What is a PEO service?
Managing a small or mid-size business is certainly not easy. Administrative tasks come up more often than you’d like. Administering payroll, paying taxes, and keeping up with changing legal requirements around insurance and employment can turn into a full-time job. This is when you may ask “What is a Professional Employer Organization?”
Without offering competitive benefits, your company may struggle to hire and retain top talent. Faced with such administrative HR tasks and compliance requirements on a regular basis, it may be challenging to focus on the growth and success of your business. That’s where a Professional Employer Organization (PEO) comes in.
What is a Professional Employer Organization and How Does it Work?
A professional employer organization (PEO) is an outsourcing firm that enters into a joint-employment relationship with small and medium-sized businesses (SMBs). The PEO enables employers to share employment liability, provide their employees with better, more affordable benefits, and outsource their human resource functions, such as workers’ compensation, employee benefits, payroll administration, and employment taxes.
In a PEO relationship, the PEO and the client company enter into a co-employment contract called a client service agreement (CSA). The PEO assumes specific employer responsibilities, rights, and risks through the establishment of a relationship with the client’s employees.
The contract stipulates that:
- The PEO acts as the administrative employer and the business owner acts as the worksite employer.
- The PEO is responsible for processing employee benefits, wages, and withholdings. The PEO also remits taxes under the PEO’s tax ID during the duration of the contract.
- The client retains full control of the company, as well as hiring, managing, and firing decisions.
- The client company is responsible for handling non-employee-related tasks such as customer service, sales, and marketing.
- Certain responsibilities may be shared by the PEO and the client company as stipulated in the CSA.
This arrangement is more useful than just outsourcing HR services because your company can leverage economies of scale. So, if your business can’t support an in-house HR team or if your small HR team is constantly overwhelmed, shifting the administrative tasks to the PEO can help ease the burden and help you focus on growing the business. You get to negotiate better health benefits for your employees, usually at a lower rate than you could get without a PEO.
What Does a PEO Do for You?
In general, the PEO solutions handle employment-related HR administrative tasks, including:
Payroll and Tax Management – When you partner with a PEO, they take the basic functions of payroll processing, withholdings, tax remittance, and more. They also ensure court-ordered garnishments and payments are remitted to the appropriate authority. A PEO will automate the payroll processing and administrative services, ensuring real-time access to the most up-to-date reports.
Benefits Administration – As a co-employer with many companies, a PEO is able to offer cost-effective, comprehensive plans that cover the spectrum of coverage types. A PEO will identify, design, develop, and revise benefits packages for your employees.
Workers’ Compensation – A PEO is a motivated partner in keeping your business compliant and improving workplace safety. They provide you with highly rated Workers’ Compensation insurance with complete claims processing and management, at a largely discounted group rate. A PEO can help you mitigate risks and ensure any claims are resolved quickly.
HR Administration – HR solutions provided by a PEO can help add value to your company and help you stay competitive in your industry. A PEO helps you follow labor and employment laws by offering consultation in the areas of employee relations and retention, sexual harassment, hiring and firing practices, sexual harassment, employment handbook development, background checks, drug testing, and more.
Benefits of a PEO
When you work with a PEO, you can expect many valuable benefits, including:
A PEO can handle your company’s HR functions at a much lower cost than an in-house HR team. The HR experts use existing infrastructure, which enables them to perform administrative tasks more efficiently. And because PEOs co-employ workers from many companies, they’re able to negotiate better rates with insurance providers. Access to economies of scale can help lower employment costs and boost your bottom line.
Improved Business Focus
When business owners and their teams devote significant hours to HR tasks that take away from their mission and job description, they experience inefficiencies and slow growth. With a PEO, however, you can free up time on administrative duties to focus on core business activities. Your PEO should provide you with designated payroll, benefits, HR, and compliance specialists to meet all your needs so you can focus on growing your business.
Employee Benefit Management
As a small or medium-sized business, it can be a challenge to retain the best talent if you can’t provide your employees with competitive salaries or benefits. Partnering with a PEO levels the recruitment playing field and allows you to attract better talent. For example, providing Fortune 500-level benefits and health insurance can broaden the recruiting network and reduce employee turnover.
Staying abreast of local, state, and federal compliance regulations related to taxes, benefits, hiring, and employee-related claims can be overwhelming for small or medium-sized business. But still, you can’t afford to have any missteps.
With a PEO, you can avoid costly fines that arise when regulations are misunderstood or glossed over. The PEO has more bandwidth to help your company stay compliant with the ever-changing laws. Also, employee liability shifts to the PEO, giving you peace of mind.
Vested HR Can Help You and Your Business
Vested HR helps small to midsize business owners take better care of their teams. As a leading PEO company in Florida, we offer human resources, payroll, employee benefits, and workers’ comp services to help businesses succeed. When we take on your administrative burdens, you can put your focus on what matters: building an effective team, developing customer relationships, and growing your business. Contact us today to talk with one of our experts and learn how Vested HR can help your company and employees thrive.