Fewer than 10% of the 900 PEOs in the United States are CPEOs – for a reason. The IRS designation entails a rigorous process that requires a certified PEO to annually illustrate organizational integrity, proven experience and financial stability.
A Certified PEO is your Secret Weapon
A knowledgeable CPA, a good banker, a smart lawyer, and a visionary business advisor or two – these are key people small and mid-sized business owners tend to draw on when they are working to grow their companies. Those subject matter experts are important – even critical – to smaller organizations’ success. But company owners can build an even more powerful expansion arsenal by adding an often-overlooked secret weapon: a certified professional employer organization (CPEO).
A CPEO steps in to help handle vital HR tasks a business owner may have neither the time nor the expertise to handle. CPEOs help organizations improve productivity and avoid costly tax and HR compliance mistakes. Smaller companies that work with CPEOs have fewer employment-related headaches and grow 7-9% faster than those that do not.
CPEOs relieve HR headaches
Business owners can devote more time and resources to meeting core business goals when they rely on a CPEO to streamline their employment-related responsibilities. Take payroll, for example, which is one of the most-commonly outsourced HR functions. Third-party administrators, which include certified PEOs, relieve employers of payroll hassles – from calculating deductions to filing unemployment tax reports – but not every third party assumes legal responsibility for an employer’s payroll-related obligations.
In fact, among the kinds of outsourced payroll administrators a small business can hire, only certified professional employer organizations assume sole liability for paying income taxes, unemployment taxes and employee contributions to Social Security and Medicare. So, it’s wise for employers who outsource payroll to understand the protections a CPEO provides that other providers do not.
The difference between a CPEO and a PEO
Companies also should know that there is a big difference between a CPEO and a non-certified professional employer organization (PEO). A CPEO has met stringent requirements established by the Internal Revenue Service. Fewer than 10% of the 900 PEOs in the United States are CPEOs – for a reason. The IRS designation entails a rigorous process that requires a certified PEO to annually illustrate organizational integrity, proven experience and financial stability. A CPEO – by virtue of having completed the IRS process – is inherently trustworthy, minimizes employer financial risk and maximizes the benefits of HR outsourcing.
Non-certified PEOs, on the other hand, require more vetting. For example, companies that are considering a relationship with a non-certified PEO should ask for proof that the PEO is in solid financial shape, prioritizes data integrity and has an established industry track record. When PEOs cannot or will not provide this type of information, that is a red flag.
Choosing the “best fit” CPEO
A certified PEO, while providing advantages a non-certified PEO does not, still has to be a good fit if a small business is to benefit fully from the relationship. Employers who are considering working with a CPEO should evaluate its industry experience, approach to customer service and commitment to helping the small business objectively determine which HR services will provide the greatest return on investment.
Asking each prospective CPEO partner the same key questions will help employers compare them and assess which is the right partner, helping to ensure an enduring relationship that enables smaller businesses to achieve greater success without worrying about the complex intricacies of mission-critical HR functions.
Besides payroll services, CPEOs also often provide employee benefits administration. Signing on with a CPEO often gives smaller companies access to better benefits packages, thanks to economies of scale CPEOs create by adding each client’s employees to a “pool” and going to market with a larger group than the small business could bring on its own.
CPEOs offer additional, business-related services that lead to smarter HR decisions, improved employee engagement and better-trained workforces. To maximize the benefits of working with a CPEO, look for one that can help you with such employment matters as ensuring your compensation structure is helping you attract and retain top talent, keeping employees engaged and planning for future success – precisely what smaller companies want and need from a trusted HR business advisor.
Expertise You Can Use Now
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