Too many start-ups and SMEs are bogged down by the continuous cycle of performing some of their non-core, but equally important business activities.
Naturally, this begs the question: What really is the core function of every business?
The simple answer is: to make a healthy profit.
What then should be the core focus of every executive in a business?
Again, the answer is: making healthy PROFITS.
Ironically, all too often, the reality is that HR executives in most organisations are perpetually saddled with the unending routine of managing non-revenue generating functions.
Such as payroll processing, benefits administration, ensuring regulatory compliance and other HR tasks that can be easily and speedily handled by an experienced Professional Employer Organization (PEO).
We have frequently found that business leaders by-pass the crucial support that a certified PEO can give their businesses because they have unresolved misconceptions about Professional Employer Organizations.
In this article, we debunk 8 of the most common PEO myths.
Recommended Post: 5-Set Questions to Choose a Dependable PEO
8 Most Common PEO Myths
PEO Misconception #1: “The PEO will super-impose its ideas on my business.”
One of the most powerful things that highly experienced PEOs bring to the table is a high-level of experience and expertise, and very frequently, we have found that many business leaders tend to worry that entering into a co-employment arrangement with a PEO would mean that they’ll be forced to yield the decision-making power in their business to the PEO as well as the ability to operate it the way they want.
Nothing could be further from the truth. As a co-employer, a PEO’s sole function in your business is to free you up to focus more intently on your revenue-generating projects.
For instance, in our co-employer arrangements with our clients across Africa, our functions in the businesses are strictly streamlined to the purposes of payroll administration, welfare and benefits management and other HR functions that have been mutually agreed upon.
It is safe to say that PEOs perform in a role that is similar to a director of human resources (HR), a trusted advisor that always puts your business first. You’ll never have to lose control of running your core business.
All that is necessary is to tell the PEO what you’re trying to accomplish, and the PEO provides you with HR guidance and best practices on how to achieve those goals optimally while potentially minimising risks.
For example, over the years, one of the biggest benefits our clients have derived from our PEO services—regardless of geography— has been timely compliance with the ever-changing employment regulations or labour laws.
PEO Misconception#2: “The PEO will replace my HR Department.”
The best PEOs do not eradicate the need for your existing HR team and make you unhealthily dependent on them. On the contrary, they unleash the strategic capacity of your HR team by freeing up their time to pursue strategic projects.
Today’s business reality demands that every HR professional be more revenue-focused. And that means they need to be free of the tactical HR management tasks (e.g., developing an employee handbook, payroll administration or benefits administration) to be able to focus on those strategic tasks that directly improve the profitability of the organisation.
As a matter of fact, when Workforce Africa partners with clients, one of our strongest performance indicators is that the HR professionals we work with have more time to work on strategic projects that might otherwise sit on the back burner.
Additionally, when you work with a PEO, you gain access to a team of HR professionals who work with a number of industries and can bring HR best practices from those industries to the table.
The reality is that even if you were to hire a highly talented HR professional, the chances are low that they will have the breadth of experience and knowledge that you can get from a PEO’s team of HR specialists, professionals who are continually gaining deeper insights through the experiences of their other clients.
Another key advantage that a PEO offers your organisation is that as your business grows, you get to save money when it comes to HR staffing.
While other companies may struggle to increase their HR headcount to keep up with growth in other departments, all that you need to do is update your PEO on the new demands of your business and adjust their deliverables.
PEO Misconception #3: PEOs have hidden costs and are way too expensive
When there’s a lot of speculation about the true cost of hiring a PEO, research by the National Association of Professional Employer Organizations (NAPEO), shows that small companies that work with a PEO grow 7 to 9% faster, have employee turnover that is 10 to 14% lower, and are 50% less likely to go out of business.
Additional NAPEO research reports that the annual return on PEO investment for cost savings alone is 27.2%.
It is crucial to appreciate the value that PEOs bring to the table. They help businesses minimise their risks and manage their workforce more efficiently.
PEOs do not price their services arbitrarily. They do so according to:
- The value they will deliver to your company
- The amount of HR-related risk the PEO is assuming under their agreement
For detailed explanations on how a professional employer organisation (PEO) pricing works, please read our article on What You Need to Understand About PEO Pricing.
PEO Misconception #4: “My Business is too Large or Too Small-Scale for a PEO”
When PEOs may slightly differ in the volume of business that they may choose to handle, typically, PEOs often handle businesses with staff capacity that range from 5-5000.
For instance, Workforce Africa currently manages a staff force of close to 10,000 employees.
When it comes to implementing a successful PEO arrangement, companies of just about any size stand to gain from a PEO partnership. Staff-strength is never the problem.
What is essential is drafting a compliant employment agreement, structuring benefits, working through market norms, and being prepared for unexpected problems in local working terrain.
PEO Misconception #5: Co-Employment Adversely Affects Employee Experience
The question is: How can this be true when an enhanced employee experience is a core performance indicator by which a PEO measures its success?
A good PEO boosts the employee experience for many employers because not only do they give employees access to a wider range of big-business benefits, these benefits are often gotten at much better rates than most small and medium-sized organisations can afford on their own.
Moreover, since a PEO can help improve HR practices and strategies, employees stand to gain even further in terms of increased expertise.
PEO Misconception #6: Setting up a PEO is Complicated and Burdensome
When it is true that some organisations may have experienced an undue number of complexities in onboarding their PEO, the reality is all PEOs are not equally furnished with the same level of expertise.
Well established PEOs have teams to help their new clients transition into the PEO relationship. These teams include individuals who specialise in:
- Risk management and HR compliance
- Payroll
- HR management
- Employee benefits
- New client on-boarding
As a case in point, when the Workforce Africa team works with client organisations to set-up the relationship infrastructure, they stay connected once a business becomes a client and are always available to answer questions and concerns on a wide-variety of HR topics.
PEO Misconception #7: “The PEO may end up deciding who gets hired and fired.”
This is closely linked to the first misconception that PEOs superimpose their ideas on a business.
As we said earlier, the functions of PEOs does not include taking over your decision-making function, and this includes who you hire or fire.
What PEOs do instead is to help your organisation manage potential risks during the hiring and firing process.
With recruitment assistance from your PEO, you can find a candidate with not only the right skills, but also someone who fits in with your organisational culture.
For example, as a part of our PEO services, Workforce Africa offers the hiring supervisors of our client organisations the option of getting trained to follow through with the progressive disciplines of right hiring— whenever necessary.
This includes learning how to design assessment instruments that thoroughly explore a potential candidate’s ability to deliver on the job.
A good PEO’s recruiting team will take the time to get to know your organisation. From there, they can help you decide what kind of skills and experience your new employee needs to be successful.
When the time comes to narrow your list of candidates, you’ll be able to focus on qualified candidates, rather than sifting through bad ones.
PEO Misconception #8: All PEOs are pretty much the same.
All PEOs do not perform at the same capacity. As a result, it is always a mistake to assume that all PEOs are the same.
Therefore, whether you’re shopping for a PEO for the first time or looking to make a long-anticipated change, taking the time to search for one that best meets the needs of your company, and its goals is important.
If you’d like to learn more about how to select a PEO, we recommend that you read our article on 9 Things to Consider Before Choosing a PEO as Your Market Expansion Partner