Payroll Outsourcing Or PEO?
Once upon a time, when government regulations were simpler and easier to
comply with, companies had no problem taking care of payroll. "Human
Resources" usually consisted of a stack of contracts that the employees
had signed saying when and for what they would work. Come pay day, the
employer would hand them their wages or, in later times, a check. Sounds
wonderful doesn't it? If you could take care of your employees, give them
top notch benefits, and comply with every government regulation ever
passed, and make it as easy as it was 150 years ago, no matter what the
size of your company, you would take it wouldn't you? Welcome to the
world of PEO.
So lets assume that you are a new business owner, an entrepreneur, a go-
getter. You get your capital together, you get your location, you file
500 pieces of paper with the local, state, and federal government to get
all your licenses, and you are ready for opening day. You put an ad in
the local paper looking for employees, and when they come in, you hire 10
of them. It's a few months in, business is good, and then one of your
employees suffers a workplace injury. They go and complain to the local
workers comp office, and all of a sudden you find yourself out of
business, with all your money gone. What happened? You failed to comply
with Regulations (Standards - 29 CFR) and Directive CPL 02-00-135 of
OSHA. What? You didn't know that regulation even existed? Well that's too
bad for you, because your business is already gone.
Why choose PEO?
So, you now know that Regulations (Standards - 29 CFR) exists, but what
about the rest of the directives? How could you possibly keep up to date
with all these standards and new regulations while running your business?
The answer is, you couldn't. That's why you outsource. Most companies
find it easier to outsource payroll, but why not just get rid of all that
liability at one time? PEO stands for Professional Employer Organization.
Essentially, the PEO you contract takes on all the liability of your
employees. They will have teams of people dedicated only to complying
with regulations. They handle payroll, human resources, workers
compensation, regulation compliance, and even employee benefits. Many
PEOs can enable small businesses to supply Fortune 500 benefits to their
employees. This aids in employee retention and satisfaction. With all
these great benefits you, the business owner, can focus on running your
business, rather than complying with every new rule made.
Wheres the catch?
No catch. Ok, let me rephrase that. There aren't any catches, as long as
you have the whole picture. The one main objection business owners have,
is that they loose control of their business. Not true. When you sign a
contract with a PEO, they become the employer of record, and all taxes
and claims are filed under their tax number. All liability is with them,
but since they do this for a living, they have all compliance issues
down. You maintain control of your employees, except where the government
is concerned. And with most PEOs, you can cancel your contract at
anytime, (with no fees) and immediately regain complete control of your
employees. You'll have to re-assume liability for them though, so you
better make sure you know what you are doing. Apart from that, there's no
I'm sold, where do I go now?
Well, there's a few places you could start. The first is Google. Look up
PEO and your state (eg: "PEO in Arkansas) and you should get quite a few
results. Also look at other companies in your area. Find out if they
outsource their payroll, or employees. Many PEOs offer payroll services
as well, so it's not out of the question to find a neighboring company
that outsources payroll. You may want to tell them about this article so
that they can reap the same benefits that you will. One of my favorite
PEOs is GWC Capstone Solutions, a branch of a much larger PEO that
operates in almost all 50 states. The reason I endorse them is because
they donate 100% of the profits to fund student scholarships. But all
points aside, you need to do a little bit of homework in order to find
the best PEO available in your area, because one day something will
happen and you don't want to be out on the street because you failed
compliance code 29.
Interested in GWC Capstone Solutions or PEO?
Contact me directly at