Frequently Asked Questions
What is a PEO?
A Professional Employer Organization (more commonly known as a PEO or Staff Leasing Company) enters into a co-employer relationship with its clients, which allows them to share and manage many select employer-related responsibilities and liabilities. Small businesses outsource their human resources to the PEO, which provides an integrated and cost effective solution to the management and administration of the human resources services, employee benefits coordination, payroll administration, risk management services, workers’ compensation, claims management and unemployment claims handling.
Who uses a PEO?
The average client customer of a PEO is a small to medium sized business with 10-50 worksite employees, though larger employers also find value in a PEO arrangement and some businesses as small as 5 employees can be offered PEO services. Business customers include every single type of business from manufacturing, call centers, property management companies, doctors, lawyers, accounting firms, retailers, fast food and restaurants, engineering companies and every profession in between.
How does a PEO arrangement work?
In the relationship among a PEO the worksite employee and a client company, there exists a co-employment contractual relationship in which both the PEO and client company have an employment relationship with the worker. The PEO and client company allocate some, and share other, traditional employer relationships and liabilities. The PEO assumes responsibility and liability for the “business of human resource management”, such as risk management, a large part of personnel management and human resource compliance, unemployment claims administration and payroll and employee payroll tax compliance. The client company manages product development and production, marketing, sales and service (their business).
What are the benefits of using a PEO?
FOR THE BUSINESS
– Controls Administrative costs
– Reduces Accounting & Payroll costs
– Saves time and paperwork hassles
– Provides professional compliance (EEOC, Payroll, IRCA);
– Access to an HR Professional
– No unemployment claims to process
– No workers’ compensation claims to process
– Provides professional human resources services (Employee Handbooks, forms, Policies & Procedures, better communication for employee grievance issues).
FOR THE EMPLOYEE
- mproved employer / employee communication
- Payroll always on time and accurate
- Professional assistance with employment related problems
- Professional / complete new employee orientation and enrollment forms
- Access to a HR Professional;
- Direct answers to questions regarding unemployment compensation
- Professional claims management services for injured employees
- Professional orientation and Employee Handbook
- Provides statutory protection to more employees.
- Human Resource Management
- Payroll Administration
- Payroll Tax administration and Compliance
- Legal and Regulatory compliance
- Employee benefits Coordination
- Workers’ Compensation Administration
- Workers’ Compensation Claims handling
- Risk Reduction and Safety solutions
- Unemployment Claims handling
- Recruiting and Staffing
What are the core services provided to Client employers?
The PEO provides small to large sized companies with cost-effective solutions to effectively and productively manage their employees. Services range from consulting to a broad range of outsourcing of the client’s HR department where the PEO can assume major employer risks and responsibilities.
Core services provided by a PEO include:
Outsourcing many of the above responsibilities of PEO enables clients to regain focus on its core competencies, ultimately increasing value and competitiveness, lowering risk and overhead and ultimately raising profit potential for each client.
What is the difference between temporary staffing & a PEO arrangement?
A temporary staffing service recruits employees and assigns them to clients to support or supplement the client’s workforce in short-term special work situations, such as employee absences, special projects, increased workload, skill shortages or seasonal work.
A PEO arrangement, however, involves all of a significant number of the client’s existing worksite employees in a long-term, non-project related employment relationship. A PEO contractually assumes and manages many select employer responsibilities for all or a majority of the workforce.
What is Co-employment?
Co-employment is the contractual arrangement between the client and PEO Staff Leasing Company that allows PEO to provide a full range of services and to transfer or share select employer liabilities. Each party is responsible for certain employment obligations, and each party shares responsibility for other employment obligations. These responsibilities should be clearly defined in a good client-PEO services agreement! Workers become employees of two employers; the client retains supervision for the day-to-day activities and responsibilities of running their business while PEO assumes many of the responsibilities for human resources, including workers’ compensation and unemployment claims administration.
Does the business Owner / Manager lose control of his/her business?
As co-employers, the PEO and the business Owner / Manager become partners in the employment of the workers. The Client retains complete ownership of the company. As co-employers, PEO and the Client contractually share or assume many employer responsibilities and select liabilities. The PEO assumes a real and factual role. PEO is responsible for providing workers’ compensation insurance, claims handling, paying payroll and employment taxes, maintaining employee records, reserving the “ultimate” right to hire and fire, and possessing the authority to resolve employee disputes. By shifting these responsibilities to the PEO, our client gains more command of the “core” revenue generating aspects of their business.
How many Americans are employed in a co-employment PEO agreement?
It is estimated that 2-3 million American workers are currently employed in a PEO arrangement. PEOs are operating in every state and the industry has grown between 20-30% per year. Today, there are approximately over 700 PEO companies who are responsible for over $42 billion in sales revenue.
Why would a worker of a small business want a PEO as a Co-employer?
Worksite employees seek financial security, a safe working environment, on-going / quality professional support and opportunities for retirement savings. PEOs may provide Fortune 500 quality employee benefits including health insurance, 401-(k) savings plan, and aggressive worksite risk management. Job security is improved as the PEOs economy of scale permits a business to lower employment related costs. Job satisfaction and productivity increases when workers are provided quality human resource services like employee handbooks, grievance procedures and improved communications.
What will my employees think about getting their paycheck from PEO?
