What is a PEO and how does it work?

A PEO stands for a Professional Employer Organization. It exists as a separate, stand-alone organization focused exclusively on managing its clients’ human resource-related functions, including benefits administration, regulatory compliance, workers’ compensation, payroll, taxes, and similar practice areas. It is more than just an extension of your Human Resources department.

A PEO will assume the role of “employer of record” for a company’s employees, taking on the responsibility of administering most or all of the administrative tasks – as well as a fair measure of the risk associated with maintaining a workforce.

In recent years, PEOs have staked out a claim to a growing portion of the HR field, supplementing or eclipsing in-house Human Resources departments in many small to mid-sized companies. Even as the popularity of PEOs have increased, many business owners and C-suite decision makers do not understand how their organizations can benefit from these services. Once they find out more about a Professional Employer Organization, they quickly come to understand that they are fundamentally changing the way American businesses manage interactions between employers and employees.

What is the benefit of using a PEO?

A PEO shifts some essential functions and responsibilities from employees to an experienced, external third party that works with your team. The professional employer organization will assume the role of “employer of record” for a company’s employees, taking on the responsibility of administering most or all of the administrative tasks – as well as a fair measure of the risk – associated with maintaining a workforce.

By engaging with a PEO, client businesses gain a number of significant operational and competitive advantages:

The ability to reallocate both attention and resources from HR functions to core areas of interest and expertise – the making and selling of the company’s product or service.
A measure of insulation and/or indemnification.
The streamlining of human resource functions placed under professional administration.
The ability to leverage economies of scale in securing necessary benefit and insurance programs.
Improved adoption of HR best practices under professional administration.

Is a PEO a staffing agency?

Most PEOs are not staffing agencies, which essentially lease employees to other businesses and remain the sole employer for those workers. PEOs do not generally supply businesses with staff, but instead assume certain responsibilities that make them co-employers with their partner companies.

Is a PEO the same thing as HR outsourcing?

Human resources outsourcing (HRO) is not the same as a PEO, although some PEOs (like Trion Solutions) can meet both needs. A PEO acts as a co-employer, whereas an HRO works with processes that are already established by your organization. PEOs and HROs fulfill different roles as an HR provider.

Working with a PEO can benefit businesses of any size. A PEO is a good choice for organizations looking for a turn-key solution that reduces overall administrative burden in human resources as well as limits your organization’s liability. PEOs offer a more inclusive solution and HROs often provide individual solutions à la carte

What functions does a PEO not do?

While the specific functions of individual PEOs vary from one provider to the next, there are some general functions which you should not expect a PEO to do. Those include:

Influence or define your company culture
Hire and fire your employees
Set workers’ schedules or pay rates
Define your business goals
Participate in marketing your products or business

Is Trion a PEO?

Michigan-based Trion Solutions is among the nation’s Top 10 Professional Employer Organizations (PEOs). Trion relieves the stress and burden of payroll and other HR-related functions for companies – from small to large – so they can remain focused on their core business.Trion’s size provides client employees access to better benefits and HR services available usually to only large corporations – all while taking employer risk and regulatory strain off of partner organizations.

Can my business benefit from a PEO?

The growing popularity of the PEO model is driven to a great degree by the increasing challenges and stressors facing small to medium-sized businesses. An increasingly technology-driven, global marketplace heightens competition and shrinks margins, even as increased regulatory and legal risks impose additional complexity and costs upon HR departments and practitioners. A PEO can deflect risk, contain costs, ensure consistency and predictability in practices, and effectively address complex taxation, insurance, and regulatory issues becomes increasingly valuable to companies operating within this challenging environment.

As your business evolves, chances are that a PEO model can support growth and operational efficiencies for companies in a wide range of industries. The experts working on your behalf as part of the professional employer organization can also deflect risk, contain costs, and ensure consistency and predictability in practices to support the completion of taxes, insurance decisions and other regulatory issues.

See if a PEO would be a value-added service for you by contacting Trion Solutions to speak to one of our experts.

OUTSOURCING’S EXPENSIVE ALTERNATIVES: Why The PEO Model Is Gaining Ground

Throughout the last half of the 20^th century and the first part of this one, we had the opportunity to learn the same lesson over and over: For business, “business as usual” wasn’t working – at least not as well as it needed to or should. Traditional models of ownership, management, investment, employment, marketing and distribution all underwent repeated phases of major disruption as technology, demographics, wealth distribution and market demand experienced major change. With each upheaval, the choice was stark: Adapt or perish.

Sure, you could try to stick with the way you’d always done things – but chances were that there would be a new, aggressive upstart ready and waiting to eat your lunch. The rise of the Japanese auto industry, Chinese consumer goods, and Silicon Valley tech startups were all made possible by seismic changes in old-guard industries. Smarter companies adapted, evolved, and survived; those who didn’t disappeared. RIP, Packard. RIP, Howard Johnson’s. RIP Union Carbide.

One upheaval that hasn’t been broadly addressed: The slow, steady decline of the old employment model. American business still maintains hundreds of thousands of atomized individual HR departments, doing what HR departments have always done: reviewing resumes, managing paperwork, negotiating contracts, and administering benefits. While practices have remained largely the same, though, costs have not: Estimates have shown that the average company now spends $5,000 per year per employee on HR administration expense alone. In an era of narrow margins and savage competition, such nonproductive capital expenses seem not only unjustifiable, but unsustainable.

Many companies have tried to blunt the impact of this inefficiency and expense by turning to temp agencies. Companies that once were called on to provide only short-term or ad hoc personnel now are called on to handle a significant portion, if not all, of many businesses’ staffing needs. While this can be a valuable short-term solution, it probably isn’t the best way to address all long-term needs..

Over time, cost and consistency can emerge as issues. Temp agencies depend upon the availability of a steady supply of skilled personnel willing to work in a temporary capacity. In an economic downturn, that doesn’t pose a tremendous challenge as the labor supply rises; in a tightening labor market, though, it becomes a bigger problem as temp workers find long term or permanent employment, or create their own businesses or individual consultancies. The continuing need for new recruits, and to handle the associated paperwork, adds to infrastructure costs which are passed on to clients.

Traditional employment models are becoming less suited to many of today’s efficiency-driven, stability-seeking businesses. That’s why Professional Employer Organizations (or PEO) like Trion Solutions have prospered. The ability to provide a high-quality, stable, and affordable labor pool while containing costs has become a pivotal competitive advantage—and one that more and more forward looking businesses are finding impossible to ignore. There will always be temp agencies, of course, and there will always be companies that insist upon maintaining their own extensive HR infrastructure—but as labor and administration costs rise and as a technology-empowered workforce becomes ever more mobile, these will become more challenging to sustain.