Professional Employer Organization (PEO): Employers as Stakeholders

What is a Professional Employer Organization?

A Professional Employer Organization, or PEO, is a method of outsourcing for companies. PEO’s offer corporations a number of employee management services such as:

1. Employee benefits
   ‍
2. Taxes and payroll
   ‍
3. Retirement savings and unemployment
   ‍
4. Risk management
   ‍
5. Recruiting
   ‍
6. Training and development

What is a Stakeholder?

A stakeholder is any party, either internal or external, to an organization that shows interest or investment in the organization’s performance and profitability.

In this structure, PEO’s are stakeholders to their employing organizations. PEO’s work to maximize and manage HR functions of corporations by analyzing the return on investment of prospective employees in terms of costs, benefits, revenue and market share, work-group performance, financial incentives, and fulfillment of executive and legislative mandates.

How PEOs are changing the landscape of SMEs

SME’s, or Small and Medium-sized Enterprises, must consider the opportunities for growth of the company and the costs of making such progressive change.

Managing human resources poses critical challenges for any firm, large or small. However, the size of SME’s leads to a lack of sufficient economies of scale. Thus, small and medium-sized firms encounter additional issues.

Management of HR functions is complex and time-consuming. Large firms employ teams of HR professionals to administer such functions. In smaller firms, the responsibility of human resources falls on the general manager, who is often juggling other responsibilities and lacks suitable training.

As a result, the quality of HR functions in the SME suffers which often reflects on the overall firm.

Because of these challenges, SMEs are increasingly outsourcing HR functions to PEOs. PEOs efficiently maximize the benefits of the company while minimizing its costs. PEOs administer employee benefits, taxes and payroll, employee compensation and unemployment, employee training, growth, and development, and recruitment.

When SMEs trust PEOs to manage the firm’s HR functions, the PEO, with the firm’s best interest in mind, becomes a shareholder of the company.

Contact AYP today to learn how our Professional Employer Organization can simplify your hiring process and help you succeed in new markets.