What is a PEO?

What are the benefits of using a PEO?

What does a PEO relationship look like?

How will my Employees feel about PEO's?

Why is a PEO Better than a payroll service?

How does utilizing a PEO impact my workers' compensation insurance?

Can PEO Advantage assist in getting out of the JUA?

Can I keep my current benefit plans?

Are the fees payable to a PEO tax deductible?

Q. What Is A PEO?

A. A Professional Employer Organization (PEO) is defined as an organization that provides an integrated and cost effective approach to the management and administration of the human resources and employer risk of its clients, by contractually assuming substantial employer rights, responsibilities, and risk and, through the establishment and maintenance of an employer relationship with the workers assigned to its clients. More specifically, a PEO establishes a contractual relationship with its clients whereby the PEO:

• Assigns workers to client locations, and thereby assumes responsibility as an employer for specified purposes of the workers assigned to the client locations;
• Reserves a right of direction and control of the employees.
• Employer responsibilities are shared with or allocated to the client, consistent with the client's responsibility for its product or service;
• Pays wages and employment taxes of the employee out of its own accounts; Reports, collects, and deposits employment taxes with state and federal authorities;
• Establishes and maintains an employment relationship with its employees which is intended to be long term and not temporary; and
• Retains a right to hire, reassign, and fire the employees. Businesses today need help managing increasingly complex employee related matters such as personnel management, health benefits, workers' compensation claims, payroll, payroll tax compliance, and unemployment insurance claims.

Businesses contract with a PEO to assume these responsibilities, which then allows the client to concentrate on the operational and revenue-producing side of its operations. A PEO provides integrated services which more cost effectively manage critical human resource responsibilities and employer risks for clients. PEOs deliver these services by establishing and maintaining an employer relationship with the workers assigned to its client and by contractually assuming certain employer rights, responsibilities, and risk. (NAPEO 2003)

Q. What are the benefits of using a PEO?

A.  For The Business: 

• Controls costs
• Saves time and paperwork hassles
• Provides professional assistance with compliance (e.g., payroll, IRCA, EEOC)
• Reduces turnover and attracts better employees
• Manages claims (e.g., workers' compensation, unemployment insurance)
• Provides better benefits packages(s)
• Provides professional human resource services (e.g., employee handbooks, forms,policies and procedures)
• Reduces accounting costs

• Access to comprehensive benefits previously unavailable
• Better employer/employee communications
• Payroll on-time and accurate
• Professional assistance with employment-related problems
• Professional orientation and employee handbook
• Extension of statutory protection to more employees
• Up-to-date information on labor regulations and workers' rights, worksite safety
• Efficient and responsive claims processing
• Portable benefits (employees can move from one PEO client to another without loss of eligibility for benefits)

Q. What does the relationship with a PEO look like?

A. A Professional Employer Organization is also called a co-employer, which characterizes the relationship between employers, the employee and the PEO: Co-employer means that your company's employees are actually employed by two employers in a contractual relationship. The PEO shares your employer responsibilities and liabilities, human resource and personnel obligations of the work site employees and employer regulatory compliances. This includes employee wage reporting, employment tax reporting, workers' compensation administration, unemployment insurance administration and employee benefits administration.

• The Professional Employer Organization is established as the employer of record.
• The PEO assumes all liability for payroll taxes and tax filing.
• The Professional Employer Organization provides workers compensation for all employees.
• Using a PEO allows for aggregation of all clients for group buying power.
• The employer retains control of employees at work site.

Through co-employment, a PEO becomes the employer of record and shares employer liability and responsibility, provides Fortune 500 benefits to the client’s employees, maintains all personnel records and administers all of the above.  Employers benefit by receiving top tier benefits and HR services, relieving their staff of time-consuming tasks and allowing them to focus their valuable resources on your core business.

Q.  How will my employees feel about PEO’s?

A.  They will love it.  While they will continue to perform the same jobs, report to the same people and receive the same compensation, they will also have access to benefits that are normally only available to Fortune 500 companies.  The benefits include:

• Multiple medical insurance plans
• Dental insurance plans
• National provider networks
• Section 125 savings, including flexible spending accounts
• Group Life/AD&D insurance
• Short-term and Long-term disability insurance
• Vision plan
• Retirement plans (401(k) and/or IRA’s)
• Credit Union eligibility
• Employee discount plans

Q.  Why is a PEO better than a payroll service?

A.  What a PEO can provide in terms of payroll services is generally much more comprehensive than what you would get from a standard payroll service provider. Your PEO will not only be able to cover your day-to-day payroll needs, they will also offer access to various in-house specialists who will manage your complete benefits programs, oversee unemployment benefits, administer workers’ compensation plans plus administer your filings and record keeping while staying up-to-date with applicable regulatory issues for you industry.

Q.  How does utilizing a PEO impact Workers’ Compensation insurance?

A.  PEO’s purchase a bulk policy and therefore can provide substantial savings up front and control your costs over the long term through effective claims management.  Cash flow is improved as the deposit premium for workers’ compensation is no longer required. This coverage is automatically calculated each pay period based on the amount of gross payroll.  In other words, it’s a pay as you go program.  As a result, payroll audits are no longer necessary.

Q.  Can PEO Advantage assist in getting out of the JUA?

A. Yes, depending on your particular situation. Please give us a call to discuss what options may be available.

Q.  Can I keep my current health plan with a PEO?

A.  Yes, though administrative services vary by PEO.

Q.  Is the fee payable to the PEO tax deductible?

A.  Yes.