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Case Study: Part 1 | 12 Common PEO Myths Debunked

As HR has grown more time-consuming and expensive for employers (especially small and medium-sized businesses), owners have increasingly turned to outsourcing. But over the last 15 years, one solution in particular has grown

in popularity—professional employer organizations (PEO).

In case you are unfamiliar with PEOs, they are firms that allow small and medium-sized companies to outsource most of their HR management responsibilities such as:

• Payroll • Employee benefits • HR administration • Risk management

• Compliance • Recruiting services • And more

But as PEOs have grown in demand by business owners, so too have the number of myths that exist about them. But are they true?

Myth 1: Business Owners Lose Control of their Business

Perhaps the number one concern that business owners have about working with a PEO is the fear of losing control of their business, so it’s no surprise that this is one of the most common PEO myths, too.

However, this myth isn’t true. In fact, owners don’t lose any control when they partner with a professional employer organization.

Instead, businesses gain a strategic partner who shares various HR responsibilities to ensure improved practices, strategies, and efficiency.

But this isn’t the only myth that exists about responsibilities and business control...

Myth 2: A PEO can Hire and Fire a Client’s Employees

Along with losing control of the day-to-day aspects of their company, some business owners assume that a PEO takes over hiring, promoting, and firing employees.

But this myth has also been busted.

In a PEO partnership, all talent management responsibilities stay with the owner. This means they get to make all hiring and firing decisions, along with any promotions or raises that are given to employees.

All a business owner would need to do is notify their PEO so that all HR and employment documentation is updated accordingly.

It should be noted that some PEOs do offer recruiting services to their clients and can help small business owners find potential new hires. However, the decision to interview or hire a candidate rests solely with the owner, and not the PEO.

Myth 3: Businesses Lose their Insurance or Benefits Broker

For many small and medium-sized business owners, their insurance or benefits broker is more than just a broker— they are a trusted advisor who has the best interest of their client in mind.

This myth is a bit different than the first two, because with some PEOs you might lose the broker relationship. So why is this a myth and not a fact?

It’s because Broker-Only PEOs exist today that differ from other PEOs on the market. A Broker-Only PEO partners with brokers to offer their services to small and medium- sized employers. The benefit to this type of PEO is that not only does a business owner gain an HR partner, but they also get to keep their broker.

This is ultimately a win-win for many employers.

Myth 4: My Business is Too Big or Too Small for a PEO

According to the National Association of Professional Employer Organizations (NAPEO), the average PEO client has around 22 employees. But another common misconception is that PEO is only an option for companies around this size—and more specifically, that much larger or much smaller employers can’t benefit from this HR solution.

However, most PEOs will work with clients who have a wide-range of employees. And while the exact employee number will vary depending on the PEO, some will work with start-ups who have just 1 full-time employee to medium-sized companies withupwards of 1,000 workers.

Some professional employer organizations will even go beyond 1,000 employees!

Companies of just about any size stand to gain from a PEO partnership, debunking this popular myth.

Stay tuned for part 2 of our PEO myth case study and follow us on Linkedin for more content on #HCM.

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