PEO - Professional Employer Organization: The Great Small Business Equalizer

To compete to retain employees, small business owners need a benefits plan that compares with a larger company.

In order to do that cost effectively, small, and even mid-sized, businesses have been focusing on shared service opportunities like Professional Employer Organizations, or PEO.  This model was originally called "employee leasing," however, in the past 20 years, industry leaders have gotten together to formalize a standard definition and operating procedure to be considered a true "PEO" or co-employer.

And the term, "co-employer" is the key to how the model works.  By placing current employees under the tax identification of the PEO, the client companies receive immediate economies of scale in order to purchase benefits such as Major Medical, Dental, Vision, 401(k) and HR software.

Additionally, the PEO, as employer-of-record, is legally bound to do business in a manor that is labor law compliant.  So small businesses are instantly compliant, with a Fortune 500 benefits plan, and provided back-office support for payroll, benefits administration and risk management.  Oftentimes, PEO will assist in recruiting as well.

Now, PEO is not the model for everyone, but with potential savings of up to $1,000 per employee per year, it is worth investigating to see if it fits.