A PEO, or Professional Employer Organization, is a third-party source that keeps track of all your HR-related matters so you don’t have to. Then, you have more time to handle what’s really important: the needs of your business.
But, you may be wondering, how does a PEO benefit from this? Do you pay them one solid fee each year, and then they take care of you for the year? Or is it a monthly payment setup like a Netflix subscription?
The PEO business model works like this: A PEO charges a fee for the services it provides. They can charge this fee in one of two ways.
First, they can charge a flat fee based on the number of employees currently employed by the business they are partnering with. The second method is they charge a percentage based on the amount of gross payroll the company pays out each month. The client may pay directly, or the PEO may receive commissions from insurance companies.
Of course, you can work with the PEO of your choosing to determine which of these arrangements works best for your budget. If you’re not sure how to do this or don’t have the time to find a PEO on your own, call NetPEO today at (678) 376-1212. We’ll do the work so you don’t have to, and so you can put the focus where it belongs — on your business.
How a PEO Makes Its Money
Of course, every PEO has its own way of doing business. However, with the experience we have gained in this industry, our team at NetPEO has seen certain practices emerge as some of the more common ones. We discussed it briefly above, but here is a more in-depth look at the two main ways a PEO makes its money.
The Client Pays Directly
A PEO, of course, charges a client for the services it provides. There is no one set fee for a PEO since the fees they charge depend highly on the specific makeup of the business they are supporting.
For instance, the number of employees a company has and the types of employees they hire (salaried workers versus freelancers, etc.) can influence the price a PEO charges a client. Usually, a PEO will either charge a percentage of the company’s total payroll or a flat fee per employee.
The PEO Receives Commission
Another way a PEO can bring in income is through commissions. This is not true for every PEO. However, some PEOs receive commissions from insurance companies based on the business they bring to that insurance company. In this case, the insurer pays the commission, not the client. However, if the PEO has its own insurance plan that it funds itself, there are no commissions paid because the PEO already owns that plan.
In either case, an upstanding PEO will be upfront and clear about its business model and will disclose any and all commissions received upon request. How do you know if you’ve found a PEO with integrity? NetPEO can help you do that.
How a PEO Broker Can Help You Navigate the Costs Involved in Hiring a PEO
A PEO can be a valuable tool for any business, large or small. Not only can a PEO help with payroll and taxes, but it can also help you comply with the provisions of both state and federal laws. This is why, even though the process may seem a little confusing at first, it is absolutely worth it for you to consider pursuing.
If you are concerned about the costs involved in hiring a PEO, our team at NetPEO can help you navigate the field to find an affordable PEO who can do all the things you need them to do. In some cases, some businesses may not even need a PEO. That is why it is important we conduct our free analysis of your business to determine what it is you truly need and the best way to proceed.
If your company is on the larger side, a PEO can help you secure significant discounts on benefits plans and similar perks that can save you more money than you end up spending. This then feels like a better value for the money, especially if you need a PEO’s help with other HR-related matters. And better benefits lead to better rates of retaining employees, which also saves you money on hiring and training new talent.
NetPEO Can Help You Find an Affordable PEO Today!
A PEO can offer so many benefits to your company that it’s worth looking into, even if you ultimately decide a PEO is not right for you. You can provide better benefits, take better care of your employees, and focus more on your business’s needs, rather than the back-end paperwork.
You can reach us at (678) 376-1212 or send us a message on our website. Call NetPEO today and let’s see what we can do!
