HR Paperwork a Nightmare? Try a PEO

If you had 40 hours in a day, you might have enough time to devote to shopping for low-priced benefits for your employees, finding deals on workers' comp and staying abreast of all the latest changes in employment laws. Odds are, you don't have that luxury.

If you are interested in reaping all the benefits of this research and expertise, hiring a Professional Employers Organization (PEO) may be the answer.

"The industry as a whole is taking off," says Rudy Serrata, chief financial officer of Advanced Employment Concepts, a PEO based in Florida and Texas.

It is no wonder. According to the U.S. Small Business Administration, the average small-business owner spends between 7 percent and 25 percent of his or her time handling employee-related paperwork.

For around 3 percent of the gross payroll, a PEO will take all the paperwork off the hands of the small-business owner. Often, a PEO will save more money than it costs the employer, according to industry insiders.

"Our workman's comp program usually saves the small business between 10 percent to 30 percent immediately," says Serrata.

The National Association of Professional Employers Organization (NAPEO), only offers membership to PEOs that have been audited by an external source to ensure that they have made all premium payments and filed all paperwork on time.

Perhaps the greatest strength of a PEO is their ability to negotiate with benefits providers in the same way that a large company does. According to the SBA, firms with fewer than 500 employees pay an average of $1,600 more for each person yearly than a company with more than 500 employees. A PEO, which generally manages thousands of employees, enjoys the same research and negotiation power as a larger company.

While the business owner retains all hiring and firing power, the PEO becomes the employer and assumes responsibility for the paperwork and benefits for each employee. Fortunately, most PEOs are designed to serve local companies as well as those located in more remote regions. Serrata explains, "We will overnight benefits paperwork to a new employee and talk them through it over the phone."

The National Association of Professional Employers Organization (NAPEO), only offers membership to PEOs that have been audited by an external source to ensure that they have made all premium payments and filed all paperwork on time. NAPEO's Web site features a helpful reference for small-business owners who may be shopping for a PEO.

Serrata emphasizes that larger businesses do not benefit from PEOs because they already have an internal HR infrastructure and negotiating power based on their numbers. The benefit of a PEO for smaller businesses is that their resources can be pooled in a way that the business owner can focus their time and energy on growing the business, while handling all their employee needs.