How a PEO Can Help You Build Your Brand New Business

How a PEO Can Help You Build Your Brand New Business

November 27, 2018 | By Tailored Solutions

Opening a brand new business is an exciting and harried experience. Whether you’re building your dream business from scratch or buying an existing one, there’s a lot to of things to cross off your to-do list before opening day. Prior to hanging your “open” sign, there’s one more thing to do:

Find out how a PEO can benefit your brand new business.

Check out these reasons to use a PEO when you’re starting a new business and find out exactly how beneficial this service can be.

PEOs for Payroll

Professional employer organizations (PEOs) can take the hassle out of payroll for your brand new business.

Payroll is a necessary part of being a business owner.

Many small business owners start off doing payroll themselves. But payroll requires time, diligence, proper tax forms, and knowledge of state, local, and federal laws and regulations.

Immersing yourself in the details of compliant payroll takes you away from running your business - whether that’s getting more sales, serving customers, marketing activities, supervising employees, managing inventory, or any of the hundreds of other activities that small business owners tend to take on themselves.

An alternative to doing payroll yourself is paying someone else to do it.

Whether you’re outsourcing to a payroll company or hiring someone in-house, you can free up the time by investing another resource: money.

If you’re going to invest in a payroll service, be sure you’re getting the most value for your business.

A PEO is different than a basic payroll service.

PEOs provide payroll as part of a broader range of services. Instead of investing in a business that only takes care of payroll for your business, you can invest in a PEO and get professional payroll services plus much more value for your investment.

Payroll is only the beginning. PEOs can help your new business in other ways, too.

Save on Workers’ Compensation

If you have employees, you’ll need workers’ compensation insurance.

Workers’ comp is required by law in nearly every state. Workers’ comp helps cover the costs of medical care or lost time if your employee is sick or injured as a result of doing their job. Even if you only have one employee, you’re likely required to carry workers’ comp.

Workers’ compensation insurance can be one of the biggest expenses, hassles, and headaches for a business owner.

And for brand new business owners, it comes with even more challenges.

For starters, workers’ comp rates can vary depending on different factors, including:

  • your industry
  • number of employees
  • loss history (claim history)
  • time you’ve been in business

Some insurance carriers won’t even consider insuring a brand new business without a loss history.

That means many first-time business owners are left with very few options for obtaining workers’ comp. They typically turn to state-run funds, where they pay significantly higher rates for workers’ comp coverage compared to a similar business with a few year’s experience.

Workers’ comp insurance often requires large deposits and complicated year-end audits. Your deposit for comp with a state fund could be as much as 25% of your estimated annual premium, for example.

If you have an incident and need to file a workers’ comp claim, the process can feel daunting, as well. There are best practices for managing workers’ compensation claims that can take a business owner years to figure out.

PEOs can solve your biggest workers’ comp challenges.

  • Many PEOs have an appetite for brand new businesses and can get you workers’ comp coverage, saving you from resorting to the state funds.
  • PEOs offer workers’ comp as a pay-as-you-go model tied to your payroll.
  • PEOs can eliminate up-front deposits and year-end audits.
  • Tying comp to your payroll means you only pay for the coverage you need, protecting you from overpaying for this coverage.
  • PEOs manage workers’ comp claims so you don’t have to.
  • PEOs can provide safety evaluation, training, and return to work programs that can help control workers’ cost comps and reduce future instances.

One of the best reasons to use a PEO for workers’ comp is this:

A PEO can save you up to 40% on your workers’ compensation insurance costs.

PEOs can offer their client-partners discounted rates on workers’ compensation insurance due to an economy of scale principle.

PEO clients often spend less on workers’ comp compared to buying a standalone policy. But they get so much more.

Remove the Hassle from HR

Many new business owners are surprised to find how much of their time and energy goes into employee-management functions.

Complying with HR-specific regulations, training employees, developing job descriptions, conducting performance reviews, taking care of payroll, deductions, and taxes are just a few of the HR tasks that a business owner must face day to day.

You can attempt to handle all of your HR tasks yourself, adhering to local, federal, and state regulations.

You can hire an HR professional to take care of HR matters.

Or, you can let your PEO take over the employee-management responsibilities for you as a total workers’ comp, payroll, and HR service package.

When your business partners with a PEO, you can spend less time, money, and resources on employee administration...and invest more time, money, and resources into growing your business.

PEOs Bring Big Benefits to Small Businesses

Businesses that partner with PEOs experience big benefits.

Businesses in PEO arrangements are 50% less likely to go out of business compared to their non-PEO peers.

Not only can a PEO partnership help your business survive, but it can also help you thrive.

  • Businesses in PEO arrangements grow 7% - 9% faster and have 10% - 14% lower turnover rates.
  • PEOs are able to offer a broad array of HR services at a lower cost.
  • Businesses are able to save an average of $450 on annual administrative costs per employee.
  • As many as 16% of all small businesses partner with a PEO for HR and benefits.

How Does a PEO Work?

PEOs and their client-partners enter into a co-employment relationship. This relationship involves a contractual allocation and sharing of employer responsibilities.

The PEO typically is responsible for employee administrative functions such as payroll and wage withholdings, reporting, collecting, and depositing employment taxes, issuing W2 forms, managing benefit packages, and other services as outlined in the client service agreement (CSA).

The client company retains responsibility for business operations, such as marketing, product development and production, sales, and service.

If you enter a partnership with a PEO company, you retain ownership of your business and full responsibility of your business operations. The PEO only takes over responsibility for payroll, payroll taxes, and benefits administration - basically, taking the employee-related tasks off your to-do list.

A PEO may handle your employee administration tasks, but it’s not in charge of finding you employees, hiring, or firing. Your employees are yours, and if you decide to end your PEO partnership in the future, your employees remain with you.

How Much Does a PEO Cost?

Most PEOs can offer your business their broad array of employee administration services for the same - or less - than you would pay for a standalone workers’ compensation policy.

And PEOs can bring even more value to your business.

PEOs have been shown to decrease employee administration costs by up to 25% - an average of $450 annual per employee. For smaller businesses, this savings can even be higher.

Businesses that partner with PEOs have 10% - 14% lower turnover rates. The cost to hire, onboard, and train a new employee can add up quickly. When your employees stick around, you can save thousands a year in lost costs from employee turnover.

How Do I Get a PEO Quote?

Want to know how much it will cost your business to hand over payroll, workers’ comp, and employee administration tasks to a PEO partner?

  • Contact us, or
  • Ask your insurance broker for a PEO quote from Tailored Solutions

Starting a business can be an exciting challenge. When you have an industry of professionals backing you up, you can double your chances of surviving those difficult first years and get a leg up on the competition. And that’s good for business.

Become a Producer.