Why Use a PEO?
(This is part one of a three part series called “Why Use a PEO”)
Frequently Asked Questions:
What is a PEO?
PEO stands for Professional Employer Organization. It is a company which provides a co-employment situation, where your employees are also employees of the PEO in a shared responsibility and obligation agreement. The PEO will be the employer for payroll, workers’ comp, human resources, health and other benefits, while the client retains control of the employees on the worksite. Working together, the PEO and Client can achieve a safer workplace, streamline all the HR processes, spread out some of the risk, and ensure compliance with all local, state and federal regulations.
How is it different than a payroll company (ASO)?
ASO stands for Administrative Service Organization. In a payroll situation, the employees remain your employees with no transfer of liability, and the Payroll company (or ASO) may only provide HR services, such as payroll, HR, and some insurance options. This may be the only option when there is a requirement for the client to maintain all employees on their own Tax ID number (FEIN). In can be less expensive from a price persepective, but 100% of the liability is retained by the client. In the long run, the cost may be higher.
Why a PEO or ASO?
Small to medium sized companies expend valuable and nonchargeable time and resources on tasks such as payroll, HR compliance and workers’ comp administration for their employees. In many cases it is difficult to secure proper insurance (like workers’ comp) and other benefits. By “teaming” with a PEO or ASO the company now has the collective buying power shared with all the other client companies. It is often advantageous to have a professional partner with shared risk when dealing with employee issues such as workers’ comp claims, unemployment claims or employee lawsuits, etc.
Is There an Added Convenience?
A PEO will either assist you or take care of your payroll and taxes. In almost all cases your quarterly tax forms and annual reports (such as W-2s and 1099s) will be supplied at no additional charge. This is generally not the case with Payroll companies.
Can a PEO Reduce My Risk?
While it is impossible to eliminate all risk, a business owner can benefit by having a PEO as an experienced and well represented partner in his dealings with HR and government services. This applies with regard to payroll taxes, insurance, compliance, employer’s liability, and other areas.
Is There Personalized Service?
With all PEOs? Maybe. With PEO Pros? Yes. We work directly with our clients on a frequent basis to ensure that all tasks are functioning properly. If there is an issue, we act as a representative for the client to resolve the problem. Our agents will find you the PEO (or ASO) that fits your specific needs and special services.
Is There a Cost Savings?
Possibly. A large group of employees facilitates significant savings in the areas of Payroll/Tax Services, Human Resources, Workers’ Comp, and other benefits (such as Health care, Liability Insurance, Banking, Savings Plans, etc.) The main cost saved is the cost associated with dealing with employee problems that often arise, such as claims, lawsuits, government interference and the like.