South-Western - Management  
Outsourcing Lets Owners Focus on Big Stuff
Topic Human Resources Management
Key Words PEOs, personnel
InfoTrac Reference A87743229
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News Story

Employer Support Services is a professional employer organization (PEO). Depending on the services contracted, it negotiates and manages insurance plans, manages payroll, 401(k) and worker's compensation plans, and provides other services.

Between 2 and 3 million workers are now on the payroll of such companies nationwide. And the number is growing. PEOs can save a company money on insurance costs and 401(k)s because they buy under the umbrella of their plan. That may be changing as evidenced by Louisiana's new law, which requires PEOs to purchase a separate insurance policy for each company they work with.

Employer Support Services charges a rate of about 3.5% of the total payroll for payroll services, depending on the services purchased. In return, 89% of companies recently surveyed felt that PEOs significantly reduce demands on time.

Questions
1.

What is a PEO and how does it benefit a company who pays for its services?

2.

What kinds of companies might best benefit from outsourcing human resource tasks?

Source Amy Alexander, "Outsourcing Lets Owners Focus on Big Stuff," Greater Baton Rouge Business Report, June 4, 2002, p. 38.
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