PEO Solutions Providers

Why small business should consider hiring a PEO

PEOs What you need to know:
What Are PEOs?

The National Association of Professional Employer Organization (NAPEO) defines PEOs as an organization which allows the cost-effective outsourcing of employee management. In other words, a Professional Employer Organization, or PEO, is an entity that offers administrative assistance and employee management services including, but not limited to, recruitment, human resource (HR) services, payroll processing, and benefits management. PEOs are also referred to as business process outsourcing, HR outsourcing, or co-employment.

The American PEO industry has existed for over three decades. It was first introduced in the 1980s and has become increasingly prevalent ever since. Currently, more than 150,000 businesses have utilized services provided by PEOs, and more than 800 PEOs exist in the United States alone.

How Do PEOs Work?

PEOs should not be confused with temporary help businesses. While the latter work on an as-needed basis over a short-term period and assist in recruitment, work overload, or particular projects, PEOs work over a longer period and administer all personnel functions while leasing the employees back to the client.

To better understand the way in which PEOs work, it is necessary to become acquainted with the process they follow. These organizations directly hire employees and manage all administrative tasks that are relevant to employment, while the business owner or client maintains control over the work performed by employees. The PEO is listed as the employer of record for tax and insurance purposes, and also has to take care of other liabilities.

PEOs hire employees through a process known as joint employment. Through this process, the PEO and business owners are able to share employment responsibilities. This increases efficiency as it quickens the procedure of managing payrolls, taxes, insurance, and benefits. PEOs also provide businesses with a means of developing a payroll and HR infrastructure which does not require as much time or effort to help the organization run smoothly. The services offered by PEOs are commonly utilized by growing companies and start-ups which need support in terms of administration.

The client business determines the exact duties that the PEO will be responsible for, which are stated in the form of a written agreement. This agreement includes factors such as tax compliance, payroll administration, the administration of employee benefits, as well as human resource administration. Other aspects, such as recruitment and onboarding can also be included in the agreement.

Services Offered by PEOs:

The client business’ required tax liability is calculated and paid by the PEO, ensuring that relevant tax deductions are made.

HR Services
PEOs offer assistance in recruitment, labor contracts, compliance adherence, as well as other services associated with human resources.

Payroll Services
Payroll processing is managed with compliance to the local regulations. Automated or manual procedures are used to make sure that employees get the correct amount. PEOs also audit pay delivery and handle other responsibilities related to payrolls.

All employee benefits, such as vacations, sick leaves, annual leaves, compensation, allowances, retirement contributions, health insurance etc. are managed by PEOs. The PEO also ensures frequent reviewing of market offerings and compliance in order to aid employees in getting the best deals.