How a PEO Solves Restaurant Payroll, Compliance, and HR Needs for Less

By Christina Lau|Sep 24, 2024|12:10 pm CDT

As an owner, manager, or operator, you take on the responsibilities of restaurant payroll and HR. It’s no small task and requires a major time-commitment every month. To add another challenge, the more the restaurant grows and the more locations you open, the more time and energy HR and payroll demand. However, there is a way to take HR and payroll off your plate…

This August, Fourth’s Senior VP of Operations, Gene Cabrera, hosted a webinar with Andrea Desmond, the Director of Member Engagement at the National Association of Professional Employer Organizations (NAPEO). They discussed how a professional employer organization (PEO) can take on the burden of HR, payroll, and compliance, and the benefits that it provides to restaurant operators. A PEO can help ensure alignment with federal, state, and local employment laws, deliver a better benefits package to employees, accelerate growth, and more.

In this blog, we’ll recap the most critical information from the webinar with NAPEO, so you can make informed decisions about the best way to render HR & payroll services in your restaurant.

What is the NAPEO?

NAPEO is a national trade organization representing the interests of the PEO industry. They advocate for PEOs to federal, state, and local levels of government, help provide member resources, continuing education, and networking opportunities.

What is a PEO and Why Does It Matter for Hospitality Businesses

A PEO is a professional employer organization. It provides HR services to small and medium-sized businesses who may otherwise be unable to afford a full-time HR professional. The services provided by a PEO enable these restaurants to access the expertise of HR and accounting professionals without needing to staff them internally. That expertise is used to ensure compliance with all relevant employment laws as well as help employees better understand their rights and responsibilities under these regulations.

More specifically, the services rendered by a PEO can include:

• Payroll
• Benefits administration (such as workers’ comp and risk management)
• Human resources
• Tax administration
• Regulatory compliance assistance
• Workforce management

How PEOs Help Employees

The hospitality industry, particularly small to medium-sized chains, are excellent candidates to benefit from a PEO, because their businesses are highly dependent on a motivated workforce while also operating at a revenue level that precludes an in-house HR team. By taking on the administrative functions of an HR department and ensuring compliance, the PEO frees management to focus on higher level goals like improving productivity, profitability, and the dining experience.

NAPEO has conducted research that looks into the impact of using a PEO and how it helps businesses succeed. They found a staggering level of support and enthusiasm for PEO services — 98% of PEO clients would recommend one to a business colleague. In addition, they revealed:

• Companies that use a PEO grew twice as fast as comparable companies
• Companies that use a PEO are 16% more likely to report increased profitability
• Employees at companies that use a PEO have higher trust and confidence in employers as well as higher overall satisfaction

The PEO industry as a whole is not widely known, but it is larger than you may expect. There are over 500 PEOs in the US with more than 200,000 small and medium-sized businesses as clients. 17% of businesses with between 10 – 99 employees use a PEO.
PEOs provide exceptional value in three key areas: employee benefits, risk management, and compliance. Let’s walk through each area to see why.

Employee Benefit Plans

The restaurant industry is infamous for its high turnover rate. Combined with a tight labor market, the competition for top talent is fierce. A key advantage of using a PEO is that it enables a small or medium-sized business to improve its benefits package and compete with larger corporate chains in the hiring market.

Typically, a larger chain will have a higher headcount of employees, which allows the business to negotiate with insurance providers for better rates per individual. As the headcount increases, there are break points in pricing that a large organization can take advantage of. Small and medium-sized businesses simply lack the headcount and the raw capital to purchase the same quality of benefits. Candidates for hire will often choose the offer with the higher wage or better benefits plan. This puts small and medium-sized chains at a disadvantage.

A PEO levels this playing field by pooling together the workforces of their clients. Assembled together, a dozen small companies can reach those price breaks and procure a much better benefits package at a lower cost per head. The benefits most frequently added by new PEO clients includes life insurance, retirement plans, and health benefits. According to a Hierl Insurance study, 83% of employees rated health insurance as “very” or “extremely” important when deciding to stay or change jobs.

Risk Management

Another area where a PEO can provide value is risk management. To start, a PEO can provide workers’ compensation insurance, which is crucial to supporting your team and retaining employees after accidents on the job. In addition, PEOs can take a holistic look at the business and identify places where adjustments in policy or procedure can reduce overall risk.

Note that PEOs offer a flexible range of services, so it is important to tailor your agreement to meet your needs. Many white collar businesses for example only need to submit claims during working hours, the 9 – 5 workday Monday through Friday, but the hospitality industry works nights and weekends. Ensure you have proper coverage. At Fourth, for example, we offer 24/7 claims intake to provide our clients access to HR and restaurant payroll services at all hours.

Regulatory Compliance Assistance

In the webinar, the speakers noted that the regulatory environment is shifting towards more local levels. Gridlock in Washington is pressuring states and cities to pass their own employment and workplace laws.

From the perspective of a business owner, this creates an additional compliance burden. If your restaurant chain spans multiple states or you staff remote employees who could be living elsewhere in the country, you must ensure your operation meets all compliance requirements in each jurisdiction. Many states have different employment rules for overtime, paid family leave, hiring practices, and more. Each of these must be adhered to.

Partnering with a PEO offers a straightforward solution. Operators gain peace of mind knowing that a team of experience HR and employment experts are there to help you comply with government regulations. This can both help support your employees and avoid financial penalties for non-compliance.

Over the last twelve years, the regulatory environment has been a significant driver of growth for the PEO industry. The size of the industry has quadrupled in that time as more businesses lean on their services to navigate regulations.

Why You Need a PEO

There are four key reasons to pursue a PEO partnership, including:

• Save Time: In the hospitality industry, HR administrative tasks do not produce revenue while absorbing a massive amount of time and resources.
• Turn-key HR Support: When you partner with a PEO, it takes on all the responsibilities typically associated with a robust HR department. The PEO handles everything from paying wages and taxes to assisting with compliance and providing competitive benefits to employees.
• Cost Control: One of the biggest benefits to restaurant employers is that even as you grow, you can keep a tight rein on overhead costs by maintaining a streamlined HR team.
• Drive Growth: Partnering with a PEO is not just a time saver. It’s a business accelerator. With dedicated HR expertise, streamlined operations, and the opportunity to grow without the red tape, many companies are finding success through their partnership.

PEOs Are Your Advocates

PEOs are a leading advocate for small and medium-sized businesses. They are a lifeline and a buoy in turbulent economic times. During the COVID-19 pandemic, PEOs helped their clients secure PPP loans and loan forgiveness, managed employee leave, and helped businesses apply for available tax credits. The interfacing between government and a business is a complex relationship, and the expertise available from a PEO can helps the business receive all the benefits and incentives available.

In fact, due to advocacy and value, businesses that partner with a PEO were about 60% less likely to close permanently during the pandemic.

Catch the Full Webinar on HR & Payroll Services

Restaurant operators and business owners are busy enough with day-to-day responsibilities, but running a restaurant is more than putting food on plates.

Administrative duties and compliance obligations cannot be ignored. As businesses grow, more owners and operators will not have the human resource training, accounting skills, and compliance knowledge to meet the demands of being an employer. A partnership with a PEO, a true advocate of your success, is the pathway to amenities, benefits, compliance and peace of mind you would not have otherwise.

Watch an on-demand recording of our webinar, “Stop Running Payroll The Hard Way: Tips for Hospitality Operators” to learn more strategies to save time while growing your business or contact us for more information about Fourth’s HR and payroll services.