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10 Common PEO Myths De-Bunked

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Ready to rethink your HR?  QTI can help!  Check out these common myths about PEOs and learn how a PEO can remove the transactional burden of HR, increase your businesses profitability, provide safeguards of HR regulatory compliance, and more.

Myth #1: Business Owners Lose Control of their Business.

It’s no surprise that this is one of the most common PEO myths. However, 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.

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

Though QTI can help small business owners find potential new hires, the decision to interview or hire a candidate rests solely with the owner/company. In a PEO partnership, all talent management responsibilities stay with the owner. Business owners just need to notify their PEO so that all HR and employment documentation is updated accordingly.

Myth #3: Businesses Lose their Insurance or Benefits Broker

This myth is a bit different than the first two, because with some PEOs you might lose the broker relationship. But Broker-Only PEOs exist today that partner with brokers to offer their services to small and medium-sized employers. With this type of PEO, business owners gain an HR partner and 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 22 employees. But another common misconception is that PEO is only an option or is only beneficial for companies around this size. However, PEOs often have clients with a wide-range of employees – from start-ups who have just 1 full-time employee to medium-sized companies with upwards of 1,000 workers. Companies of just about any size stand to gain from a PEO partnership.

Myth #5: A PEO Replaces HR Personnel

So, if a business partners with a PEO, do their HR team members lose their jobs? Not at all! PEOs can assist and support internal HR employees with certain HR responsibilities, especially around compliance issues. Often, HR personnel end up benefiting from a PEO partnership as the additional resources can help make their jobs easier and allow them to shift time spent on transactional activities to broader value-add initiatives.

Myth #6: PEO is the Same as Employee Leasing

Some believe a PEO relationship to be employee leasing. However, this is not the case. When a client partners with a PEO, their workers enter into a co-employment arrangement in which they have two employers—the client company and the PEO (the employer of record). There are a few major differences between co-employment and employee leasing, but the biggest is that PEOs do not lease out employees or provide staff to their clients. Instead, the client keeps control over all hiring and other employee-related decisions.

Myth #7: A PEO Won't Save My Business Money

Another barrier for some business owners is the thought that PEOs are too expensive and won’t save a business money or reduce HR-related costs. However, a report from NAPEO found that PEOs help their clients save up to 35% on HR administration costs. Additionally, PEOs can help employers save considerable amounts on health insurance and other benefits, all while improving the quantity and quality of current offerings.

Myth #8: Co-Employment will Negatively Impact the Employee Experience

The opposite is usually true -- a PEO can actually boost the employee experience for many employers. The co-employment partnership allows employees to choose from enhanced employee benefits that include:

  • Tailored health insurance
  • Voluntary benefits (identity theft protection, pet insurance, etc.)
  • A wide-range of complimentary benefits

And since a PEO can help improve HR practices and strategies, employees stand to gain even further.

Myth #9: Switching to a PEO is too Complex and Cumbersome

Most PEOs have teams to help their new clients transition into the PEO relationship. These teams include individuals who specialize in:

  • HR management
  • Risk management and HR compliance
  • Payroll
  • Employee benefits
  • New client on-boarding

They stay connected once a business becomes a client and are always available to answer questions and concerns on a wide-variety of HR topics.

Myth #10:  All PEOs are the Same

The success of the industry has led to an increase in the number of PEOs that operate today – but not all PEOs are the same. While there are numerous differences that can exist between PEOs, here are a few of the major differentiators:

  • Is the PEO a regional or national
  • HR technology offered
  • The service model – big box PEO’s tend to have limited service
  • Transparency in pricing – bundled versus unbundled

To learn more about how a PEO can help your business, contact us.

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