PEO stands for professional employer organization that is a type of outsourcing which partners with a company for a complete HR services provided. In this type of arrangement, the PEO will take care of functions such as payroll and employee benefit administration for businesses. And while some PEOs provide strategic services in addition to basic offerings, each one has its own distinct offering set, so make sure you do your research and compare their PEO services.
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Why Should You Use A Professional Employer Organization (PEO)?
The professional, strategic support of PEO can be the key for you to gain market share and have the confidence you are more secure while growing the business. PEOs typically help with the following things :
- Payroll and tax filing
- PEO services may perform the payroll, and in this regard, they may as well take up the responsibility to calculate local, state, and federal employment taxes too. On top of that, plenty of PEOs make payroll an integrated function by combining it with the time and attendance systems, this helps reduce the data entry by hand and as a result, cut down the chances of making mistakes.
- Benefits administration
- The good things about joint employment include the fact that he has access to high-quality and cost-effective health insurance, dental care, and retirement schemes as well as other priority employees. The PEO services will usually do the enrollment for your employees and send the claims from your end to the respective benefit providers.
- Compliance
- PEO services often have compliance team who guide you through all the legal stuff as well as enable you to keep your business safe from punitive measures and fines. These entities can be considered as legal and accounting entities which among others are in charge of payroll law and reporting, unemployment insurance, workers’ compensation, employment, and HR compliance.
- Risk and safety
- Besides workers’ compensation insurance, PEO services also are often engaged in safety audits and providing training programs, which assist in reducing and preventing potential claims. Similarly, they can help with the Occupational Safety and Health Administration (OSHA) inspections.
- Human resource support
- Quite frequently, this is performed by PEO services, which engage the HR professionals to provide the services and aid as well. Suppose a business has an HR team that is in-house already, the PEO could co-operate with them in strategic and administrative levels.
- Talent management
- Some PEO services provide comprehensive talent services that include recruitment and strategic hiring, employee training and engagement, as well as performance management.
PEO Services For Small Business
In many cases, small and mid-sized business owners hire PEOs to help with the key and strategic HR functions so that they can focus on their core competencies, like producing, improving, and selling products and services that make their companies famous.
PEO Services Assist In Minimizing Your Employer’s Liabilities
Finding a partnership with a professional employer organization (PEO) may serve as a great option for risk management and loss control measures. Take FastLane Group for example, which goes beyond providing support in the case of unforeseen situations by including a legal defense benefit that covers you if you follow the company’s guidance and yet end up in a lawsuit filed by your employee (subject to terms and conditions).
PEO Services Go Beyond HR Administration
Other PEO (professional employer organization) services bring data analysis and benchmarking methods that translate into key information about your resources. By utilizing the right data and HR expertise, you may be able to better answer critical questions, such as:
- What do you pay for specific employees in comparison to the market?
- Which skills will best apply to the open job position?
- What departments need additional staff members?
- How is your turnover rate compared to that of your competitors?
This sort of information is bound to shape your business policies, helping you redesign for better staff stabilization and organizational retention.
What is a PEO (Professional Employer Organization)?
A co-employment model creates a unique scenario where the business and the professional employer organization (PEO) share certain employer responsibilities. In specific, the PEO takes care of processing the payroll on the payday, gathers payroll taxes and pays them off, upholds the workers’ compensation insurance, serves as caretaker for employee benefits and is the main advisor on the HR matters. The employment status of a business owner and his or her responsibilities are simplified which gives them the privilege to perform core business operations such as delivering products and services to the customers and give their final decision on hiring or termination of employees.
How To Select A Professional Employer Organization (PEO)
For making the right PEO decision for your business, firstly, approach the choice of the PEO the same way you would take any other important business move. Here are some suggestions to look for in PEOs :
- Have a solid performance of earnings and a healthy budget.
- Can be custom-tailored to the needs of your company and employees.
- Use the endorsements of clients as a reference from similar areas
- Provide extensive materials and compliance knowledge together.
- Provide services and coverage where you operate.
- Accredited by ESAC or certified by the IRS.
Which Kinds Of Companies Benefit From PEO Services?
Typically, small to mid-sized businesses have the most number of co-employment agreements, but bigger entities can also seek this type of arrangement. Professional Employer Organization (PEO) are suitable for almost every industry, including, but not limited to:
- Retail
- Hospitality (hotels, restaurants, etc.)
- Construction
- Transportation and logistics
- Education (schools, tutoring services, etc.)
- Marketing and advertising
- Financial services (banks, credit unions, etc.)
- Entertainment and media
- Agriculture and farming
- Fitness and wellness (gyms, yoga studios, etc.)
- Automotive (car dealerships, repair shops, etc.)
- Information technology (IT) services
- Food and beverage manufacturing
- Telecommunications
- Environmental services
- Healthcare facilities (clinics, nursing homes, etc.)
- Beauty and cosmetics
- Renewable energy
- Sporting goods and recreation
- Government contractors
What Are The Things PEO Services Does Not Do?
