How Does a PEO Make Money?

You have heard about how Professional Employer Organizations benefit partner businesses. Businesses that contract with PEOs offer better benefits to their employees, reduce liability, and have lower turnover — all at a reduced cost. This allows partner businesses to thrive and invest their time and attention in the value proposition of their business. Small businesses that contract with PEOs experience more growth and are less likely to close.

With such compelling outcomes for the business, you may be wondering how it’s possible that a PEO can save my company money and have such impressive outcomes. The key to understanding how a PEO works is the key to understanding how PEOs make money.

A PEO will work one-on-one with your company to identify your unique needs. This process will assess the real costs of your company’s human resources processes. Once your company’s needs are assessed, the rate will be determined. This rate, or administrative fee, is often based on the census and is a per-employee rate.


Understanding Common Practices of a PEO

Professional employer organizations are businesses too! Just like our clients, we have a passion for the services we offer – our passion is excellence in human resources. The very systems and risks that bog down small businesses in other industries are the lifeblood of PEOs. PEOs seek out, develop, and train human resources professionals. Our teams stay abreast of current and up-and-coming laws and regulations. We anticipate the changes and make sure our organization has the expertise to guide our client businesses. That level of expertise is out of reach for the majority of small businesses. But it is our business.

A PEO provides human resources policies and practices in full compliance with local, state, and federal laws and regulations. We use our expertise to support your organization. There is no learning curve. Employee policies and practices are vetted against best practices and consider any new labor laws and regulations.

A solid PEO prides itself on being a driver for excellence. Many Professional Employer Organizations are members of NAPEO, a membership organization. NAPEO member organizations have access to resources, legislative updates, and professional development.

A PEO maintains solid relationships with benefit providers and leverages their economies of scale. Professional employer organizations are the employer of record for many small businesses at the same time, so PEOs have the economies of scale of large corporate employers. PEOs have leverage and relationships that allow them to offer world-class benefits to your employees. Often, through a PEO relationship, a business can offer additional attractive benefits such as retirement, life insurance, and dental care. And PEOs handle benefit enrollment and administration.

A PEO utilizes state-of-the-art Human Resources Information Systems. Because it is the PEOs business to be the employer of record, PEOs have assessed and implemented powerful Human Resource Information Systems (HRIS). These systems provide employees with the ability to self-serve routine inquiries and provide client businesses and the PEO the ability to continually monitor and assess key indicators. Issues are identified and addressed early.

A PEO handles all the HR administration from recruitment, to hiring, to onboarding, to end of employment, and beyond. At every phase of the employee lifecycle, there are HR compliance issues. Any misstep can result in the risk of litigation and/or fines and penalties. A PEO provides employees and employers with time-tested effective procedures that ensure HR compliance.

Payroll and tax filings are on time and accurate.

PEOs are trusted advisors. PEOs already know your business and your employees. They have the expertise. Your management team has access to highly trained specialists that are able to provide HR consulting. With access to data analytics, PEOS can provide insights to address the issue and/or poise your business for higher performance.


Contact Us Today

A PEO can save your company money while also reducing risk. Small businesses that contract with a PEO have lower turnover, increased sales, and a reduced risk of closing. With innovative technology, a knowledgeable staff, and personalized attention, TANDIUM Corporation can help you determine if working with a PEO is right for your business. TANDIUM Corporation specializes in serving the Human Resources, Payroll, and Benefits needs of small and medium-sized businesses and non-profit organizations. Contact us today to schedule a free initial consultation.