How Do I Know if a PEO is Right for My Small Business?

February 21, 2019 Written by Oralie Chapman

A professional employer organization (PEO) can help with your HR and payroll needs; freeing up time to handle other parts of your business. Imagine how much easier it would be to run your small business if you didn’t have to spend time on non-revenue generating tasks like learning employment regulations, administering benefits, handling payroll, and setting up a 401(k) policy. More and more small business owners are partnering with professional employer organizations (PEOs) so they can get on with running and growing their businesses. Beginning in the 1980s, PEOs have gained an average of 6,000 net new clients every year. As of 2018, PEOs are providing services to 175,000 small and mid-sized businesses, employing 3.7 million people. They serve about 15 percent of all small businesses with 10-99 employees.

What is a PEO?


A PEO partners with small businesses to take care of their administrative and human resources needs. A PEO is much more than a payroll provider; it is a co-employer that uses its size to negotiate better prices for health insurance coverage that would not be available to a small business if they bought on their own. Common services include administering 401(k) policies, handling worker’s compensation and ensuring compliance with local and federal employment laws.


How do I know if a PEO is right for my small business?


Choosing to outsource HR is a big decision and every business is different. Whether a PEO is right for your small business depends on the number of employees (typically under 100 is the best fit) and whether you are willing to outsource administrative decisions.


Here are some questions to ask yourself:


1. Do you have a plan to handle human resources issues like sexual harassment accusations? A PEO provides expert HR support to help small business owners handle human resources emergencies.

2. Do I have the time, interest and skills to handle employee paperwork and HR issues? PEOs take the burden of employee paperwork and HR issues off of small business owners who, let’s be honest, would rather be handling other aspects of their business.

3. Can I afford an in-house HR manager/team? For many small businesses, it is more cost effective to partner with a PEO than it is to hire an HR manager/team.

4. Am I hiring in a competitive job market? With their buying ability, PEOs offer benefits to their clients like those offered at large companies. This allows small business owners to compete for top talent.


Discussing your needs and budget with a few PEO companies is the best way to know if a PEO is the right fit for you. It’s important to know that each PEO offers different services and fee structures. Look for a PEO that understands your industry, offers a transparent fee structure and is accredited.


Partnering with Makai HR


Don’t want to handle your HR and payroll needs in-house? We’ve got you covered through HR outsourcing! When you partner with Makai HR you can get on with the business you are trying to grow while we take care of your employee needs from 401(k) plans to payroll, taxes, health insurance/benefits, and worker’s compensation. You also gain peace of mind that you are in compliance with all of Hawaii’s employer laws (if you’ve ever looked you know that the list is very long). When choosing a PEO to partner with, there are many things to consider including cost, services and technology solutions.


With the cost of doing business in Hawaii at record highs, we know how important it is to keep labor costs in line with revenue. Our plans are priced competitively and include value-added services like time-in/time-out systems. Our three tiers of PEO service plans are tailored to the size of your business and specific needs. We offer a 100% paperless solution which means that your employees can manage their needs through a computer, tablet or phone. We can truly improve your employees work benefits while freeing you up to run your business.


What are you waiting for? Companies who partner with a PEO benefit from 7-9% faster growth, 10-14% lower employee turnover; and they are 50% less likely to go out of business. Contact us today to get started!