Recently I met with a manufacturing company interested in securing services from a PEO.  When asked why the interest, the CEO told of a recent “business nightmare” which came as the result of a compliance audit from a federal agency.  While she considered a PEO just over a year ago, she now realized that had she secured a partnership then the audit would have had a much different outcome.  Tales such as this one reminds me that not all businesses are aware of the benefits by partnering with a PEO.

Since the PEO partnership embraces the concept of “co-employment”, the PEO becomes responsible for payroll, employee benefits, risk management and other accountabilities  that would normally be overseen by their client’s full service human resource  department – if they had one. Partnering with a PEO means that some responsibilities are owned by the company, some by the PEO and some are shared.  Ultimately, for the manufacturer, partnering with a PEO might have provided “nightmare insurance”.

The truth of the matter is that many small and mid-sized manufacturers do not have the resources to devote time, money and attention to this important component of every business enterprise.  While some might argue that for businesses of a certain size an HR department is unnecessary, nothing could be further from the truth.

Having a full functioning HR department, whether in-house, or outsourced through a PEO is not a luxury, it is a necessity.  So does a PEO partnership mean a manufacturer will see a meaningful return on the investment?  Can it save the business money?

The answers are yes and yes.  With a fully accredited PEO in a manufacturer’s corner, the PEO will manage as well as develop a well defined human resource function.  The result is an enhanced employee benefit offering, reduced turnover and improved worker productivity.  Further, a full service PEO offers the flexibility and price competitiveness of a large employee health insurance plan.  This capability coupled with compliance issues (as related to the Patient Protection and Affordable Healthcare Act  – PPACA, for example) makes the PEO a valuable partner for all small and mid-sized businesses.

Why is this concept important to manufacturers?  Manufacturers went into business to create a product, not to become human resource professionals.  But for manufacturers to grow and prosper, an effective HR strategy is not an option, it is a necessity.  Manufacturers should focus on their core competency and partner with those who will help them.  It is a good way to help ensure against unwelcomed business nightmares.

To learn more about the PEO industry, those interested should review the websites of The National Association of Professional Employer Organizations and The Employer Services Assurance Corporation.