The Three Disadvantages of Working With a PEO

Of all the reasons your company might work with a Professional Employer Organization (PEO), the most prominent of those are probably to save money on benefits, reduce your “employer liability,” or to simplify your day-to-day business operations. The idea behind a PEO is to allow employers to outsource their employee management tasks, such as employee benefits, payroll, recruiting, and training. As great as this might sound, there are a lot of disadvantages with PEOs that are important for business owners to be aware of. Weighing the pros and cons of a PEO is necessary to ensure you’re making the smartest decision for your company. With that in mind, here are some of the reasons a PEO is not always the smartest decision:

1. Creates Discontinuity

With a PEO, the employees recruited do not actually work for you but rather the PEO itself. This isn’t always a bad thing, as it shifts any liability from your business to the PEO, but is it worth the segmentation it causes within your organization? The individuals in question can have a difficult time discerning what direction to take, what position they hold within the company, and whether or not to follow your businesses regulations or those of the PEO. This creates friction between the employees within your company and those sent by the PEO.

2. Increases Risk

PEOs don’t always give you much say (if any) in who they recruit for you. They send over employees as they see fit and have no real concern for the many factors that go into hiring quality candidates. Employees have to represent your company both on and off the clock, which is why personality and “cultural fit” are vital to consider when we hire employees. Hopefully, your PEO is going to make sure the employee at least looks good on paper, but will they properly vet each candidate to make sure they have the necessary skills and experience to succeed? By placing control of your business in the hands of another, you’re taking a huge risk.

See how Dominion’s Applicant Tracking Software can eliminate the need for a PEO for all your hiring purposes.

3. Eliminates Control

Healthcare is expensive, so many employees are looking for quality workplace benefits now more than ever. Most businesses use their benefits packages to attract and retain new employees, and often times the better benefits you offer, the better talent you get. With a PEO, you don’t get a say in what benefits are offered, which means you have no control over the quality of candidates you’ll attract. If your (non)employees get frustrated with the lack of benefits the PEO offers, there is nothing you can do to encourage them to stay.

If you’re set on doing business with a PEO, make sure you’ve checked references and do sufficient research to know they will have your company’s best interest in mind. If you’re on the fence about what’s best for your business, consider the cost. In some cases, a PEO can save money, while in others, you’ll find the price simply isn’t worth it and you’ll lose money in the long run. Our friends over at AccuSure broke down the pricing structure of a PEO in a short video. Watch it here.

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