Commonly, businesses are finding themselves asking “What is a PEO Company?”
PEO is an acronym for Professional Employer Organization. A (PEO) or Professional Employer Organization is a business entity that helps service other businesses in the areas of Payroll Administration, Employee Benefits, Human Resources, and Risk Management. Workforce Management Agency helps businesses to learn the answers about some common questions like “how does a PEO work?” to find the advantages of using a PEO.
In our modern business world, most businesses find tremendous value in PEO services. Statistically, PEOs have proven to help their clients grow faster, while often saving both time and money in the areas of Payroll, Worker’s Compensation, Employee Benefits, and Human Resources Management.
Today, there’s approximately 980 PEOs that operate in the United States. Often, there’s a huge difference in understanding needs between the PEO and the prospective client from the onset. The need for a PEO to understand client needs and business purpose is vast and usually a PEO sales rep cares more about one thing signing you up. This often reflects in the service that a business receives. There are a million variables.
A PEO can offer these services using Co-Employment. The PEO hires your employees under their Tax ID or Federal Identification Number. Once that happens those employees are now employed by the PEO as the “Employer of Record,” and the client company remains in control of delegating the workload and daily operational tasks as the “Worksite Employer.”
The PEO arrangement that exists when a company uses a PEO, is called Co-Employment and helps a client company tap into the purchasing power and infrastructure of the larger PEO Company to achieve discounts on various expenses associated with having employees or human capital. Similar to wholesale versus retail pricing as they buy in bulk. The PEO Company which serves many different client companies across a broad spectrum of industries technically is the employer of all the employees. This makes them more valuable to their vendors and carriers as a much larger group. Often a PEO company offers to pass on many areas and ways that their clients can save money, time, and efforts on the services they provide:
Many PEO’s provide indispensable tools for Human Capital Management such as (HRIS) Human Resources Information Systems, qualified personnel who become assigned to their client to service various employment related functions. A PEO will have many responsibilities to their client in their (CSA) Client Services Agreement, For Example: Processing Payroll, Employee Benefits Enrollment, Managerial Training and Development, Helping the client become more Pro-Active with regard to Human Resources and Labor Law Compliance by updating and implementing processes and procedures related to the relationships with employees and ensuring businesses are protected with Employee Handbooks, Electronic On-boarding, (EPLI) Employment Practices Liability Insurance., etc.. PEO’s handle Payroll for other businesses and also offer a unique solution for cash flow management on Worker’s Compensation. PEO’s processing the payroll under their tax ID enables them to offer all of these advantages to a client company. One major advantage is Pay as you go Worker’s Compensation which is accrued on actual wages instead of estimating with Audits at the end of the year.
In recent years, PEO’s have also become popular with the rise of The (PPACA) Patient Protection and Affordable Care Act. The PEO arrangement will help clients with PEO benefits administration and a PEO benefits advantage would be that they will offer to completely handle the tracking and eligibility reporting requirements of the new laws because they handle much of the employee data of a client from payroll administration and have the information to do so with ease. The Affordable Care Act has made it difficult for businesses to keep their costs for employee benefits like medical insurance low. PEO’s are also a way for businesses to lower costs on employee benefits because of sheer volume and their economies of scale. It’s important to note that PEO service providers vary greatly in their service model and product suite.
The Industry has several organizations offering accreditations that a PEO should maintain. A PEO should be a NAPEO member. They are the National Association of Professional Employer Organizations. A PEO should also be ESAC accredited, by The Employers Services Assurance Corporation. They are similar to the FDIC in the Banking Industry but in place for the PEO services industry and they certify that a member PEO has Audited Financials, are remitting payroll taxes according to strict guidelines, are in compliance of their services agreement and clearly define their processes and procedures in their contracts. They also certify that the PEO is in complete compliance and is run by ethical personnel at the top level.
Some businesses have international professional employer organizations needs, we can help those businesses to secure relationships with PEO’s that have global capabilities.
We’re looking forward to solving your business strategy needs within the PEO Model of Services!