Even though a Professional Employer Organization (PEO) may take over the HR administration, that’s not an automatic delegation of ownership or lack of your organization’s control. A PEO services will not:
- Make business decisions for your company independently.
- Support the marketing or sales effort and product distribution.
- Decide on the pay rates, number of hours, or schedules.
What Does Professional Employer Organization (PEO) Cost?
Professional Employer Organization (PEO) normally bill by the percentage of payroll, but some may have a charge based on the employee’s number. To obtain a price quote from a Professional Employer Organization (PEO) you’ll usually need to provide information about your employee base, along with benefits you are currently offering or are hoping to be introduced.
The following are some things to consider when reviewing the estimated Professional Employer Organization (PEO) costs :
- It is common practice among trusted agencies to do a cost analysis for you, so you can see how your payments will go into the employees’ wages, taxes, and other social contributions.
- There will be more costs if you pay for deeper services like data insights or talent management but it could be compensated for with a better return on the investment.
- You can get distracted from maintaining business activities that generate revenue if the duration of HR duties gets too long.
Types Of Professional Employer Organization (PEO)
However, a single type of Professional Employer Organization (PEO) model (the co-employment type) does not really clear up the employers’ confusion concerning the business model. Many managers assume that employee leasing conveys the same idea as PEOs, while they are different in nature, but quite often referred to each other. Even some state legislatures continue to consider and state Professional Employer Organization (PEO) in such a form as leasing in their statutes.
PEO Services And Other Types of Outsourcing
PEOs are HR outsourcing however, this occupying type is unique because it is co-employment. Other outsourcing services that are similar to or sometimes mistaken for PEOs include:
- Employee leasing company
- Staff leasing company
- Human resource outsourcing organization (HRO)
- Administrative Services Organization (ASO)
- Managed payroll
Certified PEOs
The CPEOs (CPEOs) have passed the very high level of financial, legal, and reporting standards of the IRS. A joint venture with another firm could help to provide you with regulatory and fiscal protection and tax breaks. For instance, if you are CPEO, you will pay the federal taxes on your behalf and may not be in the double taxation situation like in the situation when you partner with a non-certified PEO. For a PEO obtaining a certification from the IRS, the number may be a small percentage.
What Exactly Does Working With A CPEO Involve?
- Financial guarantee
- The certification program needs an ordinary CPEO to post an annual bond, in order to secure its payment of its federal employment tax.
- Tax restart elimination
- Certified Professional Employer Organizations are exempt from the limitations on the federal payroll tax base when you join or leave a Certified Professional Employer Organization if you do so midyear.
- Trust
- Professional Employer Organization (PEO) must periodically renew their certification to show that they are still compliant with the fiduciary obligation and the necessary requirements.
ESAC Certified Accredited Professional Employment Organizations
Besides the IRS certification, a Professional Employer Organization (PEO) may earn recognition from the Employer Services Assurance Corporation (ESAC). Members with ESAC accreditation have shown financial integrity, acceptable business conduct of business rules and proper operation as well as following regulatory requirements.
How FastLane Group Can Help?
Experience FastLane Group’s comprehensive PEO services by outsourcing your HR management and risk mitigation needs to professionals. With our experts’ assistance, you gain strategic support, compliance expertise, and streamlined operations, allowing you to focus on what matters most—growing your business. Contact us today to discover how we can accelerate your path to success.
Frequently Answered Questions About PEO
Under a co-employment agreement, the PEO becomes the employer of record for tax purposes but the client business remains fully in charge of its workforce.
A PEO works with you on the HR, risk, and compliance issues so that you don’t need to do it on your own but rely on their expertise, thus shielding and growing your enterprise.
PEO is an abbreviation of the term ‘professional employer organization’. They offer an opportunity for small and mid-sized business organizations to delegate work on the issues of HR management and risk mitigation through co-employment.
PEOs make money by charging an amount for doing the employment part as co-employers. The amount of money varies from the number of employees you have on the team and from the package of services you purchased. For instance, PEOs which are only looking at the basic administration of HR and how it impacts payroll and benefits may end up being cheaper than those offering all-inclusive services.
Employment agencies that hire people, lease those employees to other businesses, and serve as the sole employer for them. While PEOs do not supply labor, but instead take on some responsibilities that make them co-employers of the entities they work with.
The culture of the organization will not be automatically changed to a co-employment relationship because culture change might be one of the main goals. Therefore, your PEO may have the experience to advise you on ways to define your culture for your workplace that reflects the kind of image you seek your business to convey to your employees today and in the future.
A PEO contract should never exist among all the client companies of the PEO. Consequently, you will not be liable for any employees other than the personnel associated with your business.
Through a co-employment partnership, you take on some responsibilities which cannot be given to an HR outsourcing firm, by rights. PEO, mostly, has access to a robust health insurance plan and other perks, but an HR outsourcing firm can only help in the administration of your existing benefits, HR, and payroll.