When you are trying to figure out how to best conserve cash as a small business owner, a PEO looks like the answer to all your prayers. There are many choices in which PEOs are the right ones but, which PEOs are the most economical for a small business owner?
The biggest is not always the best and is usually not the lowest cost either. Likewise, a smaller, regional PEO may not suit your needs now or support expansion efforts in the future. Which one will save you the most money really depends on your individual circumstances and growth strategy over the next few years.
Which PEOs Will Save The Most Money For A Small Business
There is a difference between cheap and economical. It is best to not confuse the two. Before you start going too deep into your search for the most economical PEO, you probably should back up and decide exactly what economical looks like to you. Of course you want it to cost less than what you are paying for everything now, but what are you paying now?
You will need to come up with a budget on what you are willing to spend for employee benefits, payroll and HR management and your payroll taxes. Hopefully, you have some idea of what you have been spending to manage all that through individual providers. If not, there are some other ways you can put together what a budget should look like.
Questions for those who have been managing all this themselves:
- Who has been managing payroll?
- What are you paying them to do it weekly?
- How much time are internal resources devoting to the task?
(This will help you figure out what you have been spending so far if you are doing payroll internally.)
- What are you spending on employee benefits?
- Are your employees paying for their own?
- How much are you paying your employees toward their health insurance?
(If you are answering â€˜Noâ€™ to the first and third question, you are going to have an expense here that you did not have before.)
The Hard Cost Of DIY HR Management
Spending any time at all managing employees requires HR Management. How well are you doing that? This is just a sample of the very real things you are required to do if you run a business that has more employees than you. Failing to do any of these can have disastrous legal consequences. If you are not managing your small businessâ€™s HR issues well, you will need to get your mind around the idea that more is required if you plan on keeping your business or even your own personal assets!
What does your DIY HR Management strategy look like?
- How much time are you dedicating to keeping yourself apprised of changing HR laws to make sure you are compliant?
- What are you spending on Workerâ€™s Compensation insurance?
- What are you paying for liability insurance, like EPLI insurance?
- How much time does it take to onboard and offboard employees?
- Are you spending time meeting with employees about HR issues you donâ€™t know how to address?
- How much time do you dedicate toward policy making and management in your company?
After you figure out the answers to all of these questions, you will realize some of them do not have a hard number associated with it. You will have to figure out, based on the time it takes to perform these tasks yourself, what you are losing per hour by having to do them. Once you have an answer, add up the column. Now you know what it really costs to not have a PEO. What you will likely notice is that the number looks a lot bigger than you thought it would. If you want to know which PEOs are the most economical for you, youâ€™ll have to find one that list lower than your number.
Figure Out Which PEOs Are The Most Economical For You
Now that you have your real costs calculated, you can now figure out which PEOs make the most financial sense for your business. There are considerations there as well.
Here are some questions you need to ask yourself:
- Do I plan on expanding this year or next?
- How many employees do I have now?
- How many employees will I have in the next few years?
- Will I expand to other states or countries?
- What is my main driver in considering a PEO?
- Is one monthly fee more important to me or paying a percentage of payroll?
- How important is technology in my solution choice?
- Am I happy with the benefits I have now?
- What would I add to the benefits and employee perks if I could?
Answering these questions makes all the difference in which PEOs are the right ones for you, or at least it narrows your choices down. Is your head swimming yet? If you are starting to wonder if there is a way to find out which PEOs are the most economical for you, there is. Working with a PEO broker, like PEO Spectrum, cuts through all of this and gets the point of what you need to know in a very short amount of time.
PEO brokers know the industry, they understand which businesses work best with which PEOs and what is best for a given company based on their individual goals and strategies. You can work through all of these questions yourself and ask each PEO you talk to if they would work for you, or you can have a quick phone call and give your answers to a PEO broker and let them tell you which ones are the right ones for you.
What is the cost of doing all this yourself? It is at least worth not having to spend some money on pain relievers for your headaches.