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October 22, 2020

Expert Interview: Everything Schools Need to Know About PEOs

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Expert Interview: Everything Schools Need to Know About PEOs

The mission of any school involves providing its students with the best education possible, but behind that mission is a host of organizational management, strategy, and process that enables school staff to bring this vision to life. Developing this operational framework is no easy feat and can actually become a hindrance to goal setting.

From the HR side, one opportunity to simplify the work of school administration is by partnering with a Professional Employer Organization (PEO). To understand what a PEO is and how it helps schools, we sat down with Jim Lynch, Director of the Education Industry at Trinet. He explained to us what a PEO is and how it helps schools as well as offered strategies for selecting a PEO. Check out our conversation below.

What is a PEO for schools?

A PEO is a professional employer organization. PEOs provide small to midsize companies with outsourced human resources services, specifically employment and HR management services. It came about in the mid-late 80s. And it really is an opportunity for small to medium-sized schools, let's say under 1000 employees, to be able to allow a co-employment model to exist. 

The PEO enables schools to do things like access big company benefits, handle the risk and compliance elements of the school, as well as manage things like payroll and technology acquisition that used to be available only to fortune 100 or fortune 500 companies.

What are the benefits of working with a PEO?

We really help schools from both an organizational and operational efficiency standpoint by both controlling their costs and bringing great value to the school teachers, parents, and staff through a comprehensive HR solution.

We realize that academic outcomes are the most important thing for you. And in order to have those academic outcomes, you have to be able to attract and retain your strong educators and give them great technology, benefits, and HR experiences that they can't get out on the open market. PEOs also handle the compliance and risk mitigation piece because staying on top of all the federal state and local laws can be cumbersome in itself. 

PEOs take that HR responsibility and act as the ‘employer on record.’ In a PEO contract, you still manage your employees; you still hire, and you still help them retire. If you have disciplinary action, you still handle all those things. Essentially a PEO acts as the copilot and manages all those administrative functions.

What did HR look like at schools before the PEO model?

There are a few different models, and I’ll go into each one of them. 

The first is really the Do It Yourself model in which you delegate somebody on your staff to handle the HR functions, and they're responsible for that. And that comes with some advantages and disadvantages. There was a perception back in the day that you had greater control by handling things in-house or that doing it in-house was the inexpensive alternative, but these aren’t always the case.

So the disadvantages, if you decide to do it in-house, are really the limited expertise – they aren’t SHRM certified or up to speed on other local federal and state laws. As a result, they spend a lot of time googling the answer or money keeping an attorney on retainer. All in all, it's difficult to scale, especially as school staff grows, and it can even open you up to risk when mistakes happen. 

The second option is you can go in and hire additional staff to run your HR, who are certified in the field. This way you still have the ability to own the work and keep it under your control.

But, as you can probably tell, this can be extremely pricey, especially for smaller schools under 200 to 300 employees. Covering these costs takes the attention away from your school's core responsibilities because now you're managing an entirely different department. 

The third option is you can get multiple vendors to outsource different functions. This model brings you real HR expertise because you're leaning on companies that have expertise in that area. As well, it gives you choice: you get to choose specifically what your school's needs are. 

But there are disadvantages. Working with multiple vendors requires time and oversight – for example, making sure that you're billed correctly or that they're meeting your product and service expectations. And buying a-la-carte is not always the most cost-effective choice because there's not a lot of scale working with multiple vendors, where things can become siloed or disconnected, which is inefficient and can have legal consequences. And not all vendors really understand the particular needs of schools, and that's important. 

What makes a PEO different from these other options?

Unlike these, a PEO is a comprehensive, single-vendor solution that handles everything under a co-employment relationship. Comparatively, a PEO is very flexible and scalable. As your school grows in size or to multiple locations, and even multiple states, a PEO helps you stay compliant with all those federal, state, and local laws.

With a PEO, you have a certified SHRM representative handling your account that's going to give you the HR expertise needed to make effective decisions. They can even bring best practices to the table on what other schools similar to yours are doing. And a PEO also shares in the liability; they work alongside you to establish policies, procedures, and regulatory requirements. 

The disadvantage is really a perception of loss of control, especially over who manages the employees. This is you; they are still your employees. The PEO just helps you to handle the more administrative functions of HR and give your employees the best experience.

Similarly, another disadvantage is confusion, which is more perception as well. For example, how does the process work with payroll, benefits, missed litigation, and technology?

Those things take time to learn, but that's why vendor selection is so important. You want to find a PEO that can walk you through each of the elements. In the end, a PEO is an easier turnkey solution than fastening a patchwork together from multiple product and service providers.

What does co-employment mean?

There's a lot of different misconceptions around co-employment, and part of that goes back to the fear of lack of control. So when you're working with a PEO, you enter into a co-employment relationship, and the PEO does become the employer of record. That's what gives us the ability to handle the payroll and payroll taxes, compliance, benefits administration, workers’ compensation, and other HR-related tasks. 

Your business retains the responsibility as “worksite employer” and continues to retain day-to-day control and direction of the worksite employees.

The employees still report to you; they're still part of your school. We don’t mess with your P&L, coach and manage your employees, or do job performance evaluations. But what we will do, for example, is give you the technology to make sure these evaluations are legally compliant. Moreover, the co-employment model is a transfer of key employer liability and risk mitigation. You manage your employees, your brand, and your culture; we manage the administrative tasks.

The need for a PEO is greater than ever when you think of the current environment. PEOs can help with applying for PPP loans, navigating the ever-changing direction that's being provided by the CDC, establishing a hybrid model, and equipping teachers to work from home with technology. 

How does a school go about selecting a PEO? What are some of the things they should look for?

I like to say there are five areas that you ought to look into.

First of all, you have to make sure the pricing makes sense. Check that you understand the pricing from a standpoint of how it's broken out. There are a lot of different PEOs, for example, that do something called a percentage of payroll, which causes transparency issues to know what you're actually paying for.

Second, verify that they're legitimate and stable. Fortunately, this is pretty easy. 

  • Go to NAPEO, the organization that oversees all PEOs.
  • Make sure they are ESAC certified.
  • Check that they have industry expertise and are verticalized to meet the needs of your school.

Third, make sure you find a PEO that knows your business landscape – your mission, vision, and community.

Fourth, find a PEO that has the HR expertise that you would want if you are hiring somebody. The thing I always tell schools to do, if you want to know if it's a good PEO, is to go look at the PEO's job openings and what the requirements of the position are. Are those the same requirement you would have?

Fifth, look for big company benefits. Make sure that PEO has access to big company benefits and that they're leveraging their scale.

Just like not all schools are created equal, not all PEOs are created equal. So do your due diligence. The bottom line is a PEO should understand the rules and regulatory requirements in your area.



The goal with administrative software and services like PEOs is to help schools and their local communities be able to run more efficiently and educate and support kids. We care about kids getting the best education and the best academic outcomes; and efficient, scalable, and flexible operational processes are the foundation of this.