If you are in the Human Resource industry and your intention is to someday become your own boss, then you should consider starting your own Professional Employer Organization – P E O. It is one of businesses that a HR person can successfully launch. Professional Employer Organization which is popular called by its initial P E O is an organization that provides back up human resources consultancy services to both big and smaller organizations.

They provide services such as; Human Resources auditing, manage payroll, responsible for selection, recruitment and training, employee’s benefits, talent hunts, risk management and all other Human resources related task that can be comfortably outsourced to a third party provider.

Some organizations prefer to outsource all their HR functions to a consultant (professional employer organization) because in the real sense it helps them save cost and also it gives them the opportunity to concentrate on their core responsibility. For example; it is cost effective and convenient for a construction company to outsource their HR responsibility to a Professional Employer Organization as against handling it themselves. It will provide them with the opportunity to concentrate on their core job description – construction.

Now let us consider some of the surefire tips that will help you start your own Professional Employer Organization (P E O) from the scratch and build it to a global brand;

Starting a PEO Company – Sample Business Plan Template

1. Conduct Your Market Survey

In other to successfully launch your own professional employer organization, it is important that you conduct a market survey to be sure that the organizations around your area and even beyond are ready to welcome the idea of a third part Human Resources provider. You can achieve this by sending out questionnaire and request for honest feedback from your potential clients.

The information you get from your survey will go a long way to determine whether the area you intend launching your professional employer organization is ready for such services or not. If the responses you get are positive, good for you, but if it is negative, and then you should relocate to a more receptive community or state to launch the business.

2. Acquire Relevant Experience and Certifications

The truth is that for you to be able to successfully start and run this type of business, you must have acquired relevant Human Resources experience from reputable organizations and also professional HR certifications. Organizations will only take you seriously when they know that you have what it takes to help them handle their Human Resource responsibility.

As a matter of fact, your professional profile must be rich if you want to be competitive with this type of business; it is a consultancy service. You can check online to find out the HR related professional exams you can write in your area and how you can become chartered et al. Part of what you need to do if you live in the united states is to join the National Association of Professional Employer Organization (NAPEO); you can leverage on the organization to build your business.

3. Draw up Your Business Plan

Once you have been able to conduct your market survey and also to acquire the relevant professional experience and certification, then the step to follow is to write your business plan. You business plan is the professional document that will guide you to effectively manage and expand the business.

You should be able to clearly outline your business strategies, business goal and profit projections et al. The truth is that if you have a workable business plan in place before officially launching your business, you are likely going to be well prepared to properly run the business; challenges won’t deter you.

4. Register Your Company

It is very important that you register your company before opening shop for business. The truth is that; no organization will take you seriously if they realize that you are operating an illegal business (unregistered business). You can visit the corporate affairs commissions of your country to enquire on how to get your business registered.

Once you have been able to successfully register your company, you can then visit the nearest tax office to obtain your Tax payer’s ID. It is also important to state that you would have to open a corporate account from any bank of your choice; to facilitate easy payment for your organization’s service.

5. Rent / Lease an Office Space

Despite the fact that you would have to work in same facility with your client, you still need your own private office; a place where you are expected to operate from especially when you have not been able to secure a contract. Your office should be decent and well equipped with the basic office equipments. You can hire one or more staff to help you man the office.

6. Hire Professionals

There are some contracts that you can’t handle alone and there are times when you will have more than one organization to handle at the same time which is why it is important to ensure that you have competent employees – core HR professionals in your payroll. The truth is that part of what you need to boost your company’s profile is the quality of staff under your payroll.

7. Market and Promote Your Business

There are several organizations out there who will appreciate contracting their HR jobs to a HR consultant. So, what you need to do is to make a list of the organizations you want to work for, and then send comprehensive business proposals to them.

Just ensure that you are well prepared to clinch the job once you are given the opportunity to do a business presentation. You can also make use of the conventional advertizing medium to advertise and promote your professional employer organization.

There you have it; the 7 surefire tips you need to follow to be able to start your Professional Employer Organization from the scratch and the build the business to a world renowned brand within record time.

