Running a trucking company is tough. You’ve got drivers to manage, rules to follow, and tasks like payroll and benefits to handle. Outsourcing tasks to a Professional Employer Organization (PEO) can be appealing, but it’s crucial to understand the potential risks before losing control over how your business runs. Before you sign up, it’s important to know the facts.
At Superior Trucking Payroll Service, we’ve spent years helping trucking companies like yours navigate these challenges. We understand the unique needs of the trucking industry and know how critical it is to keep control over your operations.
In this article, we’ll share insights on the specific challenges and pitfalls that could impact your trucking business when partnering with a PEO.
What is a PEO?
A Professional Employer Organization (PEO) is a company that helps businesses by taking over HR tasks like payroll, tax filing, and benefits. When you partner with a PEO, they handle these tasks, which gives you more time to focus on running your trucking company.
PEOs work under something called a co-employment relationship model. This means that both the PEO and your trucking company share responsibility for your employees. You still manage the daily work, but the PEO takes care of HR tasks such as payroll, benefits, and ensuring tax compliance. This setup can give you access to HR help you might not have in-house, but it also comes with downsides.
Important Things to Think About Before Using a PEO
While a PEO can help with HR tasks, there are important things to think about before deciding to work with one. Knowing the downsides of a PEO will help you decide if it’s really the right choice for your trucking company.
Loss of Employee and Truck Driver Control
One of the biggest challenges with using a PEO is losing control over your employees and how your business operates. In a co-employment setup, your drivers and staff become employees of the PEO. This can limit your authority over decisions like hiring, firing, and managing your team on a day-to-day basis.
How a PEO Could Slow Down Your Hiring Process for Truck Drivers
PEOs often have their own hiring procedures, which can be slower than what your trucking company needs. These procedures may include extra steps like background checks, drug testing, Motor Vehicle Record (MVR) checks, and employment verification. While these checks are important for ensuring driver safety and compliance, they take time.
In the fast-moving trucking industry, any delay in hiring can hurt your business. Trucks may sit idle while waiting for new drivers to clear these steps, leading to missed opportunities or contracts. If the hiring process takes too long, you may also lose good drivers to other companies that can hire faster, putting you at a disadvantage.
Impact on Trucking Company Culture
Company culture in a trucking business is about how things are done every day—how your team works together, follows safety rules, and treats each other. It’s more than just policies; it’s the work environment and how your drivers feel about their jobs.
When you partner with a PEO, they may bring in their own rules that don’t align with the way you run your business. This can change the culture you’ve worked hard to build. For example, a PEO might enforce strict rules about time off or discipline, which could frustrate your drivers if they’re used to more flexibility. In trucking, maintaining a good culture is key to keeping drivers happy and reducing turnover. A PEO’s influence could upset this balance.
Limited Help with Specific Trucking Industry Needs
While a PEO can take care of many HR tasks, they don’t usually help with the specific needs of a trucking company. For example, PEOs don’t handle driver recruiting, which is a major challenge in the trucking industry. They also won’t help with driver retention strategies, which are crucial for keeping good drivers on your team.
Another area where PEOs fall short is managing driver files required for Department of Transportation (DOT) compliance. You’ll still be responsible for keeping up with these records, including Motor Vehicle Record (MVR) checks and Hours of Service (HOS) logs. A PEO may not understand the specific demands of trucking, leaving you to manage these important tasks on your own.
No Relief from On-the-Ground HR Issues
PEOs don’t usually handle day-to-day HR problems like harassment, a hostile work environment, or conflicts between drivers. These are still your responsibility, which means you’ll need to deal with them directly.
In trucking, these issues can come up more often than in other industries due to the long hours, stress, and close quarters drivers often work in. If a driver feels unsafe or if there’s a conflict between team members, it’s up to you to step in and resolve the issue. While a PEO might give you general advice or policies, they won’t be there to help manage these problems when they arise in real time.
Potential for Hidden Costs
One important factor to consider is the total cost of working with a PEO. While PEOs often promise savings on things like workers’ compensation and benefits packages, they may charge extra for services that aren’t part of their standard offering, like additional compliance checks or special reports.
These unexpected fees can add up quickly, especially in a cost-sensitive industry like trucking. To avoid surprises, it’s important to fully understand the financial details of the agreement before signing.
Difficult to Exit an Agreement with a PEO
While joining a PEO may seem easy, leaving the agreement can be much more difficult. Many PEOs require long-term contracts that are hard to break without facing early termination fees or other penalties. Additionally, because the PEO is the “employer of record” for your drivers, switching back to your own system for payroll and benefits can lead to complications, like payroll delays or gaps in benefits coverage.
Exiting a PEO relationship can be stressful, and it’s important to be prepared for this process if you decide the PEO isn’t working for your business.
A PEO Might Not Be Worth the Cost
Deciding whether a PEO is worth the cost can be tricky. Your cost is usually based on how many workers you have and which services you use. At first, a PEO might seem like a good deal, especially if they offer lower workers’ comp rates or benefits packages. But once you do the math and include any hidden fees, some businesses find the cost isn’t worth it.
For trucking companies, where profit margins can be thin, every expense counts. Make sure you fully understand all the costs before you commit, including any extra fees for things like overtime calculations, special reporting, or contract termination.
Looking back, we’ve discussed some key downsides of using a PEO, like losing control over your company’s culture, facing slow hiring processes, and dealing with hidden costs. These are serious issues that can affect how your trucking company operates day-to-day.
Right now, you’re faced with an important decision: is partnering with a PEO worth the risk for your business? It’s crucial to weigh these potential problems against the benefits a PEO might offer.
Moving forward, if you’re concerned about these downsides, you might want to explore other options that give you more control over your operations. To learn more about what’s involved in making a change, check out our article “Is it Difficult for Trucking Companies to Switch Payroll Providers?” Understanding all your options will help you make the best choice for your business.
Written by Mike Ritzema
Before founding Superior Trucking Payroll Service, Mike was the CFO of a trucking company with 80 trucks and a thriving brokerage. This experience gave him the perspective that a payroll solution has to make the lives of the office people better. All the solutions he has designed are to benefit everyone. Our company mission is to help trucking families and that includes the company owners, the drivers, and the office.