Honestly, they probably won’t know the difference. Although our name may be on a paycheck that is signed by the PEO, they can also place your name and logo on each employee’s check-stub. Most employees are typically only concerned as to whether or not the check will clear the bank. It is the check-stub that really matters most. The check stub is what most employees ultimately use to verify income, payment amounts, deductions, etc. It is the check stub that most creditors / lending institutions want to review – not the check itself. And, as stated above, this stub can be tailored to bear your company’s name and logo.
Is a co-employee arrangement accepted by my insurance certificate holders?
Absolutely. PEO will make requests for certificate of coverage quick and easy. Just contact your human resources professional at (915) 532-9400 and we will take it from there.
How does PEO help their clients control costs and grow their bottom line?
PEO’s economy of scale enables each client to lower employment costs and increase the business’s bottom line. The client can maintain a simple in-house Human Resource infrastructure, or, none at all by relying on PEO. The client can also reduce hiring / payroll and benefits overhead by not having to hire a full-time Risk / Safety Manager, Payroll Manager, Unemployment Claims Coordinator and / or Human Resource Manager (not to mention additional support staff, additional payroll taxes, benefits, supplies and office space).
The Small Business Administration reports that the business Owner or Manager spends roughly 7% to 25% of his / her time just handling employee related paperwork. Add it up – the “business of employment” can become very expensive, very quickly! Instead, the professionals at PEO can provide critical assistance with employer compliance, which also helps protect the client against costly liability litigation. Finally, PEO provides time-savings (to you) by handling many routine and redundant tasks for you. This enables the business Owner or Manager to focus his / her time on the company’s core competency and grow its bottom line more proactively.
How can PEO Staff Leasing Company help my Company?
Today, small business owners want to focus their valuable time, attention and energy on the “business of their business” and not on the “business of human resource management”. As businesses grow, most small business owners do not have the necessary human resource training, payroll and accounting skills, knowledge of regulatory compliance, or backgrounds in risk management, insurance and employee benefit programs to meet the de
What kind of payroll deductions are taken from my employee’s payroll?
Deductions may vary by state, however, most states allow the following: voluntary deductions (i.e., health insurance, dental insurance, vision insurance, 401(k) section 125), and non-voluntary deductions (i.e., Medicare, Social Security, garnishments, child support and IRS levies)
What do I do with the employee’s paperwork?
A PEO human resources representative will assist the new worksite employee with completing PEO’s new employee enrollment forms. These forms can be found by clicking on “get forms” found at the top right hand side of our home page. These completed forms can be emailed to PEO for expedited entry into our computerized payroll system; however, an original signed copy of these forms must be immediately returned to PEO before the new employee can be paid. The client should retain a copy of these documents; however, PEO will properly store, maintain and manage all government mandated records on all worksite employees.
Who is responsible for the employee’s wages and payroll taxes?
PEO assumes responsibility and liability for payment of wages and compliance with all rules and regulations governing the reporting and payment of federal, state and local (if applicable) taxes on wages paid to its employees. The Internal Revenue Service recognizes PEO as the employer for federal income and unemployment taxes, and case law affirms the principle that PEO is the responsible party.
Who is responsible for state unemployment taxes?
As the employer for employment tax and employee benefits, PEO assumes responsibility and liability for payment of state unemployment taxes. Colorado, Texas and New Mexico, as well as other states, recognize PEO as the responsible entity. PEO will report all unemployment tax liability under our tax number.
What do I do with my state quarterly tax information for the first quarter after I have signed on with PEO Staff Leasing Company?
When you become a part of the PEO team, your company may no longer have employees to report. If all of your employees are co-employees with PEO, simply mail your 941 quarterly tax form back to the state, reference that your employees are now with PEO Staff Leasing Company, and mark “final return” on the form.
If you paid employee wages for any time during the quarter, you are still responsible for reporting those wages and paying appropriate taxes.
What should I do when I receive a request for information regarding an unemployment claim?
If you receive a state unemployment claim form request, you should immediately contact PEO’s human resource department or PEO’s unemployment claims coordinator. Please understand that all claims must be answered within a (short) state mandated period of time.PEO will obtain information from you as to why the employee was terminated, and will appropriately respond.
Who is responsible for Workers’ Compensation?
Many states recognize PEO as the employer of worksite employees for the purpose of providing workers’ compensation coverage. Worker Comp is part of the PEO agreement
Who is responsible for employment laws and regulations?
You, the client are; however, PEO provides worksite employees and co-employers with on-going guidance within the entire spectrum of employment laws and regulations, including federal, state and local discrimination laws, Title VII of the 1964 Civil Rights Act, Age Discrimination in Employment Act, ADA , FMLA, HIPPA, Equal Pay Act and COBRA. In some cases, these laws would not apply to workers at a small business without the PEO relationship since many statutes have exemptions based upon the number of workers in a workforce. Once included in the PEO’s workforce, the workers are protected by these laws.
What is the future of the PEO industry?
American business is undergoing a fundamental change in human resource management and the PEO industry is one response to market demands for change. The expertise required to manage the human resource elements of a small to mid-sized business has outgrown the experience and training of many entrepreneurs who started these businesses. The PEO industry is demand driven as business owners seek solutions to the increasingly complex “business of human resource management”, as PEOs