Frequently Asked Questions

  1. How Do You Start A PEO?
  • Conduct your feasibility studies
  • Learn Everything you need to learn about PEO business
  • Choose a name and register the business
  • Draft a detailed Business Plan
  • Secure the needed licenses and permits
  • Apply for an EIN (Employer Identification Number) / Federal Tax ID Number.
  • Open a corporate bank account
  • Rent / Lease an Office Space.
  • Hire Professionals.
  • Market and Promote Your Business.
  1. What Does PEO Stand For?

PEO stands for Professional Employer Organization.

  1. How Do You Explain PEO?

The acronym PEO stands for Professional Employer Organization. PEOs work with small businesses to help them manage payroll-related taxes, certain human resources functions, access to benefits, and other employer-related administrative functions necessary to running a business.

  1. What Is A PEO Partner?

A partner professional employer organization or PEO allows businesses to outsource crucial functions of their business operations and HR such as talent acquisition, payroll, and benefits.

  1. What Is The Benefit Of A PEO?

The benefit of PEO is that it helps with both compliance-related tasks and employee liability, “greatly [streamlining] business operations” and giving you peace of mind. PEOs typically have compliance experts that monitor employer-related laws and ensure payroll and benefits compliance so you don’t have to.

  1. What Do You Look For In A PEO?

Here are what you should look for in a PEO;

  • Make sure the PEO is capable of meeting your goals.
  • Ask for client and professional references.
  • Check to see if the company is a member of NAPEO, the national trade association of the PEO industry.
  • Is the PEO IRS certified?
  • Check to determine if the PEO’s financial statements are independently audited by a CPA, whether their risk management practices have been independently certified by the Certification Institute or if their operational, financial, and ethical practices have been independently accredited by ESAC.
  • Investigate the company’s administrative and management expertise and competence.
  • Understand how the employee benefits are funded.
  • Understand how the employee benefits are tailored.
  • Review the service agreement carefully.
  • Make sure that the company you are considering meets all state requirements.
  1. Is Kelly Services A PEO?

Yes, Kelly Services is a PEO and as a matter of fact, Kelly Staff Leasing has provided PEO services to its diverse client base for more than 20 years and offers a wide range of human resources, payroll processing, benefits, and risk management solutions to small and medium-sized business throughout the United States.

  1. How Do You Leave PEO?

In order to leave PEO, first, create an employee handbook and have it reviewed by legal counsel. Complete this before the PEO relationship is terminated and the paperwork is ready to go. Have all plan documents written and reviewed, ERISA Wrap, health notices, exchange notices, etc. Establish a compliant Leave of Absence policy.

  1. What Are The Pros And Cons Of A PEO?

Pros

  • Benefits administration.
  • Recruiting and hiring.
  • Payroll administration.
  • Unemployment administration.
  • Workers’ compensation administration.
  • Compliance assistance.
  • Drug testing programs.
  • Family and Medical Leave Act administration.

Cons

  • Loss of control of essential processes and people.
  • An outside company’s influence on your culture.
  • Diminished value of internal HR department.
  • Lack of control and security over employee paperwork.
  • A loss of institutional knowledge.
  • Security issues with the vendor’s system.
  • Resistance from employees.
  1. What Is The Difference Between A PEO And EOR?

The difference between A PEO And EOR is that an EOR puts a portion of your business and employees on its payroll. A PEO takes on all of your employees and provides all HR-related functions. Furthermore, you hold the employment contracts when working with a PEO, whereas an EOR keeps the employment contract, engaging you with a service agreement.

  1. What Is A Global PEO?

A global PEO is a PEO that manages payroll, HR, and benefits a company with employees in more than one country. It is built to help companies handle international business challenges.

  1. Is A Staffing Agency A PEO?

A staffing agency is a different sort of entity than a PEO, which is also known as a professional employer organization.

  1. What Services Does A PEO Offer?

Here are some of the core services that PEO offers;

  • Benefits administration
  • Recruiting and hiring
  • Payroll administration
  • Unemployment administration
  • Workers’ compensation administration.
  • Compliance assistance
  • Drug testing programs
  • Family and Medical Leave Act administration.
  1. What Is The Best PEO?

Here are the 7 Best PEO Services of 2022;

Best Overall: Paychex

Best for Small Businesses: Insperity.

Best for Large Businesses: INFINITI HR.

Best for Startups: Oasis Outsourcing.

Best Customer Service: ADP TotalSource.

Best for Industry-Specific Services: TriNet.

