Is a PEO worth it for your business, or are you better off doing things in-house? One Dallas PEO broker breaks down this approach to outsourcing and why and when you should consider investing in one.
“No, PEOs are not just there to take admin work away from your team,” said Insurance4Dallas, an insurance company that also doubles as a PEO broker, matching its clients with service providers in the city. “They do other things, too, besides admin and HR tasks.”
Insurance4Dallas—the online face of the Thornton Insurance Agency, LLC—has been seeing an upsurge in PEO inquiries from many startups and growing small businesses in Dallas. But this rising demand is not a local phenomenon, as professional employer organizations, or PEOs, can expect double-digit growth this next decade, according to industry insiders.
“The reason why companies are all too eager to let PEOs take over is that admin work has gotten too complex,” Insurance4Dallas explained. “If you want growth, then you need to focus on operations or R&D; not paperwork. Luckily for our clients, PEOs handle more than just paperwork—a lot more.”
When PEOs are employed, the usual arrangement is a co-employment setup, where the PEO acts as an “employer of record” (EOR). But unlike traditional EOR arrangements, where the third party assumes all responsibility for employees on behalf of another company, the powers of a PEO are more limited in scope, relegated to HR and compliance roles. “This simply means that the PEO doesn't own or control employees under a co-employment setup. The client company is still responsible for managing employees as they go about their tasks," Insurance4Dallas explained.
The broker said that the PEOs it partners with can handle common HR management tasks like payroll, benefits administration, and compliance, but they also manage lesser-known or more specialized roles, such as employee training and development, recruitment support, analytics using HR platforms, and dispute resolution and mediation—to name just a few.
While PEOs offer numerous benefits, some organizations may benefit from them more than others. Insurance4Dallas said that businesses that are scaling quickly but are incapable of handling HR complexities should consider partnering with PEOs so that they can ensure they comply with local labor laws. "Startups and small to medium-sized businesses often lack the internal capacity to handle multiple HR functions, and this is where the expertise of PEOs can prove invaluable," Insurance4Dallas said.
PEOs can also aid small and medium-sized businesses that want to provide better benefits to their staff but lack the negotiating power. According to Insurance4Dallas, because PEOs manage a large number of employees from different companies, this results in purchasing power akin to that of a large firm. "This, of course, translates to policies with more comprehensive coverage and lower out-of-pocket costs," it added.
Companies that want to delegate their admin and HR roles to PEOs have the option of speaking to a PEO directly or having brokers handle the selection process for them. Insurance4Dallas said that while it may seem that brokers add another layer of complexity, they fulfill a critical task. "If you're working with PEOs for the first time, then it's advisable to let someone with more in-depth knowledge guide you," Insurance4Dallas said. "Brokers work with numerous PEOs, allowing you to access multiple options, and they can negotiate rates on your behalf so that you can get the best terms."
"If you don't have the time to do your due diligence, PEOs will help prevent you from making uninformed decisions," it added.
This content is provided in partnership with Insurance4Dallas and is intended for informational purposes only. The views, opinions, and advice expressed in this article are solely those of Insurance4Dallas and do not necessarily reflect the views or policies of any other individual, organization, or entity.
