How a PEO Can Help Small Businesses

Updated: Mar 29



Congratulations on starting your business! Or maybe, you have an established business and are looking to grow? As a small business owner, your financial situation may be a bit shaky. COVID-19 certainly did not do any favors. As you continue to operate your business, you may find that you have been spending more time and money on the “back office” part of your business. Stuff like payroll, tax compliance, employee benefits, you know the stuff that no business owner wants to be bothered with. Not only do they distract your time away from key business operations; the things that make you money, but they could screw you down the road if you are not careful. In fact, there was a business owner from Pennsylvania who filed his taxes and payroll slightly wrong and the IRS slapped him with a six figure fine. That fine was so detrimental that he had to close his business forever.


All of this could have been avoided by using a PEO. PEO stands for Professional Employer Organization and they are the largest employers that you have never heard about. PEOs specialize in providing benefits, payroll services, tax compliance and human resources help for many different clients. Because PEOs serve a lot of different companies, PEOs are able to leverage the sheer number of their clients to secure benefits and insurance plans at a much cheaper price. Those savings are then passed on to the clients of the PEO.


Employee benefits are key factors in employee morale. When employees are happy, they are more loyal and work harder. As a business owner, not only do you get more productivity out of your employees, but you will also save money on employee turnover. Not only that, but a competitive employee benefits package can help secure the talent you need to continue growing your business. In fact, 4 out of 5 employees rather have new or better benefits than a pay raise.


So how does a PEO work? PEOs enter a co-employment agreement with their clients. This means that you employees are also employees of the PEO. And no this does not mean that the PEO has control of your employees. You still run the day to day of your company while the PEO focuses on payroll, tax, and benefits administration. The PEO is also responsible for your taxes and payroll. Let us say the PEO makes a mistake while filing taxes, it is the PEO who is responsible for that.


Why use a PEO? PEOs give small business the chance to administer competitive benefits without the large cost that only corporations could afford. They can also provide more selections for healthcare that a small business would otherwise be limited to. PEOs also help with workers compensations and unemployment costs. Each worker’s comp and unemployment cost vary by state and company. They can also be quite complicated. It’s much better to trust an expert like a PEO rather than risk getting a hefty fine that could potentially damage your business or reputation.


Unless you are an accountant you probably do not know the details of tax law. Or even if you are who seriously likes doing taxes? Not only do PEOs handle your yearly taxes, but they also provide payroll services, making sure that the proper taxes are taken out of each employee wages every pay period. On top of that PEOs are experts in managing state and federal taxes and will provide your employees a W-2 once tax season rolls around.


PEOs can save small business owners time and money. While PEOs handle your back-office needs, this gives you the time to focus on running and scaling your business.


Partnering with a PEO like CornerstonePEO may be in your best interest. CornerstonePEO covers everything to HR and employee benefits to payroll and workers comp. Our industry leading PEO services offer innovative, cost effective, easy to understand business solutions for companies of any size and industry. Contact us to learn more.