Simploy representatives meet with hundreds of business owners a year and when interacting with business owners, one of the questions we get asked a lot is: “Is my business ready for a PEO”?
Now, our sales department would like us to respond to this question with an abrupt, “Yes! Of course it is!” but, in reality it’s not that simple. In fact, there are cases in which a PEO is just not the right fit.
Within this piece we will take a moment to outline the characteristics of a business that make it suitable for a PEO, and, we will discuss some of the business traits that prevent a PEO partnership from being successful. Ultimately, you know your business better than anyone and only you can determine whether a PEO is right for you. Our job is to breakdown all of the online chatter and make that decision simple for you.
When is a PEO partnership a good fit?
We are routinely told just how beneficial our expertise has been to our clients, and we are proud of that. It was not until recently that we began to ask, why are some of our clients experiencing such incredible results and cultivating their PEO partnership, while our other clients (who are also growing) experience a lesser level of success. That inspired this piece and got us to think about the characteristics that make for a great PEO partnership.
When your business is growing
As your business grows it will be greeted by the additional tasks that expansion requires. Unfortunately, these are a massive drain on productivity (and profitability). It’s easy to understand that as your workload increases with fixed resources (manpower, time, etc.), you will become stretched and overextended.
If your business is currently experiencing growth in employees, or you expect to grow within the next few months, now is your time to get out ahead of the complications growth will bring. By partnering with a PEO, you can outsource the headache tasks and focus on what made you grow in the first place.
When your business is hiring
Like business growth, hiring (when not well managed) can be an incredibly time consuming struggle. If handled internally, hiring gives you two options: 1) spend valuable time to find the right candidate (which is very expensive), or 2) don’t spend enough time and run the risk of hiring the wrong candidate.
If your business will be hiring within the next twelve months, find a PEO, fast. The expertise possessed by PEOs will ensure you find quality candidates without having to spend huge amounts of time and money.
When your business is still fairly new
At Simploy we are lucky to be headquartered in a city experiencing an incredible entrepreneurial renaissance. Tech startups from across the world are opting to call our city home due to the startup infrastructure and culture here. This has blessed Simploy staff with additional opportunities to support passionate entrepreneurs as they form fledgling businesses.
They often ask us if it’s too soon for their new business to utilize a PEO, and, there is no easy answer to that question. If this is your concern, determining your suitability for a PEO will require some additional discussion. We invite you to reach out to the Simploy team for additional advice and guidance HERE.
Alternatively, head over to our article discussing PEO’s and Startups, HERE
When you make more than $15 per hour
As a business owner, you should rarely ever find yourself utilizing administrative software (QuickBooks, Sage, FreshBooks etc.) When you perform these menial tasks, you immediately turn yourself into a $15 an hour employee. Don’t. Your time as a business owner is far more valuable than that.
If the above statement fits your weekly routine and you find yourself completing clerical tasks, a PEO is in your interest. Outsourcing these tasks to an expert in that field will allow you to recover the time you would have wasted, whilst saving money.
When is a PEO a bad fit?
When you have “1099 employees”.
We are sorry to be the bearer of bad news but, there is no such thing as a 1099 employee. A company’s workforce will either be made up of W2 Employees, or, 1099 Contractors. Unfortunately, the inaccurate classification of W2 employees as 1099 contractors makes it impossible to work with a PEO. A PEO relationship would see your employees become co-employees of your company and your PEO, but if your workers are classified as 1099 contractors, this is not possible.
Note on 1099 Contractors
When an employee is incorrectly paid as a 1099 contractor, the employer is not expected to pay unemployment tax on that individual. This in turn results in lost government revenue. However, this exploitation is no secret and the government has proactively ordered auditors to hunt down this activity and stomp it out (through very steep punishments).
When you haven’t done your homework
Like any large decision, establishing a relationship with a PEO and trusting them requires a fair amount of due diligence. Do not use the first PEO you come across. At Simploy, we are confident in our model and conscious of what makes us great. If we are the first PEO that you have looked into, we are happy to let you take a look at the competition before partnering with us.
When your company is too big
Generally speaking, partnering with a PEO is no longer cost effective when your workforce exceeds 200 employees. At that stage, it could be in your interest to hire a dedicated HR associate.
If your company fits this description or is close to 200 employees, you should still get in touch with us. We will happily provide you with a side-by-side cost comparison as part of our quote.
Determining whether a PEO is the right choice for your company is a decision that cannot be rushed. Almost every small- to medium-sized business will benefit from a PEO. Cases when this is not the case are extremely rare.
Nevertheless, take your time and read the articles within our PEO 101 Hub Page, we know how important it is that you come to a well educated decision.
Interested in learning more about the PEO concept? – visit our PEO 101 Hub for additional insights.
On the other hand, if you have seen enough and want to get in touch with a member of the Simploy team, submit a contact request and a Simploy associate will reach out to you shortly.