Professional Employer Organization (PEO) services equal investment protection, in my opinion.
What I’ve found is organizations that utilize PEO services are provided with a number of different investment protection opportunities they would not be afforded if they were going it by themselves.
There are really three main times when a company needs investment protection: during downsizing, when the business is for sale and when the business is growing rapidly.
To better explain this point, I will give you three examples:
- In the case of downsizing, when you think of investment protection, you probably think about the outstanding liabilities a company will have when it comes to shrinking down its workforce to a size that is going to better fit what’s going on in the company’s marketplace.
There are issues, such as severance agreements, wrongful terminations, COBRA management, standard payroll payouts, etc., which are pretty complicated for a company to handle on its own.
When these issues are handled by a PEO, however, the Ts are going to get crossed and the Is are going to get dotted. And that really keeps a company from being exposed to the many liabilities that come up during layoffs.
The PEO may also be able to give consultation on what possible efficiencies might be available to help tighten up the organization.
- In the case of selling a business, utilizing PEO services may give a company the opportunity to show potential investors less employer liabilities when buying the business.
So if I’m an investor looking to purchase a business, for example, when a company is up for sale in an economy like the current one, I’d want to know if there was a downsizing or any other outstanding liabilities coming with the business related to possible EEO threats, pending severance payments or ongoing COBRA management.
Using PEO services can manage potential threats and offer an amount of investment protection to any investor who wants to purchase the company.
And showing that the company used PEO services will prove to the potential investor that HR is covered, rather than the investor having to investigate what I regularly hear termed as “skeletons in the closet.”
- In the case of a company that’s going through a rapid growth period, the employer often needs help managing the growth. PEO services can help a company keep compliant, as well as recruit and hire additional staff as necessary.
I think one of the biggest things a PEO offers, from an investment protection standpoint during growth, is the ability to not have to build out infrastructure in multiple states.
So, for example, if you’re a business that’s based in Texas and there’s a great business opportunity available in California, you would deal with a lot of paperwork and having to re-learn employment laws because the two states have different laws and liability systems related to having employees.
If you’re using PEO services, however, the PEO can build a bridge of employer liability protection for the Texas company in California. It can be done in such a way that the payroll processes, taxes and benefits for California employees are covered.
In my next Insight, I’ll talk about some mistakes employers make when considering PEO services, as well as some steps they can take to effectively utilize these services.
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