Coming up with your own company? Exciting, right? However, along the way after documenting your business and recruiting your first employee, you might notice one thing; HR is complex. How can you start with taxes, payroll, benefits and compliance where to begin? And what in case that you are wrong?
Come on, it is not HR that made you embark on a startup. But wrongs in HR? They may be the cause of the failure of a startup. It is, therefore, one of the reasons why a lot of growing businesses seek the assistance of PEOs.
What is a PEO?
A Professional Employer Organization (PEO) is basically an outsourced HR team. Think of it like this: instead of handling every hiring, benefits, and compliance issue yourself (while juggling ten other roles), you let experts do it for you. Sounds as a dream? In the case of a high number of startup founders, it certainly is.
However, the best part is that PEOs do not only save on time, but also risk.
The DIY HR’s Dangerous Dark Side
As a small business owner, you have probably been searching on Google terms like, how do I onboard employees or what is a W-2 or a 1099? And what about failing to take into consideration a law specific to a state or pay taxes a little less than you are supposed to? Even in HR, the mistakes made may attract penalties, lawsuits, and even loss of available funds.
Shall we leave out the emotional part? Do you have time to hear an unfair dismissal claim and a discrimination complaint… all by yourself?
It would serve better to have a person that knows how to deal with it?
Why PEOs Are a Lifesaver to The Startups?
This is where PEOs come in and perform very well.
- They deal with the compliance: Did you ever attempt to figure out about the labor laws of different states? PEO familiarizes itself with the legal environment and ensures that your startup does not overstep on it.
- They mitigate liability: You will not have to worry about agreements, employee manuals, or labor conflicts. There are legal pros to assist the PEO.
- They have superior benefits: You want to provide healthcare services but you cannot because of cost? Small business pooling is what PEOs do to ensure that you have access to Fortune 500 level plans.
- They automate payroll and taxes: Goodbye spread sheets and eleventh hour panic. A PEO also makes sure that salaries, taxes and filings are to be done in time, all the time.
What do you do to find PEO for startup that suits your requirements? It all comes down to making sure it gets one that will know what you are about, at the early-stage of a company- your budget, your team size, your growth desires.
What are the Signs of Needing a PEO?
You are not ready to get one yet? The following questions should be asked of yourself:
- Do you have a cross state budgets?
- Are you more focused on the HR than your real product?
- Are you interested in providing competitive benefits, but you cannot do it by yourself?
- Have you ever been afraid of violating labor law?
When you answered yes to several or more of them, it may be time to consider a PEO to assist your start-up. The quicker you jump ahead of HR problems the easier you will scale.
Mistakes That Startups Wish They Hadn’t Made in Real Life
The following is a short story. One of the tech founders in Texas employed three remote employees in three different states: one kind in California, one in New York, and the last one in Arizona. That sounds good in terms of diversity of talent right? Unless he failed to properly register himself in those states and failed to comply with the mandatory sick leave policies and landed on a sum of monetary fines that totaled over 15,000.
Was a PEO the answer to that? Absolutely.
Such mistakes are frequent. And preventable. The management just requires providing the right systems and support.
PEO vs. In-House HR
What you are probably wondering is, why not just have an HR person?
In-house HR is very effective with big organizations. However, being a startup, the company might find it costly to hire someone as a full-time employee, not to mention that one person cannot do payroll, compliance, benefits and legal on themselves.
PEOs introduce a team as a whole, but at a small price.
And let’s face it, wouldn’t you rather spend that HR budget on product development or customer acquisition?
Final Thoughts
Startups are swift-moving. You do not want to pause at any compliance update or staff problem. With the help of a PEO, your operations run smoothly, you lower risks, and concentrate on building, instead of regressing.
HR need not be your thorn in the flesh. Leave the heavy work to the other person and do what you love to do the most, which is creating and developing your business.
Next time you plan to hire or implement a new benefit, wonder whether it is time to consider some HR muscle. There is a possibility it could be the best decision you ever made.
