Business Risk Management: How PEOs Can Be Your Lifesaver

Business risk management can be daunting, but PEOs are changing the game in business. Learn how they can be your company’s lifesaver.



Every day, your business operates with risks that could impact its operations, financial stability, and overall success. But what can you do when the compliance risks and legal liabilities become too much for you to handle on your own? 

Thankfully, there is a resource called a Professional Employer Organization (PEO) that is designed to help businesses of all sizes mitigate these human resources (HR) and compliance-related challenges. This is through their risk management services that help you anticipate and mitigate problems as you grow, which benefit companies like yours to develop 7 to 9% faster and be 50% less likely to fail. 

In other words, a PEO could be your company’s lifesaver. 

What is a PEO (Professional Employer Organization)? 

Professional Employer Organizations, or PEOs, are third-party HR outsourcing firms that employ trained experts for you to entrust some or all your human resources functions. By outsourcing to a PEO, you can offload administrative tasks (employee paperwork, payroll processing, benefits administration), streamline risk management (federal and state employment law compliance, unemployment insurance claims, workplace safety, workers’ compensation claims), and free up valuable time and resources to focus on growth. 

What types of human resource risks do businesses face? 

When you hear the term “risk management,” you might only consider your efforts to manage the health and safety of your employees. But there is a much broader perspective of risks your business faces, including payroll management and compliance, in addition to the health and safety of your employees. 

Payroll Management 

Processing payroll seems like an insignificant task… until it’s not. When employees are not paid accurately or on time, this creates a huge disruption to their lives and provokes significant frustration. 

Payroll can easily go wrong by miscalculations, security breaches, tax inaccuracies, inadequate record-keeping practices, and dependency on a single person or small team. 


Failure to comply with federal, state, and local regulations regarding taxes, overtime, youth rules, break times, and other employment laws can result in fines and legal consequences. The severity depends on the nature and extent of violations, but most have serious implications for your business. 

Tax Compliance Issues 

When processing payroll, you must pay the appropriate amount of taxes and submit them on time to the correct agency. Failing to do so will lead to penalties. 

In addition, errors in tax reporting may disqualify you from participating in government contracts or receiving certain benefits or subsidies. Your reputation may also suffer, which impacts the trust and credibility of your customers, vendors, and partners. 

Employment Law Compliance Concerns 

Noncompliance with federal labor laws such as the Federal Labor Standards Act (FLSA), Occupational Safety and Health Act (OSHA), Title VII of the Civil Rights Act, Americans with Disabilities Act (ADA), Age Discrimination in Employment Act (ADEA), National Labor Relations Act (NLRA), Family and Medical Leave Act (FMLA), Equal Pay Act (EPA), Immigration and Nationality Act (INA), Employee Retirement Income Security Act (ERISA), all have their individual compliance requirements and steep penalties for violators. These are in addition to state and local labor laws, which can vary significantly. 

Employee Health and Safety 

The most common business risks associated with employee health and safety include workplace accidents and injuries, occupational diseases and illnesses, and morale and productivity issues due to an unsafe work environment. 

Workplace Accidents and Injuries 

There are both direct and indirect costs due to work-related accidents. Depending on the accident, the medical expenses and time off incurred by the workers’ compensation insurance claim may impact your e-mod and future premiums. You may also face legal fees, depending on the situation. 

Accidents oftentimes disrupt normal business operations, leading to downtime and decreased productivity. And having a poor safety record will harm your company’s reputation. 

Occupational Diseases and Illnesses 

Exposure to occupational hazards can lead to long-term health issues, which increase healthcare costs for both the employer and employee. Sick employees also take time off work, leading to increased absenteeism, reduced productivity, and morale concerns for employees who must make up for the missing workers. 

How can a PEO mitigate risks related to payroll management? 

While every PEO provides clients with payroll software, Stratus HR is unique from other PEO risk management services in the following ways: 

  1. Comprehensive Software: Stratus HR provides clients with our own custom-built payroll software and backup systems that encompass all the human resources tools you need to support your team. 
  2. SOC (System and Organization Controls) 1 Type 2 Compliant: We take security seriously and protect personal information with military-grade encryption. Stratus HR is regularly audited by an independent firm to verify our systems and controls are secure to protect employee data and are SOC 1 Type 2 compliant.
  3. Employee Records Management: Stratus HR provides digital filings of client employee records to satisfy all federal, state, and local record retention requirements. Our software also includes fields for you to document any employment action to help you protect yourself in the event of a legal claim.
  4. Cross-Trained Staff: When your employees are out on vacation, Stratus HR is still punching the clock. Even if your dedicated representative is unavailable, they will have a back-up ready to answer your questions or assist with anything you may need.

How can a PEO mitigate risks related to compliance? 

The PEO model minimizes the amount of liability your company is subject to for compliance due to co-employment.

Co-employment is the legal term for partnering with a PEO that allocates employer responsibilities between your company and the PEO. While you remain responsible for all business decisions, operations, day-to-day supervision of employees, job assignments, employee reviews, and so on, the PEO is responsible for payroll processing, collecting, and remitting payroll taxes, administering employee benefits, and more. 

PEOs also provide human resource professionals to help you comply with federal, state, and local employment laws and guide your employees regarding their rights and responsibilities under these requirements. While you retain the ultimate decision-making authority for hiring and firing, the PEO will work with you to manage potential risks (such as a wrongful termination) and ensure appropriate procedures are being followed and documented appropriately. 

As a PEO, Stratus HR takes this one step further by employing certified payroll processing and human resources experts who regularly undergo trainings, attend conferences, and take certification courses to stay up to date with tax laws and labor regulations. They also provide employee and supervisor trainings for your staff to help them be in-the-know regarding employment laws and requirements. 

How can a PEO mitigate risks related to employee health and safety? 

When you outsource risk management to a PEO, they procure workers’ comp coverage on your behalf. While that does not prevent accidents from happening, the PEO will help you streamline the accident reporting, point you to the preferred providers, help you set up light duty, and represent you in conversations about the claim. 

To help you prevent workplace accidents, a PEO can guide you with implementing safety policies, substance abuse programs, and drug free workplace programs. This will help you minimize the risks of employees working while impaired. Allowing your PEO to conduct a voluntary safety audit and provide you with a risk analysis will help you identify workplace hazards that could contribute to an accident. 

How do I choose the right PEO for my business’s risk management needs? 

For most business owners, mitigating business risks can feel daunting and overwhelming. That’s when you know you’re overdue for getting a quote from a PEO. But which one should you choose? 

In addition to learning about the PEO's risk management services, be sure to ask questions about their communication, data security and compliance, their own turnover, HR technology, and how they will immediately address your HR concerns. 

To get started, book a free consultation with Stratus HR today and our team will contact you shortly. 

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