Best for Benefits: Justworks.

  1. Is A PEO An Employer Of Record?

In the co-employment relationship, the PEO becomes an employer of record of the client company’s employees. This means that they are able to handle sensitive information like payroll matters and employee benefits package information.

  1. Should A Startup Use A PEO?

Yes, of course, because a professional employer organization (PEO) is a natural fit for startups because PEOs can offer access to enterprise-grade HR services for organizations whose time, money, and expertise are scarce and high-value. As a result, startups can leverage PEOs for the following advantages.

  1. How Long Does It Take To Implement A PEO?

Typically, the time frame is about 30 days and is usually starts at the beginning of a payroll cycle. During this process, there are multiple steps that need to be completed.

  1. How Much Does It Cost To Start A PEO?

Joining a PEO can start as low as $39 per employee, per month, with a vendor like Justworks, whereas others might cost over one hundred dollars per month for each worker.

  1. How Does A PEO Make Money?

In general, there are two main ways that PEOs make money: The fees you pay to the PEO directly. They will either charge a fixed percentage of your total payroll or a flat fee per employee.

  1. I Already Have A PEO License, Do I Need To Reapply For A PEO License?

No. The licensing and renewal process will be the same with TDLR with some slight modifications to the forms.

  1. What Is The Difference Between A PEO And A Staffing Company?

Both staffing agencies and PEOs are focused on workforce HR tasks, but with a staffing agency, you are outsourcing your hiring process and the associated tasks. With a PEO, you’re doing the hiring on your own and only outsourcing the administrative tasks, payroll, and compliance associated with your workforce.

  1. Who Regulates PEOs?

The IRS has recognized the right of a PEO to withhold and remit federal income and unemployment taxes for worksite employees per section 3511 of the IRS Code. The IRS has promulgated specific guidance confirming the authority of PEOs to provide retirement benefits to workers.

  1. What Is The Difference Between A PEO And A Payroll Company?

The difference between a PEO and a payroll company is that with a PEO, you’ll get more than just payroll processing. The full-service approach of a PEO frees you from having to take care of additional employee management functions yourself like hiring, terminations, health insurance, workers’ comp, and retirement plans.

  1. How Much Do PEO Companies Charge?

The flat fee is normally between $900 and $1,500 per employee each year, depending on the PEO in question. If the business owner elects to be charged as a percentage of the company’s overall payroll, PEOs charge about 3-10% on average.

  1. How Can A PEO Help Your Business?

Using a PEO eliminates the need to hire a full-time accounting staff, lowering costs for small business owners. It also allows owners to focus on the day-to-day running of their business rather than having to deal with complicated HR paperwork and compliance issues.

  1. Should My Company Use A PEO?

If you can afford it, it is advisable for your company to use a PEO because PEOs will bring down benefit costs for your company. PEOs give you the chance to save money on major expenses like healthcare since they provide more options than a small business would normally have available. For example, if your business employs more than 50 people, you must provide health insurance, as per the Affordable Care Act (ACA).

  1. How Do You Explain PEO To Employees?

You should start by telling them that PEOs typically serve as a professional employer of their clients’ employees. The client company reports its wages under the PEO’s federal employer identification number (FEIN), and employee liability shifts to the PEO. Employers gain economies of scale by having more benefits options, sometimes at lower rates.

  1. What Is The Downside Of A PEO?

PEO pricing can be subjective and negotiable, making it difficult to know what is a fair price. Typically, a business is charged a percentage of its payroll. Invoices can be difficult to understand with payroll, taxes, workers’ comp, ELPI, and their administrative fee often lumped together as a “package.”

  1. What Is The Size of Companies That Use PEO?

While a PEO can benefit most companies, the average company using a PEO has anywhere between 10 and 100 employees. Since that is a pretty large range that encompasses many types of unique businesses, employee size is not always the best indicator of whether or not a company could benefit from a PEO relationship.

  1. What Is The Advantage Of Using A Professional Employer Organization PEO For Recruiting?

The advantage of using a Professional Employer Organization PEO for recruiting is that Professional Employer Organizations (PEO) often employ experienced recruitment experts that have the hiring know-how a growing company needs to staff up strategically. PEOs can also provide access to smart, web-based technology, so companies can manage their entire recruiting process online.

Ajaero Tony Martins