for service providers. Select a PEO with a 95% client retention rate. For example, Zamp HR has a 99% client retention rate.
Prior PEO Experience
It is crucial that employers assessing PEOs understand the experience level of a prospective PEO's management team and staff. For example, the combined PEO experience of Zamp HR's staff is more than 200 years.
High-Volume Payroll Processing
The most basic service that PEOs offer is payroll. That makes payroll services a good baseline on which to compare PEOs. A prime benchmark for a prospective PEO is one that has processed hundreds of millions of dollars in its payroll services. For example, Zamp HR has the experience of processing over $500,000,000 through payroll.
Partnered with A+ Insurance Carriers
A significant benefit of the PEO partnership is the ability to access Fortune 500 benefits that a small to mid-sized employer can afford. Look for a healthy PEO that maintains solid relationships with major insurance carriers, such as those who offer Health insurance, Workers' Compensation, and Unemployment Insurance. For example, Zamp HR maintains high-caliber relationships with Aetna, United Healthcare, BlueCross/Blueshield, and other major names in their focus to offer superior employee benefits.
Best-in-Class Technology
A healthy PEO should offer an all-in-one, full-service HR software that integrates the following HR modules:
- Payroll,
- Time & attendance,
- Applicant tracking,
- Benefits enrollment services,
- Managerial reporting, and
- Other HR functions.
For example, Zamp HR Cloud Software integrates all the above HR modules. In practical terms, that means an employer does not need to find multiple vendors for HR software.
Case Studies & Testimonials
If a PEO is healthy, they can proclaim their results through case studies and testimonials from clients. Employers need not look for too many case studies or testimonials; just enough to get an idea about their abilities. For example, Zamp HR has a page dedicated to case studies.
PEOs that do not have any case studies or testimonials most likely do not have great results. Or it means they have not put enough time and consideration into their brand.
Healthy PEOs Aren't More Expensive
When people think about PEOs, they make the common mistake of thinking that unhealthy PEOs charge less than healthy PEOs. The reality is that healthy PEOs can charge less in some cases because they have a wider client base.
Another misconception surrounds nationwide PEOs. Nationwide PEOs, healthy or not, charge more because they must recover the costs of national advertising campaigns and the regional offices they support. Local PEOs that service a state or surrounding region can charge less.
For employers who seek the finest blend of price and quality in one partner, the key to a successful PEO search is a healthy, local PEO.
