Frequently Asked Questions
What is a PEO?
A Professional Employer Organization is an entity that offers various services to other businesses on an outsourcing basis. Many times these services include assuming the responsibilities for payroll administration, tax filing, handling Worker's Comp and unemployment claims, and other services related to obligations to and interfacing with government agencies. A PEO also offers Human Resource services to aid its clients in their internal employee issues. A PEO generally provides Worker's Comp coverage to the client's employees and can assist in providing employee benefits as well.
Why does it work?
Production of payroll, managing Worker's Comp risks, working with government agencies, and other time consuming (non revenue producing) tasks use precious production hours that could be better used expanding business and increasing profits. A PEO affords its clients a professional team that has the expertise and proficiency to perform these tasks much more efficiently. In the end the fees paid to the PEO are justified by the savings realized from this efficiency, and the client has a more profitable company.
What kinds of businesses use PEOs?
The typical PEO client is a small business with 10 to 30 worksite employees, though larger companies also frequently utilize these services because it is often less expensive to outsource expertise then to develop it internally. The types of businesses using PEO services include most every field of endeavor including retail, manufacturing, service based companies and professionals.
How does a PEO help me control costs?
Small business owners want to focus their time and energy on the "business of their business" and not the "business of employment". A business owner faces many demands that revolve around the obligations of being an employer. These demands involve not only allotting time for mundane tasks, but acquiring certain expertise to comply with multiples of laws and regulations that relate to employment. A PEO can efficiently provide for the mundane task disposition as well as the expertise necessary to insure proper regulatory compliance. This "efficiency" and the economies of scale that a PEO brings to the client have a positive impact on the client's bottom line.
Will I lose control of my business or employees with a PEO arrangement?
No. The client retains ownership of the company and control over its operations. The PEO and the client company become co-employers in which the PEO will take responsibilities associated with payroll administration, taxes and Worker's Compensation. The client would retain the rights and responsibilities associated with the actual business operations. The client would continue to have responsibility for worksite safety and compliance. In other words, the PEO will focus on employment related issues while the client will continue to be responsible for business operations.
How does a PEO arrangement benefit my employees?
Whenever an employer is able to make a company more profitable, it usually translates to a healthier atmosphere for employees and their job security. PEOs are frequently able to offer superior benefits to employees than their employer is able to obtain independently. Improved communication with employees through a more knowledgeable and efficient HR department elevates employee morale, and lessens internal conflict.
Who is responsible for my employee's wages and remittance of employment taxes?
PEOs assume the responsibility for payment of wages and compliance with the rules and regulations governing the reporting and payment of federal and/or state taxes on those wages.